Vodafone merger

How to make customer experience the cornerstone of a merger

With telecom giants Vodafone Group and Three in talks over a merger, we explore some of the common customer experience challenges and opportunities that arise when brands merge. 
28th Jul 2022

Virgin Media O2 (VMO2) recently celebrated its first birthday after a £31bn merger last June. The deal created one of the UK’s largest providers with 47 million customers across broadband, mobile, TV and home phone. Rumours are also swirling about another game-changing tie-in.

According to reports, Three parent CK Hutchison is in advanced talks with Vodafone about a possible tie-in. A deal between the two firms has been described as “inevitable” according to telecoms experts. It’s a good time to look at the steps that companies can take to ensure customer experience is a strategic cornerstone when they join forces.

In this article, we use sector examples to highlight some of the common CX challenges and opportunities when brands merge. M&A activity is bouncing back. Businesses across the board are seeking new alliances. They want to: secure greater scale while increasing efficiency, improve their offering, drive customer-based growth and protect market share. There are valuable insights here on steps that all companies can take to ensure CX is a strategic cornerstone when they join forces. Business survival could depend on it.

The success factor

The run rate for merger failure is high. Study after study puts the figure at between 70% to 90% according to Harvard Business Review. There are many reasons why these deals fail. Some of the reasons are financial / driven by external economic forces. Businesses pay the wrong price, the market nosedives or there is a global crisis like Covid. Some of these reasons are internal – synergies are overestimated or there is no strategic plan for integration. There could be a culture clash or a failure of leadership. The list is long (and costly). But one thing’s for sure, few mergers will survive if customers are not at the heart of the new operation.

Successful mergers tend to be built with a laser focus on what customers experience as they transition to the new entity – and beyond. There are lots of variables in the success equation. But the equation won’t work without quickly developing a strong customer retention and loyalty strategy. This will help to build and sustain consumer confidence in the power of the new, combined business.. For telcos, for example, this converts into sustained subscriber growth, more fans and more brand ambassadors.

The loyalty factor

A merger in any sector can mark a turning point whereby the new company charts a customer-centric path and invests in the growth drivers – their customers and their people. Peel back the layers of any brand delivering a leading customer experience and you’ll find they invest in the people who deliver that experience.

During a merger, there is a risk that employees turn inwards as they worry about the security of their jobs. The jockeying for position by executives and line managers and the reorganisations that inevitably follow create an inward focus. An employee engagement and training plan is crucial here to build the commitment and the skills your people need to deliver your customer experience and ‘live’ your new brand.

For all the excitement felt by senior executives about having ‘done the deal’, a merger is a worrying time for customers and employees alike. Customers wonder if the products and services they have historically enjoyed will continue to be available. Will they be delivered to the same quality and at the same price? How will they be served and what communication channels are available to them?

Keeping customers onside is not easy and the likelihood of defections is high when two businesses combine. Loyalty can be won and lost even before the ink dries on the deal. Organisation-wide communication is key. ‘Send all’ generic press releases, emails and letters won’t reassure customers that have individual wants and needs. Trust starts with early communications that connects on an emotional level and reassures customers that their custom is valued. Focus on the benefits of the new offer to the customer – not the features.

Customer satisfaction won’t be enough to see you through the transition

Businesses that join forces with high levels of satisfaction beware. Let’s get back to VMO2 to demonstrate some of the reasons why. Satisfaction levels are relatively strong. Figures from Statista showed that in 2021 – 91% of O2 mobile customers expressed some satisfaction with service. For Virgin Media the figure stood at 88% in 2021 (it was 93% in the previous year).

But ‘satisfaction’ won’t be enough to secure, and then increase loyalty. This is the first reason. While CSAT is an important KPI, this doesn’t mean that these ‘satisfied’ customers will stick with you. In competitive industries only ‘very satisfied’ customers are likely to become super fans.

Ofcom neatly nails on the head the second reason why. Telco customers are still experiencing ‘hit-and-miss’ levels of customer service. The regulator’s recent report on service standards, which covered 2021, and included the continued impact of Covid-19, found that while satisfaction levels are high, the perennial problems of long call wait times and poor complaint handling persist. There is little consistency in what O2 and Virgin customers experience. This will need to be fixed.

Take these wait times for example:

  • O2’s mobile customers were kept waiting the longest on average last year – 3min 59s, up by 1min 42s since 2020. 

  • Virgin Mobile managed to reduce wait times to 1min 59s in 2021. 

Virgin customers though were less likely than average to recommend the brand to a friend and it was the most complained about mobile and broadband provider of the year. The challenge is to unify the experience of two groups with often different experiences, demands, expectations, values, behaviours and attitudes. With all of this in mind, we thought it would be helpful to look at five action areas to put customers at the heart of any merger.

Five ways to make CX the bedrock of a merger

#1 Focus the whole organisation on the customer

To overcome the tendency to look inward, intentional organisational focus on the customer can pay big dividends. The evidence that this customer focus pays is all around us. Here are a couple of hard-to-ignore statistics from Forbes on the proven value of customer experience.

  • Companies with a CX mindset drive revenue 4-8% higher than the rest of their industries. 

  • About eight in 10 (84%) of companies that strive to improve their CX report an increase in their revenue. 

There are good lessons from the merger between the Bank of New York and Mellon Bank on how to put your customers centre stage with an immediate focus on the drivers of loyalty. When the Bank of New York and Mellon Bank merged some years ago, leadership of the European business told their Relationship Managers there would be no job losses and that priority number one was to ensure there was no loss of clients. A ‘World Class Relationship Management’ initiative was launched to bring the two groups of RMs together.

The new group developed joint plans to secure the continued commitment of key customers. The RMs attended training together, designed specifically for them and their situation. They developed a consistent BNY Mellon experience, honed their skills and crafted joint plans to strengthen their brand and reassure clients. While the merger triggered this approach, customer focus became established as the way to differentiate and deliver improved business results.

#2 Align the leadership team

The level of focus and alignment achieved at BNY Mellon doesn’t happen without a lot of hard work. Cross-functional leadership workshops helped define a clear customer vision for the new business. Management teams from both businesses had a seat at the CX table and the new customer group sat at the head. Strong leadership ensured there was a unified approach to customers and shared culture for the new business.

#3 Put your data to work to understand your new customers

Understanding the new customer base and working out how the merger impacts CX and perceptions of the brand is crucial. This is as important as planning what the new brand will look like, how operations will align and how savings and economies of scale can be found. Put your data to work before, during and after integration. Use behavioural science to better understand what your new customers value, expect, need and want – emotionally and functionally.

This will help you build your proposition around your customers – not vice versa. As customers transition, the insight will help with data-driven strategic messaging, consistency, improving the end-to-end customer journey and working out what comes next.

But the reality is different businesses will use different strategies, methodologies and tools to analyse their data. Both structured and unstructured. Departments in the same business often operate in siloes and data is skewed by incompatible practices, objectives and outcomes. You may need outside expertise to leverage insights on the factors that shape the behaviour and loyalty of your new customers, now and into the future.

#4 Develop a proprietary customer promise

The purpose of developing a proprietary customer promise is to clearly set out what the organisation will deliver to target customers in order to drive consistency and differentiation. As the new, enlarged business embraces the potential of the merger, the customer promise should be bigger and better than anything that went before. Consistent messaging underpinned by the customer promise can help to prepare customers and manage expectations.

Developing a customer promise can also help with employee preparation as they adapt to new ways of doing things. Employees will bring the new customer promise to life. So it’s important to be clear about the benefit for them and the role they play. Unhappy, unprepared or confused employees will negatively impact the customer experience from the get go.

#5 Map the customer journey to improve the proposition

Having developed a customer promise, the question becomes how do we deliver it at key points along the customer’s journey? Customer insight should enable you to identify which are ‘hygiene’ touchpoints and points where the new business can create real, differentiated value for customers. The innovative development of new ways of delivering the proposition, by touchpoint, will help drive value for target customers. When two brands combine, the customer journey can quickly become fragmented or broken. By wearing your customer’s shoes you can quickly identify priority touchpoints where gaps need to be plugged and pain points need to be fixed.

Create a touchpoint to reward loyalty

Let’s get back to our telecoms providers. In a sector where customers happily switch providers for a better offer, increasing loyalty is especially tough for telcos. Providers have traditionally relied on chasing new customers with aggressive promotional offers. But this short-termism and a product-centric mindset have a short shelf life. A deep-rooted understanding of the positioning, strengths, weaknesses and perception of the customer loyalty programmes of both companies is crucial as the ink dries on the deal. See Customer journey mapping: time for a rethink for more information on how O2 rightly already maps a touchpoint where customers seek reward for their loyalty.

The roll call of failed mergers is long. These are just five points to consider to ensure CX is the cornerstone of a newly combined business. The underlying gain of any merger is customer-driven growth. Building your proposition around your customers and embedding a meaningful customer experience can help grow market share and deliver the value of the deal.

This article was adapted from a piece that was originally published on the cp2xperience blog.


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