Impact of Acquisitions on Customers

Through an exploratory interview with Endurance International, the parent company of branded website hosting services such as, BlueHost, TypePad, and more than 50 other brands, I learned of their $1.1B acquisition of Constant Contact. This sure beats the default listserv capabilities that comes default with web hosting. Endurance manages its brand properties as independent companies; e.g., the same way Honda is Acura, Toyota is Lexus, Peet's is Stumptown Coffee and Salesforce is Pardot. The business practice of allowing each subsidiary to maintain a brand identity independent of its parent is more commonplace than you think. 

The basics:
  • 650k worldwide Constant Contact customers
  • 90k net new hosting subscribers per quarter
  • CC acquired 5% new customers from Endurance partnership before the acquisition

The most common impacts to customers are:
  • Brand impact - not a factor here since Constant Contact's main office will continue to provide products and services under their own name
  • Customer service - a potential factor; there are mixed reviews about customer service across Endurance's many brands since they were at one time individual companies. This is certainly a future concern to have one customer service voice for Endurance; but it doesn't seem to be a high priority at the moment
  • Change in prices - I have not seen costs to the customer decrease after an acquisition and for the acquired company, despite being a lower cost provider of email marketing services, maintaining the pace of services rendered at that cost might prove challenging
  • Change in product or service offerings - Plenty of acquired companies with good customer-oriented products and services have been shelved or eliminated from poor post-acquisition management. Marketers can only hope this will not be the case for CC.
Converting customers

Just because you acquired a company with thousands of users, doesn't mean that they'll also jump ship from their current web hosting provider to buy more services from your other subsidiaries.
Who's next? I suspect MailChimp or Aweber. These target the same customer base as Constant Contact.

VerticalResponse - acquired by Deluxe in 2013
Marketo - IPO in 2013
HubSpot - IPO in 2014
ExactTarget / Pardot / Radian6 - acquired by Salesforce
Eloqua / Responsys - acquired by Oracle
Silverpop - acquired by IBM in 2014

Here's an example from Aweber on customer acquisition costs:

Aweber 2015 metrics (SoundCloud webcast interview with Sean Cohen):
  • 17 years in business
  • 120k paying customers as of July 2015
  • Most focused on driving acquisition and continued profitability, topline and bottomline
  • Privately held, no VCs, profitable from day 1
  • Avg customer pays $20/month
Aweber customer acquisition costs depends on customer lifetime value using digital marketing spend PPC and digital display ads. Referral marketing using affiliate marketing pays 30% recurring lifetime, for the lifetime of the customer. Some affiliates make five figures per month for referring customers.

To acquire a $20/month customer is all about lifetime value. The inverse of retention is churn. For Aweber monthly churn rate is in single digit percentages, on average 3-4%.

E.g., 100 customers x 4% churn = 4 customers/month loss

The minimum lifetime value (MLV) of an Aweber customer is $500 with customer acquisition costs of roughly 20% of MLV, or $100 that Aweber is willing to spend to acquire a new customer. The average Aweber customer stays for 20-25 months. 

Under its cheapest plan, Aweber generates $2.4 M in recurring monthly revenue ($20/month x 120k customers).
Related Posts Plugin for WordPress, Blogger...