Contents:
Branding: yes, you need a brand. But ...
Branding will not create a spike in cash flow or market share.
Rebranding costs you equity - and customers.
Branding was cheaper and easier in the old days
What can you do?

Branding: yes, you need a brand. First, branding is a key defense against commoditization - a situation in which a company’s products and services become perceived by buyers as being interchangeable with those of other companies, so buying decisions become driven by price. With the trend toward instantly and globally searchable competition across all product and service categories, the pull toward commoditization is now an elemental force in marketing. The value of branding - intelligent, relevant, branding that effectively differentiates you from your competition - has never been higher.

Branding is also a way to leverage success, expand market share, and fend off competition. Indeed, companies with established brands often rebrand as a way to penetrate perceived new markets or defend core markets. This rebranding is often a costly mistake.

No less a forward-thinker than Tom (“Destruction is Cool”) Peters in The Circle of Innovation says “An obsession with branding isn’t simply a “marketing department” issue. It’s an accounts receivable issue. A purchasing issue. An information systems issue. Heaven knows, a human resources issue. Every decision … every system … should reflect, visibly, the specific attention to (obsession with) BRANDING.” (His weird punctuation and capitalization.) In other words, brand management is corporate management, in the deepest, truest, sense of the term.

The problem is, companies are turning to branding as a panacea. Equally problematic, are the self-proclaimed “branding experts” who are happy to sell you this expensive snake oil. In inexpert hands, branding becomes a way to obfuscate relative sameness, instead of to communicate relevant uniqueness.

Cold, hard fact number one: branding will not create a spike in cash flow or market share. Quite the opposite in fact: it costs time and money to build brand equity whether you’re launching a new brand or re-launching an old one.

If you’re rebranding, by the time you’ve spent enough time and money on advertising and marketing, the conditions that triggered your quest to rebrand will have changed. Rebranding as reflex action to stem losses in market share is stupid.

How about branding the company with the name of its most-successful product - a recognized name with huge market share? This seems like a good idea, until you realize that implementing this strategy severely limits (if not entirely eliminates) your growth potential in future business areas, and ties you to a product that may not remain relevant.

Consider the case of a former multi-billion-dollar software company called MicroPro. For most of the 1980s and well into the 1990s, MicroPro made the dominant word processing program: a product called WordStar. Technology guru John C. Dvorak called WordStar “one of the greatest single software efforts in the history of computing.” The product name WordStar was better-known and more-respected than the corporate name MicroPro. So, when MicroPro rebranded under the corporate name WordStar International, it thought it was going with a winner.

Where is WordStar now? Its last lingering years are a grim illustration of brand management gone sour. It tried strategic alliances. It tried buying other companies. After many years of losses, what was left got acquired by SoftKey, then by The Learning Company, which Mattel acquired for $3.5 billion. In late 2000, after huge losses, Mattel fired CEO Jill Barad (partly because of the acquisition), and jettisoned The Learning Company for a paltry $50 million, non-cash. Today, even the memory of WordStar has vanished.

Too young to remember WordStar (or too obtuse to learn from it)? For a current, ongoing example, look at the $19 billion merger between Hewlett-Packard and Compaq: two powerful brands in a market where the fourth-largest brand, Gateway, is struggling. This merger - or acquisition, or whatever you want to call it - created the world’s largest PC maker. Ignore, for a moment, the $56.8 billion drop in HP’s market capitalization since mid-1999. Ignore, for a moment, the 74.8% drop in HP’s share value since July 2000. The fact remains that being the world’s largest PC maker is a long way from being the world’s largest PC seller. That’s it, folks, plain and simple. And, without sales, branding accomplishes nothing. Disbelieve? Despite a massive (and rather self-congratulatory) branding push, HP’s third-quarter 2003 profits remained below expectations - again.

Hewlett-Packard, Compaq, and Gateway are prime examples of companies that successfully built brands, but failed to build market share. That might be branding, but it’s lousy brand management. They threw a great party, but, in the end, not enough people showed up.
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Nor shareholders. In 1998, Daimler bought Chrysler for $37 billion. It rebranded the new company DaimlerChrysler. By mid-2000, its market value dropped by $35 billion, and by third-quarter 2001 - even with the aid of hugely popular “brand-building” designs like the Viper, PT Cruiser, Prowler, Pacifica, and Ram pick-up - its U.S. market share (that is, actual sales as opposed to brand equity) had dropped to a mere 11.4%. In February 2002, DaimlerChrysler announced a net loss for 2001, a loss nearly equaling its total profit the previous year, and slashed its dividend 60%. As of August 2003, after a $1.17 billion branding initiative starring pop star Celine Dion, Chrysler sales were down 4.7%, for a net operating loss of $1.1 billion. And still the bleeding continues.

In the meantime, while you implement your new brand image, you’ll suffer loss of continuity with your existing customers. This cuts off your most-cost-effective source of new or increased business: your past and current customers. The best you can hope for, is to do no harm; the reality is more bleak. Gateway is poised to learn this lesson the hard way - and they’ll find out after going through the expense of new packaging, store signage, stationery - in short, millions of dollars in unrecoverable hard costs. It was a great cash cow (so to speak) for a design firm, but a lousy decision for a brand manager.

In its rush to rebrand its newly acquired stores as Rite Aid Pharmacies, Rite Aid failed to appreciate the value of walk-in business attracted by a product mix that included “award-winning” ice cream. Rite Aid didn’t go so far as to rebrand Thrifty ice cream, but who goes to a pharmacy for ice cream cones - or beach balls, or cosmetics, or magazines? At the same time, by rebranding the company incurred unrecoverable hard costs - not just in advertising, but in store signage and remodeling.

Just a year after rebranding, after a steady decline of as much as 9.4% per month in front-end sales in its Western stores, Rite Aid sold 38 stores in California to Longs, reduced its corporate staff, and “realigned” its West Coast distribution center.

That Rite Aid struggled with the task of re-capturing former Thrifty/PayLess customers is further evidenced by the resignation of its president/CEO and its hiring, in early 2000, of two former Thrifty/PayLess executives to manage its newly formed “Western operating region.” Even after a 7-month, $50 million review of financial results, including re-stating expenses associated with acquiring Thrifty/Payless (and the corresponding loss of goodwill), and significant debt restructuring associated with yet another acquisition and sell-off, the company continues to struggle with cash flow, with 2000-2001 year-end losses of $5.65 per share. And, in June 2002, the company depended on a $44 million income tax benefit in the first quarter to post a meager second-quarter “profit” of 2.6 million - a loss of a penny a share. Allegations of accounting irregularities aside, the costs (both moral and otherwise) of that acquisition and misfired  rebranding still reverberate.

That brings us to cold, hard fact #3: branding was cheaper and easier in the old days. Television time was inexpensive enough to be cost-effective, especially at fringe times, even for small businesses. There was less competition in the media, less noise. People had longer attention spans. If you’re walking away from a brand that was built prior to the late-1990s (or, in fast-moving industries like web services, as little as two years ago), you’re throwing away a corporate asset that you simply cannot afford to replace.

Sure, you could re-allocate resources, increase your marketing budget, and conceivably (given intelligent brand management, sound marketing, and compelling creative execution) see an increase in brand awareness - but not necessarily in profitability.

As Peter Drucker says in his book Management Challenges for the 21st Century: “What we generally call profits, the money left to service equity, is not profit at all, and may be mostly a genuine cost. Until a business returns a profit that is greater than the cost of capital, it operates at a loss. … Until then it does not create wealth; it destroys it.”

In London, England, and in a completely different industry, is Gareth Williams, co-curator of the Victoria and Albert Museum’s Brand.new exhibition, which culminates a three-year study of the trend towards brand politicization. In a recent interview for BBC News, Williams points out that the explosive growth of new media makes branding harder to achieve. “There’s more competition, so it’s getting more-difficult to create your brand … the biggest brands in the world are often the oldest.”

So, what can you do with your brand, this corporate asset, if it no longer fits your corporate mission? You adapt it. You re-position your brand or your product or your service. Through a change in positioning instead of in branding, you harness the power of your existing brand while at the same time re-positioning your company for growth. You have to think, mind you, but you’ve got a multi-million-dollar head-start by being able to reconcile the past with the future.

Why don’t more people do this? Simple: in today’s throw-away world, where solutions are short-term and everything is disposable, there aren’t many people who know how to repair clocks, let alone brands.

It is easy to throw everything away and start from scratch. Marketing executives can then make large-scale changes and advertising managers can feel like they’re taking action. The result, however, is often a proactive - indeed, passionate - flying of the company into the ground.

Don’t get me wrong - there are times when corporate destruction and rebirth is absolutely the Right Thing To Do. Too often, though, it is nothing more than the marketing model du jour, seized out-of-context and executed with blind fervor and dumb obedience to management by adage.

Your brand is your company’s most-precious asset. Your brand is who you are; it defines you even more than what you do defines you. Brand management is corporate management. In a world in which goods and services are increasingly commoditized, a strong brand identity is the only way to survive, let alone grow. It encompasses all you have ever been. And, it can encompass all you will ever be. That’s the power of branding done right.

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