Service mergers are a common phenomenon in the business world despite statistics showing the high failure rates of mergers. One reason for the extreme failure rates is a lack of focus on the consumer before and after the merger. Managers either do not understand how consumers react to mergers or they do not know how to mitigate negative reactions to mergers. This dissertation seeks to address these important issues by answering two research questions. First, how does pre-merger brand valence influence post-merger brand assessments? Second, how do consumers perceive a service failure of a merged company based on their expectations of the merged firm?

Three independent studies were developed to provide answers to these research questions. Study one included a highly controlled experiment design that showed consumers are most adverse to mergers involving a negative brand. Study two featured a theoretical model that explains the consumer’s post-merger brand assessments based on their psychological reactions to mergers involving their own brand. Results suggest consumer’s perceived risk following a merger influences subsequent emotional reactions that shape the consumer’s final attitude toward the merged brand. Study three considered the consumer’s first service failure interaction with the merged firm. Results suggest service failures by a merged firm are more likely to lead the customer to switch to a competitor than the same failure by a firm not involved in a merger.

Overall, these three studies enhance the existing literature by providing a foundation for understanding how consumers react to service mergers. Future studies can build upon the findings in this research. In addition, the results of the three studies offer several managerial implications. Potential future studies, limitations, and managerial implications are discussed in the final chapter.