Last year, M&A activity finally passed pre-crisis levels, and it is poised to continue apace in 2015 with company treasure chests bursting with more than $1.2 trillion. The promise of big financial returns from growth, increased market share, operational synergies, bigger product portfolios, and squeezed competition are fueling this feeding frenzy.
However, many mergers fail to achievetheir revenue synergy goals. Why?
The most important part of a merger is frequently just an after-thought: the customer experience. While many factors influence the success of mergers, customers and partners–and what they do post-merger–form the basis of revenue projections, the most important aspect of projecting the value of any deal. Customers have many reasons to consider leaving: possible disruption, loss of services, lower service levels, cost to change, strong competitive forces, and an unappealing new brand.
Firms that get the customer experience right realize enormous rewards. In fact, West Monroe's analysis indicates that customer experience leaders nearly tripled the S&P 500 return over the last decade. Customer experience is a permission platform for cross-selling products and services; it’s a signaling mechanism for churn; and it’s an indicator of reputation and word-of-mouth that either amplifies marketing messages or creates a headwind against them.
Waiting to think about customers until integration is complete is too late. Instead, firms need to embed customer experience into M&A playbooks at every stage, from transaction strategy and due diligence through to integration. Here are seven ways to embed customer experience into your M&A activities:
1. Reinvent the experience as part of the strategy: A merger or acquisition is an opportunity for the two companies to re-imagine a future experience they could deliver to customers. When firms focus only on the product offering, technology, processes, and the mechanics of bringing the companies together, they overlook the pain points and opportunities to deliver the things that customers rank as most important. Firms with superior customer experience could leverage it as a permission platform to go into new markets (e.g., Uber or Amazon). Firms with a poor CX can use an acquisition as a way to redesign the experience.
2. Make customer experience an explicit work stream: When a deal is imminent and integration planning starts to kick into full gear, put a CX person on the steering committee, a governance team in the Integration Management Office (IMO) that reviews work output of other work streams. This person needs to make sure that the customer voice is at the table as the firm’s attention turns to employees, IT systems, and processes. Make sure this person is an unapologetically outspoken and respected customer advocate. The work stream should include mapping the customer experience, setting up customer feedback tools to identify integration priorities from the customer perspective, and embedding an outside-in perspective into other work streams. This is most often called a value capture team with cross-functional focus.
3. Assess the current experience to identify gaps, risks, and opportunities: Use customer research to gauge the current experience a firm delivers, customer health and affinity to a target brand, and the risk of churn. Use social media monitoring to identify firms with a good reputation and word-of-mouth. Assess the current operating model with a CX lens. Tools like Customer Experience Blueprints map the actual experience to the people, internal process, technology, and data responsible for delivering it. These Blueprints help firms assess the strengths, weaknesses, and risks of key interaction scenarios like purchasing, onboarding, or getting support.
4. Place customer experience metrics onto the integration scorecard:If internal measures of success focus solely on internal timeliness and cost savings, then customers will end up as an afterthought. To keep customers top of mind, make customer experience part of the scorecard that the integration team will use to measure its success.
5. Keep the customer pulse with real-time customer feedback data:It’s no good to receive data from scheduled surveys 60 to 90 days after problems and concerns arise. Instead, set up a mechanism, such as an enterprise feedback management tool, to collect and disseminate simple feedback that allows integration teams and executives to respond as problems emerge. This keeps customers reassured as opposed to investigating ways to leave.
6. Adapt communications proactively: Integration leaders need to do more than simply set up a Web site and broadcast a few messages about the merger. Instead, use real-time customer research to proactively identify communications that ease customer anxiety, as well as set expectations for how and when the integration will happen and how and when the firm will make fixes to problems that arise. Monitor customer feedback, and you should follow up and talk with customers to make sure your messages succeeded at addressing issues and allaying fears.
7. Make customer experience a rallying point: Employee and partner anxiety can be high during integration as the two firms figure out which processes, technologies, and people to implement between the two companies.
Strategists and business development executives that ignore customers do so at their own risk.
Paul Hagen is a senior principal with West Monroe Partners, in Los Angeles, where he heads the firm’s customer experience and innovation strategy. He is an experienced strategy, customer experience, and marketing professional with over 20 years of market research, human-centered design, technology and digital strategy, facilitation, and project management experience.|
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