The Warc Blog

The Warc Blog

1 + 1 (doesn’t always) = 2
Robert Passikoff, President, Brand Keys, Inc
Robert Passikoff

It appears that Sprint and Deutsche Telekom are back in discussions about merging Sprint and T-Mobile, the thought being that a combination of the 3rd and 4th largest wireless carriers would create a plausible competitor to AT&T and Verizon.

This is not as simple as it sounds. Rumor has it that Sprint wants to own more than 50% of the company, thus giving them a real ego boost and the power to effectively run the business, the board, and the brand. And then there are all those financing issues to work out. And a new name for the merged company. And possibly a new brand. With a logo!

Before the battle of boardroom egos begins, let’s take a look at how the major US wireless carriers rank, according to the 2011 Customer Loyalty Engagement Index:

  1. AT&T Wireless
  2. Verizon Wireless
  3. Sprint PCS
  4. T-Mobile

Not so surprisingly – because real loyalty metrics always correlate so very highly with positive behavior in the marketplace – these rankings correspond 100% to the carriers’ degree of annual churn – from lowest to highest—that is to say, their levels of customer “disloyalty,” and, as it turns out, according to the numbers of customers they have too.

But customer loyalty isn’t additive. One plus one doesn’t always equal 2 and almost never equals 3 no matter how much the merging brands wish it, so it isn’t as simple as just adding the customer bases together or doubling the ad budget. Oh, you might, of course, start out with more customers than you had before the merger, but that’s no guarantee customers will stick around. Remember customer churn? Customers only remain loyal to brands that are able to meet – even exceed – their expectations. And that stand for something that’s meaningful to them. Just merging two companies guarantees neither.

So, mergers aren’t easy. From a business or a brand loyalty perspective. But there are three business-based criteria that must be met if companies want to ensure that their calls for amalgamation aren’t disconnected after the first ring:

  1. The brands have to contribute something to one another,
  2. The must share resonating values, and
  3. There must be mutual respect and meaning between the brands.

Oh, and these days, when two brands merge they have to be sure the new entity can not just advertise more, but must be able to truly delight the consumer.

Subjects: Brands, Marketing, Consumers

10 March 2011 16:31

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