Watch out for customer attrition: customer attrition often balloons following a merger and stays elevated for an extended time. You can keep these loses under control by taking a few simple preventative steps involving the front-line personnel of the merged institution.

• Author: Babcock, Jr., Walter E.
• Position: Customer Retention - Cover story

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It is a well-known phenomenon that customer attrition surges following a bank merger and remains elevated for months--even years--afterward. What causes this added loss of customers? And, are there any concrete measures that marketers can take to avoid this problem?

We know that normal attrition averages about 15 percent annually, and that attrition following a merger can rise to 30 percent annually and remain there for a prolonged period before gradually returning to its pre-merger level.

Since the 1970s, I have been involve in bank studies that examine customer reactions--both positive and negative--to mergers. The research shows that when the acquiring bank takes steps to reduce the "negatives," and emphasizes the "positives," the merger usually experiences fewer lost accounts and scores higher in customer

Typically in these studies we identified a set of topics that accounted for 90 percent or more of the differences between "happily" and "unhappily" merged customers.

One surprising discovery: The number-one source of negative reactions from customers about a bank merger could be directly traced to the bank's own front-line staff.

The table included in this article shows some of the topics that were cited as a "negative reaction" to a merger. The table shows that 77 percent of customers noticed turnover or a change of employees, and 65 percent noticed a change in the employees' attitudes. These changes were viewed as negative by a 4-to-1 ratio and a 3.4- to-1 ratio respectively during studies conducted over a 15-year period.

For example, for every positive comment made about a change of employees, four negative comments were made.

The top two topics in the table dominated the negative reactions for almost all of the mergers studies that I conducted. That covers survey research data for well over 500,000 customers, including both the household market and the small- to middle-market business customer.

Let's look at some of the comments that customers made during a merger about the bank's front-line staff. Here is an example of a report by customers about a comment repeated by many tellers at an Indianapolis bank that merged with a Chicago bank:

"Now I have to call Chicago for your balance, so this will take a while."

After management heard about this, the tellers were asked to simply say "I'll get your balance now, and it'll take just a minute."

Here is a comment that was spoken to a mystery shopper at a bank branch...