January 2001
Consumer Insights: Monthly Column from McCann-Erickson
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Paul Temporal's Branding Tips
Big Names - Brand Dilemmas - the problem posed by Acquisitions and Mergers

January 2001

Paul Temporal

The trend in many industries is towards size, and the last two or three years of the last century saw a monumental number of mergers between major players.

Whenever this happened, the firms were clearly concerned about two major issues affecting brand loyalty, namely the new company name for the merged entity, and what to do with the brands included in the new company.

Citibank and Travellers Group merely combined the two to form Citigroup, but Daimler Benz and Chrysler, while combining the names to form Daimler-Chrysler had a great deal of discussion about how and where their respective brands would be communicated and sold. The result was a decision that none of each company's brands would be sold off the same premises, and as far as brand communications is concerned there is little change. So whilst they are all set to reap the economies of scale as far as operations are concerned, those achievable through combined advertising and promotions activities have been sacrificed in order to cut out customer confusion and possible brand cannibalization.

Exxon and Mobil were equally decisive about their brand dilemma, when they combined to form an organization with combined sales of US$147 billion. They showed great concern about the possible effects of combining names on consumers, and in an effort to be totally transparent about what they were doing, an advertisement by the new Exxon Mobil Corporation in December 1999 readů.

We're as brand loyal as you are. Loyalty is a two-way street. So along the street, road or motorway we aren't about to confuse our customers. Yes, we've merged. But our brands Esso, Mobil and Exxon will still be there. What will change is the company behind them. ExxonMobil is a new name for technology, efficiency and service. Helping our old names treat you better than ever.

The respective brand logos are shown and the company sign off is ExxonMobil. It is interesting to note that the advertisement offers a new promise to consumers of a better experience, and whether this is deliverable in such a short time post-merger remains to be seen. At the corner of the advertisement lies the website address www.exxon.mobil.com.

TotalFina did not make such quick decisions on brands with regard to their takeover of Elf Aquitaine, but considered three scenarios. One of these was to gain marketing synergies by converting all brands to the Total name, a second was to create a new global brand name, and the third to allow the existing brands to continue as they were before the merger. At the time of writing the three are still under consideration. The problem is thorny in that Total and Fina are still operating largely as distinctive brands in many countries and are likely to continue to do so. Whatever the outcome, any re-branding is likely to be a costly activity.

In general, the rule of brand naming is that if you already gave a strong brand name do not change it, if that can at all be helped. Researchers have found that established brand names have a great deal of brand equity locked up in them, and that changing brand names can lead to unhappy customers and a loss of business. This did not seem to deter Rhone-Poulenc and Hoechst, two well-known brand names that, on merging, created a totally new and relatively meaningless name of Aventis. Huge amounts of money will have to be spent on merely gaining brand awareness for the new entity, not to mention the tremendous loss of equity that has been destroyed by the removal of well known and trusted brand names.

The point to note about these examples is that brands are powerful entities in their own right, and people get very attached to them. Careful consideration has to be given to creating new brand names, or combining brand names, with possible brand clashes that might destroy the valuable equity in terms of both loyalty and asset value that has been built up over a substantial period of time.

See Brand Name Discombobulation for interesting observations on other famous brand names, and the book 'Hi-tech Hi-touch Branding' (Wiley, 2000) by the author for these and other cases, including Agilent Technologies.

Hi-tech Hi Touch branding Excerpted from Hi-Tech Hi-Touch Branding by Dr. Paul Temporal. You can purchase this book from Amazon by clicking on the cover.