In the Wake of a Merger: Consumer Reactions to Service Failures

Abstract

Customers are often overlooked during the merger process in both reality and the marketing literature. This research features an experiment with 431 U.S. consumers that assesses the impact of a service failure following a merger on a variety of consumer behaviors. Key results indicate that consumers are more likely to switch service providers if they experience a failure of any magnitude (major/minor) following a merger than if they experience the same failure in the absence of a merger. This finding emphasizes that firms involved in service mergers have to be extremely diligent about preventing customer defection and implement focused marketing strategies sooner rather than later. Several managerial implications are provided based on the results of the study.