UNIVERSITÀ
DEGLI STUDI
DI PADOVA
UNIVERSITÀ DEGLI STUDI DI PADOVA
FACOLTÀ DI ECONOMIA
Corso di Laurea Triennale in
Economia e Management
Curriculum International Economics and Management
Tesi di Laurea
WHAT’S IN A NAME?
DISCUSSION ON BRAND VALUE AND THE DYNAMICS OF
REBRANDING
Relatore: Prof. Antonella Cugini
Laureanda: Giulia Carrer
n⁰ matr. 608577
Anno Accademico 2011 / 2012
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2
CONTENTS
1. Introduction .................................................7
1.1 YSL historical background and brand identity.................. 9
1.2 Hedi Slimane creative direction phase........................... 10
1.3 The rebranding transaction ............................................ 12
1.4 Initial reactions ............................................................... 14
2. Brand Management...................................17
2.1 What is a brand? ............................................................ 17
2.2 The functions of a brand ................................................ 19
2.2.1 Consumers’ perspective .................................... 20
2.2.2 Company’s perspective ..................................... 21
2.3 Brand positioning process ............................................. 23
2.4 Brand as an asset .......................................................... 27
2.4.1 The value of a license ........................................ 28
2.4.2 Brands on the balance sheet ............................. 30
3. Brand Equity..............................................31
3.1 Economic Value ............................................................. 31
3.1.1 Cost-based approaches ..................................... 34
3.1.2 Comparables ..................................................... 35
3.1.3 Premium price.................................................... 35
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3.1.4 Economic use .................................................... 36
3.1.5 Interbrand brand evaluation method .................. 37
3.1.6 Brand international accounting treatment .......... 39
3.2 Social Value ................................................................... 41
4. The rebranding process .......................... 45
4.1 What is rebranding?....................................................... 46
4.2 Why do companies rebrand? ......................................... 49
4.3 How to deal with a rebranding process .......................... 52
4.4 A double edged sword: main consequences ................. 55
4.4.1 Positive results .................................................. 55
4.4.2 Negative effects ................................................. 57
5. Conclusions .............................................. 59
6. References ................................................ 63
7. Site Links .................................................. 65
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To my future.
5
6
________________________INTRODUCTION
In modern mass economies, consumers have an impressive array
of choice. There are, for example, dozens car manufacturers, hundreds
car models and thousands different vehicle specifications to choose
from: the days when Henry Ford offered “any color you want as long as
it’s black” are now long gone. This diversity of choice puts pressure on
those making or selling products and services to offer high quality,
excellent value and wide availability (Blackett, 2006). It also forces them
to find more effective ways of differentiating themselves and securing
competitive advantage. According to Fortune Magazine, back in 1997:
“In the twenty-first century, branding ultimately will be the only
unique differentiator between companies. Brand equity is now a key
asset.”
Much of the skill of marketing and branding nowadays is concerned
with building “equity” for products whose characteristics, pricing,
distribution and availability are really quite close to each other. Take
cola drinks, for example: Coca Cola and Pepsi Cola are able to
dominate the worldwide cola market. The power of their bottling and
distribution systems no doubt plays a part in this, but the main factor is
the strength and appeal of the two brands to consumers. Their strong
and instantly recognizable names, logos and colors symbolize the
makers’ promise that consumers’ expectations will be fulfilled, despite
all this might seem a subtle.
The value to businesses of owning strong brands is incontestable.
Brands that keep their promise attract loyal buyers who will return to
them at regular intervals. The benefit to the brand owner is that
forecasting cash flows make the administration easier, as it becomes
possible to plan and manage the development of the business with
greater confidence. Football teams, political parties, pop stars and
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Countries, all now consider themselves brands; the Church of England
was recently urged in the media to adopt a more “branded” approach
for the recruitment of clergy (Blackett, 2006).
So why do some companies intentionally choose to rebrand
themselves? Is there a good reason to intervene on this kind of
dimension? A brand conveys to consumers, shareholders, stakeholders
and the world at large all the values and attitudes embodied in a
product or company, it encloses their mission, vision and heritage and it
takes time to achieve full awareness amongst consumers. Is it
reasonable to revise all this?
That’s the question I’ve asked to myself since the beginning of my
internship in Safilo, at the Marketing and Licensing Dept: why does
such a great maison, like Yves Saint Laurent is, so full of tradition and
recognition, need to change its face and identity? Is it worth? Which
might be the consequences of this?
It’s definitely quite early to issue a final judgment regarding Saint
Laurent Paris’ future, but my intention now, is to follow a path, starting
from the acknowledgement of brands as proper assets, that comes at
clarifying weather it is appropriate or not to modify their identity, both
internally and externally.
I’m really grateful to Safilo for having given me the opportunity to
carry out my internship at their Licensing Dept. because this allowed me
to understand how a great brand should be managed: there’s a
thorough process of planning and performance analysis behind frames
and sunglasses on display in stores, all done in constant relation with
the label.
Arrive at a time of rebranding, when one Creative Director went
away and a new one came, has been simply the icing on the cake (for
me).
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1.1 YVES SAINT LAURENT
HISTORICAL BACKGROUND AND BRAND IDENTITY
______________________________________
No one has ever made spill more tears than Yves Saint Laurent
when he produced his first collection: the New York Herald Tribune
wrote that it was “the most exciting fashion incident of all the times”. It
was January 30th, 1958, just
three months after the death of
Mr.
Dior.
fashion
The
international
community
pilgrimage
at
30th
went
on
Avenue
Montaigne afraid to assist at the
end of High Fashion. Would a 21
years old boy be able to maintain
the fame and shine of the then
most prestigious fashion house,
preventing the French economy
from collapsing? He did it. Mr. Saint Laurent faced this task with
commitment and enthusiasm, rejuvenating fashion with elements taken
from the youth culture.
After three years standing in Dior, he shocked traditional customers
by launching the Look Beat: leather jackets, turtleneck sweaters, miniskirts, a tribute to insurgent students from Rive Gauche. It all sounded
like an explosion raised from the streets so Marcel Boussac, financier of
Dior’s empire, decided to dismiss Yves Saint Laurent in favor of Marc
Bohan.
In 1962 Mr. Saint Laurent, together with Pierre Bergé, his lifetime
partner, founded Yves Saint Laurent Couture: no other fashion shows
had never recalled so many people and generated such high
expectations as much as his first one. He was the first, in 1966, to
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realize a ready-to-wear collection, called
Rive Gauche, more affordable than most
of other designers’ collections, in an
attempt to democratize fashion: overalls,
safari
jackets,
transparent
dresses,
tuxedo suits for women were some of his
cult pieces.
Diane
Vreeland,
famous
Vogue
Editor-in-Chief, said: “Coco Chanel and
Christian Dior were giants, Saint Laurent
was a genius”.
1.2 HEDI SLIMANE
CREATIVE DIRECTION PHASE
______________________________________
In 1993 the Fashion House, back from 30 years of considerable
economic
success
and
expansions,
has
been
sold
to
the
pharmaceutical company Sanofi Pasteur, an holding controlling many
luxury brands such as Van Cleef and Arpels, Oscar de la Renta, and
Fendi. After six years, in 1999 the Gucci Group acquired Sanofi and, as
a consequence YSL too, for one billion dollars. This has been the first
great step towards the creation of PPR group, one of the world’s
leading apparel and accessories groups, run by Franҫoise-Henry
Pinault.
From this moment onwards, several designers have been
appointed as Creative Directors of the maison, starting from Tom Ford
to Stefano Pilati, who decided to drive the brand image to a more
traditional and French appeal.
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On March 2012 a PPR Press Release announced the appointment
of Hedi Slimane as new Creative Director of the maison Yves Saint
Laurent: “Slimane will assume total creative responsibility for the brand
image and all its collections. In parallel with this new position, he will
continue to pursue his career in photography. Hedi Slimane thus returns
to the fashion house where he was Artistic Director of Menswear until
2000”.
“Hedi Slimane’s exceptional talent
and understanding of the spirit of Yves
Saint Laurent heralds a promising new
chapter in the story of the maison”, said
Paul Deneve, Chief Executive Officer of
Yves
Pinault,
Saint
PPR
Laurent.
François-Henri
Chairman
and
Chief
Executive Officer, added, “As one of the
most important French fashion houses,
Yves Saint Laurent today possesses
formidable potential, which I am confident will be successfully
harnessed and revealed through the vision of Hedi Slimane.”
Born in Paris in 1968, Slimane had been installed in the position of
Director of menswear at YSL by Pierre Bergè himself in 1996, but he
decided to leave in 2000 to accept the same position at Christian Dior,
where he created Dior Homme. During his seven years at Dior, he
imposed his style and his new stretched male silhouette, relayed by his
peers male and female and adopted by the 2.0 generation. The
silhouette, combined with the thin black tie, became his signature and
the start in fashion of the rock revival. Thanks, in part, to his
contribution, in 2002 Dior’s business increased by 41% and in the same
year he received the CFDA Award for Best International Designer. In
2007 he decided not to renew the contract with Dior to pursue his
career as professional photographer.
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Now, back to Yves Saint Laurent, according to the powers provided
him, Slimane decided to rebrand the RTW line, major part of the actual
business, in Saint Laurent Paris, depriving the full logo of the founder’s
first name. What’s more, it’s not the first time that he causes a stir with a
considerable name change: in 2001, taking the creative helm at what
was then “Christian Dior Monsieur”, the designer rebranded the
collection “Dior Homme” as part of a bold new strategy that ultimately
drove a major resurgence in sales and influenced the direction of
menswear for most of the decade.
Contrary
to
many
speculations, rather than a
rejection of the brand’s
heritage,
Slimane
has
reasoned the move as a
return to the company’s
original branding, thereby
restoring the house to its
truth, purity and essence, taking it into a new era, while respecting the
original principles and ideals. Is this retro-branding calculated to
reenergize the label while also connecting it to its past?
1.3 THE REBRANDING TRANSACTION
______________________________________
Since the very beginning, such an impressive change required a
clear statement of action from Saint Laurent CEO Paul Deneve, who
stated:
“I am very pleased to announce an exciting step in the story of our
brand and our business. As part of our strategy to become one of the
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world’s true leaders in fashion and luxury, we are transforming the
name of our brand from Yves Saint Laurent to Saint Laurent Paris. The
new name of our brand has been shared with the media today.
The brand identity and visual language will be introduced over the
next several months and will be fully in place for the SS13 collection.
This change celebrates our legacy and heritage, while boldly marking
our ambition to the future. It’ll allow us to return to the fundamentals of
YSL and revive the spirit and the intentions that reigned over the
creation of Saint Laurent Rive Gauche in 1966: principles of youth,
freedom and modernity.”
When someone makes an investment to buy a luxury product, such
as an YSL one, he goes partially saying that the service should be
perfect, the product should be of exceptional quality or carefully
prepared for the individual purchaser, he mostly needs the product to
be part of a family of products, clearly identifiable. Each brand should
have its own aesthetic codes and maintain a strong coherence across
its entire range of products, starting above all from the brand. Luxury
business is, primarily, a business of brands (Chevalier, Mazzalovo,
2012).
As for the Countries’ capacity to pay their debts, good warranties
are necessary for such type of transactions to ensure that the initial
promise made to consumers/investors will be kept. According to this
argument lies the statement of the late couturier’s partner, Pierre Bergè,
who founded the company with Yves Saint Laurent in 1962, outspoken
supporter of the rebrand: “I’m very happy. Anything that makes the
house more Saint Laurent is welcome.”
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1.4 INITIAL REACTIONS
______________________________________
Let’s report first of all that online traffic and word of mouth
generated by the fashion industry is second only to automotive industry:
90% of all high-end brands have a Facebook profile, a smaller
percentage, till now, have a Twitter account (L2 research data). YSL is
part of both of them.
These,
in
fact,
have
been, and still are, the media
instruments
adopted
from
both sides, company and
consumers, to express the
reactions to the changing:
hereinafter
some
responses collected.
14
of
the
Despite negative responses, when a
company makes a bold or highly visible
move like this, it is giving a unique
opportunity to tell its story on a broad stage. Since
the announcement, the legacy of YSL brand has
been at the forefront of media attention and this is
an opportunity to strengthen the heritage while
building anticipation for Slimane’s debut SS 2013
collection. The name change invites followers to pay attention to what
will happen next.
Once again, it’s far too early to evaluate the overall business impact
of Slimane’s new branding, but similar rebrands happened at other
iconic houses in past years: today the company built by Coco Chanel is
simply known as Chanel, while Christian Dior is branded Dior across
most of the company’s products and properties and Fratelli Prada is
now successful as Prada.
Despite all this, my intention is not to focus exclusively on the
fashion industry: many other examples allow to better understand the
value of a brand as an asset and its proper management, which will
lead straight to the extreme intervention on a brand, its rebrand.
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2. BRAND MANAGEMENT
2.1 WHAT IS A BRAND?
______________________________________
Many industries, especially in the consumers goods segment, have
now reached such a degree of saturation that market potential is
virtually exhausted and growth can be achieved only at the expense of
competitors. This is why suppliers, in competitive environments, are
attempting
to
hone
competitive
advantage
through
increasing
differentiation of their brands, emphasizing how they meet the needs of
selected customers groups and market segments (Lemon, Rust and
Zeithaml, 2001).
On such a competitive field, it becomes harder and harder for a
company to differentiate its products from those of competitors and
make them stand out from the crowd of different options available:
under
these
conditions,
brand
leadership,
specifically
building
sustainable brands and creating brand value, is becoming a strategic
success factor for companies. They have learned how important it is to
be known and appreciated, not just by investors, customers, suppliers
and employees but also by opinion formers, activist groups and the
general public: with the advent of the internet such companies find
themselves increasingly in the “global fishbowl” (Blanckett, 2006),
where damaging news or opinions travel fast and wide.
Brands are key assets in the relationship between companies and
consumers, because they represent consumers’ perceptions and
feelings with respect to a product and its benefits, and this is all a
product or service means for consumers.
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Some of the most successful branded companies use correctly their
brands as central organizing principle. Richard Branson’s determination
to give the man in the street a better treatment, whether it is in financial
services, gym care or air travel, animates
the organization and acts as a filter for
corporate development. Virgin Atlantic’s
flyers can easily feel the difference: not only
the
flight
cheaper
is,
but
the
whole
experience is different. It may not be to
everyone’s taste, but the friendliness and
informality of the staff reflect the personality
of Branson himself. The result is a wellmanaged customer experience, distinctive
and memorable, priceless.
Three are the main pillars which must be set up to effectively trust
on a solid brand:

Keep it relevant with its business: what if in 1997 Steve
Jobs had not changed the brand from Apple Computer to
Apple? Would have consumers allowed
him to sell products such as the iPod or
iPhone? For consumers to respond to
the appeal of the brand, they must first
see clearly what is its company’s
commitment and effort: nobody would
ever buy financial products from General
Electric, nor cars from Pizza Hut;

Communicate the diversity, in comparison to competitors:
many great companies produce and sell motorbikes but
purchasing an Harley Davidson you obtain a product strongly
different from a Yamaha or a Piaggio motorbike;
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
Brands are based on promises and trust, so they must be
credible: what if Volvo’s “Safety First” policy would not be
verified? All the resources invested in brands which don’t
align their offering to their promise are vain.
From this point on I’ll analyze more in details how brands should be
managed in order to exploit their potential to the fullest. If managed
properly, this element can be evaluated as a real asset, with actual
economic and social value.
2.2 THE FUNCTIONS OF A BRAND
______________________________________
A brand is the face that a company presents to the world, its
business card.
Consumers expect attractive, well-differentiated products and
services that will be equal to their expectations and are well priced.
Employees want to work for a company with an engaging business
idea, to which they feel bound and were they can make a difference.
Shareholders expect a well-managed company with a firm commitment
to growing shareholders value. Trade partners want fairness, respect in
their dealings and the company’s reputation to enhance their own.
Opinion leaders and industry commentators expect performance,
innovation, transparency and a sense of social responsibility. Interest
groups want to be listened to and push to take action (Blanckett, 2006).
That’s the reason why the range of functions connected to brands is
as broad as the amount of stakeholders involved. For reasons of clarity
I grouped them into two different sections, analyzing at first, the
consumers’ perspective and then the companies’ one.
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2.2.1 CONSUMERS’ PERSPECTIVE
______________________________________
Brands play a role in terms of communication and identification:
they offer a guidance during the purchasing process because they
convey an expectation, offering help and support to those making
purchase decisions, just like a kind of route map. Interpret and digest
information on products is easier if a stable brand platform has been
built. An useful example could be related to the fruit and vegetable
market: many consumers are not sensitive to any particular feature of
such products, nor with reference to the origins neither to their
cultivation methods, others feel the difference and ask for high quality
natural and organic products. The former category of consumers will
probably go to the first greengrocer on their way while the latter one will
almost certainly go to Whole Foods Market, a company that has made
its mission of selling the highest quality products it possibly can, the
center of its offer since 1980.
Having such a well-defined brand which supports the purchase,
minimize the perceived purchasing risk on the consumers’ side, helping
in cultivating trust-based relationships and in generating regular cash
flows. Moreover, without a clearly received brand, companies would not
risk innovating, since they would not be able to finance new products
and services with their own efforts and investments, and would
therefore not be able to capture the benefits of innovation. In Brasil,
Unilever’s Ala brand detergent was created specifically to meet the
needs of low income consumers who wanted an affordable but effective
product for laundry that was often washed by hand in river water:
Unilever obtained direct business benefits from this product, and
consumers too (Hilton, 2006).
A brand can also serve as a social ID card, expressing membership
to a certain group or the adherence to certain values: it is a tool of
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identity formation, which can even engender a sense of distinction. If
branding is about belonging to a club, then Apple is one of the rulers. Its
huge success is because the mission statement resonates throughout
each and every part of its operations: brand loyalty begins from the
inside out. People who buy Apple products know of the passion and
dedication that went into making them and are proud to be recognized
through these values. All this unequivocally influence the brand
performance: back in 2007 Apple’s brand value amounted to 11,037
million dollars, last year it was 33,492 million dollars (+32,95% in 4
years) (Interbrand data).
Last but not least important point on which I will focus is the
powerful mechanism for consumers protection ensured by the presence
of the brand. It’s often assumed that regulation is the consumer’s best
protection against poor quality goods and services and of course it’s
true, it plays a vital role in enforcing and raising standards in various
fields but, how could regulation work without brands? The need of
brands to create and maintain customer loyalty is a powerful incentive
for them to guarantee quality and reliability: consumers are best
protected when a brand is involved, as the company that owns the
brand will urgently want to put things back right. Kodak yellow meant
the film would have worked, Coca-Cola red means the drink will quench
the thirst and not poison who’s going to drink it, Nivea blue means the
cream will not give a rush: all this is guarantee by brands (Hilton, 2006).
2.2.2 COMPANY’S PERSPECTIVE
______________________________________
According to what I explained in the previous section, the main
function of a brand can be summed up as the ability to provide a point
of reference to consumers while purchasing. Once they are satisfied
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with such product, consumers tend to buy it back or reuse it or
recommend it to others, but to do this, they must be able to easily
distinguish between identical or similar products: this can be done only
through the brand, the only vehicle which allows a company to build a
relationship of trust with its customers. A trust that is essential for the
acquisition of market share and to strengthen the company’s image.
Particularly strong brands can establish the predominance of
premium prices on the market and soften consumer reactions to price
changes: this decreased sensitivity to price changes allows companies
to have a significant competitive advantage in terms of stable and
constant cash flows over time generated by the installed base of loyal
consumers. Diesel uses a model based on premium prices. This is far
more a lifestyle than a clothing brand and has created a whole new
approach to get engaged with its customers, through the vision and
mission of founder Renzo Rosso. The price of Diesel’s products needs
to reflect the substance and value of that experience. We do not pay a
premium price for Diesel jeans because they are premium quality, this
is taken for granted, we pay a premium price because the jeans and the
brand fit in with and even encourages a premium dynamic lifestyle built
for
“successful
living”,
as
Diesel
would
say
(www.businesscasestudies.co.uk).
In addition to this, strong brands keep sales levels and market
share constant and considerably less dependent on short-term special
promotions: those brands, with their ability to secure income, can be
classed as productive assets in exactly the same way as any other
more traditional asset of a business (plant, equipment, cash,
investments and so on).
Co-branding, licensing and franchising are just three possible ways
to exploit a brand (I will talk about it later in my analysis), broadening its
exposure and enhancing its message. Despite the serious economic
crisis that hit worldwide markets in 2009, the Armani Group showed
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remarkable
staying
power
when
compared
with
the
average
performance of the market, generating a turnover of 6 billion euro at
retail value including licensed products, of which 4 billion Euros from the
core business and 2 billion Euros from third party licenses, by means of
fragrances, watches, eyewear, cosmetics and jewellery.
2.3 THE BRAND POSITIONING PROCESS
______________________________________
If a brand needs to be a source of value for an organization, its
positioning in the market and in the minds of consumers will be primary
to the actual value created. “Taking up a position”, in a sense of
showing leadership and vision in how your brand will deliver its promise,
meet people’s needs and satisfy their expectations and desires, is
increasingly important, even more within our highly competitive
environment. Procter and Gamble “happy baby” brand positioning for its
Pampers brand, allows them to go beyond the nappy category and
stretch into all kinds of products and services that make babies happy
and comfortable, and this is a great business opportunity (Thompson,
2006).
Understanding all
stakeholders needs
and desires
Opportunity
modelling
Brand
platform
Brand
identity
Brand
architecture
Continuous
evaluation and
development
Source: Brands and branding
The brand positioning process begins with the identification of
each organization’s stakeholders, assessing how important they are
and defining the ideal relationship needed with each of them to enable
business goals and objectives to be met. Different stakeholders will
perceive the brand differently because they understandably possess
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different needs: for example, a corporate brand such as Unilever
primarily has resonance with employees, investors, channel partners
and suppliers, whereas the company’s product brands such as Knorr
and Mentadent speak to consumers. Once the different key stakeholder
audiences have been identified, however, positioning should not be
based on lowest common denominator that unites them but, rather,
should aim to focus their different points of view towards shared
perceptions in the future.
Almost every strong brand begins with a great idea, and for it to
succeed it needs to have great positioning: to some extent inspired
intuition can help identify the positioning opportunity, but in practice
it requires many systematic researches and analysis that take into
account strategic options, core competencies, current and future market
trends and customers’ wants, needs and perceptions. The core idea for
brand positioning is often first recognized through relevance and
differentiation: once understood how existing and potential customers
define ideal experiences and perceive the world with which they
interact, it’s possible to determine what they are missing from existing
products and services and thereby identify suitable opportunities to
stake an unclaimed territory, all this trying to gain a leadership position
by differentiating from competitors. Developing a deep evaluation of
customers’ functional and emotional needs and an understanding of the
marketplace and competitive dynamics, are not the only two tasks to be
accomplished when positioning a brand, is then necessary to balance it
all with credibility and stretch opportunities (Thompson, 2006). For
consumers to be loyal to a brand, this must be true to itself and keep
the promises it made while adapting itself to time passing by: in other
words it’s tailored on the basis of organizational priorities, resources
and aspirations. Overall, the sources of information for the construction
of an effective brand positioning are broad: management interviews,
employees focus groups, business plans, industry studies and desk
researches, all contribute to form a picture for each of the four
dimensions analyzed.
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The underlying aim of a brand position should be to enable it to
survive and keep growing forever, regardless of how competitive
dynamics and business needs evolve over time. The challenge, indeed,
is to identify a core idea that frames an ambition or aspiration for the
brand that will be relevant to target audiences over time. Vision, mission
and values are the terms most often used to define the central building
blocks for the brand, and they form the so-called brand platform. An
example will help to easily understand the dynamics of such task.
Marks & Spencer, a retailer that in the 90s suffered a rapid decline after
years as one of the UK’s most admired companies, turned its business
fortunes around by regenerating its brand platform. It did this after
extensive customers, suppliers and staff researches and by taking into
account the brand’s history and future market trends. The vision
developed was “To be the standard against which all others are
measured”, with a mission “To make aspirational quality accessible to
all”. This brand platform was then the driving force behind new
products, services and corporate behavior, as well as new visual and
verbal style, but what’s more, it also provided a benchmark and filter for
all new developments (Thompson, 2006). The marketplaces in which
brands exist are now evolving faster than ever before, the speed of
innovation has increased competitors’ ability to imitate one another and
the proliferation of media vehicles makes long lasting differentiation on
basic product grounds increasingly difficult: that’s the main reason why
a process with seemingly intangible effects is otherwise the foundation
of the entire building.
Is commonly accepted that the first face of the brand is its name,
which works in tandem with the brand identity, vision, mission and
values. With this in mind, it is not difficult to understand why name
creation, especially for a brand that intends to cross geographic and
cultural boundaries, is a challenge itself. Descriptive names are the
easiest to come up with and often the most explainable in media
coverage and rational business discussions but they can be binding
when new opportunities are coming. For example IBM was originally
25
known as International Business Machines but decided to change its
brand in favor of the former, to be allowed to extend its business
activities beyond its core ones without losing full credibility. On the other
hand abstract and associative names might be highly and immediately
differentiated and more easily registered, but they also require
substantial investments in communicating what they are about. They
can be subjected of criticism, even ridicule, when announced, and this
can make an organization worried of going down this way, but unusual
names are often more memorable than more predictable ones, and
even those that are mocked at first can be accepted and even admired
in time. Diageo, Orange and Accenture are names that had their fair
share of criticism when first launched but nevertheless have become
familiar. Another reason for choosing an unusual name is that you are
less likely to encounter the problem of having someone claiming it in
any of the countries where you want to register it.
Brand architecture orchestrates the relationship between the
corporate brand and its businesses, product lines and product brands
and it should manage to create value by clarifying all the levels of
branding. Its definition begins returning back to the role a brand plays
with different stakeholder audiences and, again, is based on an
understanding of the ambitions of the brand (Thompson, 2006).
Implementation of brand architecture systems should be sensitively
managed throughout an organization but it does not necessarily need to
reflect organizational structure and processes (or vice versa), the two
should simply support one another.
At the end of the process, but spread throughout it, a continuous
appraisal and gaps recognition must be organized to effectively manage
it.
A well-structured brand positioning is as basic as a solid financial
plan in creating long-term value for business, it’s the driving power for
sustainable brand value. This long-term horizon of the brand platform
26
provides direction for interactions with all stakeholders audiences and is
thus the engine behind brand positioning.
2.4 BRAND AS AN ASSET
______________________________________
Recent rumors say that an offer amounted to 87 million euro has
been made by Apple to take home an historic brand of televisions
“made in Europe”, Loewe. Its market capitalization amounts to 59
million euro and 2011 financial statement registered a 10,5 million euro
loss, so why does the Cupertino giant would seek it? The answer is that
Loewe has a well-established brand heritage appreciated for its knowhow on devices for home entertainment and an already stable installed
base of consumers. All this together weighs more than anything else.
Brands can help generate significant value for a company, above all
in market segments where brands have large ascendancy, and this
value is generally expressed in terms of monetary value. Around half of
the capitalized value of companies worldwide consists of brands and
name rights, which means that a brand, or brand value, can literally be
considered one of a company’s most valuable asset (Lindemann,
2006).
All this is clearly demonstrated in field of mergers and acquisitions:
where production capacity or manufacturing technology were once
decisive factors considered during company takeovers, today brands
and the space they inhabit in the minds of consumers increasingly
occupy center stage. No better confirmation can be derived from last
year Microsoft’s 8,5 billion dollars acquisition of Skype: its estimated
market capitalization amounted to 1 billion dollars and the acquirer
(Microsoft) has taken responsibility to write off its 686 million dollars
27
debts. Was this an act of mere generosity? - Other competitors
interested in the deal were Google and Facebook - Of course not. The
acquisition enabled Microsoft to gain a brand with a strong online
identity which might help the
advance
of
company
business.
which
in
A
Redmond
the
online
brand
identity
required
a
surplus
expenditure of 7,5 billion of
dollars.
It is not surprising that much of the mergers and acquisition activity
of the past 20 years or so has involved brand-owning businesses: the
durability of brands, the quality of their earning power (unlike short-lived
technology assets) and their widespread appeal make them highly
desirable properties.
Better credit ratings, co-branding opportunities, brand extension,
licensing agreements are just some of the possible ways to exploit the
potential of a brand: in the next section I’ll analyze the latter one, taking
advantage of my internship experience.
2.4.1 THE VALUE OF A LICENSE
______________________________________
With its many benefits, licensing can be one of the most powerful
tools in brands’ marketing arsenal. In today’s fragmented market place,
strategic brand licensing is among the most authentic and credible
forms
of
communication,
providing
consumers
with
additional
opportunities to interact with a brand in further ways. By integrating
28
brands throughout daily life, licensed products forge a richer connection
between the consumer and the core brand.
Licensing improves a brand’s image and positioning, generates
revenues through the sale of products, adds consumers touch points
while increasing the popularity and profitability of brands. A welldefined, strategic licensing program promotes, supports, and protects
one amongst a company’s most precious assets, its name.
Interestingly
enough
Harley
Davidson,
American historical motorcycle manufacturer, 2011
brand value 3,512 million dollars, gets more profits
with the use of its trademark license to produce
merchandise than selling motorcycles. In 1997 the
Ford Motor company produced an Harley Davidson
customization with full logo of a commercial vehicle
of its F-series line. This attempt has been followed
in 2006 by the Ford pick-up F-150, full Harley
Davidson customized. What is more, a partnership
with Fisher Price, enables them to cultivate the
next generation of Harley Davidson enthusiasts
while still rewarding devoted followers. A comprehensive offer designed
for each kind of consumers.
The great majority of successful companies invest many years and
million dollars to grow up awesome brands but as many others decide
to license those brands or logo in order to exploit their potential in
connection with different know-hows. The market of licenses has
registered an exponential growth during the last decades: in United
States and Canada retail sales from licensed products have increased
from 4 billion dollars in 1977 to 55 billion dollars in 1987 and more than
187 billion dollars in recent years. This is made possible thanks to the
advantages recordable on both sides (licensor and
licensee):
maximizing the sales effort the licensee maximizes its profits, on which
29
the amount of royalties owed to the licensor is calculated. It’s a
mechanism of mutual benefits: the more one invests, the bigger the
amount of money gained by both. The alternative is to provide a
minimum royalties guaranteed to the licensor at the end of each fiscal
year: a kind of insurance for the one that owns the brand and, at the
same time, and incentive for the one who keeps it under concession.
2.4.2 BRANDS ON THE BALANCE SHEET
______________________________________
Is it possible to show the potential of a brand through the
accounting documents? How can a company, which owns a strong
brand, benefit from this asset?
Through the early chapters of the analysis I’ve made clear that such
asset has a great importance from many perspectives. Today, many
companies including LVMH, L’Oréal, Gucci, Prada and PPR have
recognized acquired brands on their balance sheet and used the
balance sheet recognition of their brands as an investor-relation tool
and as a financial performance indicator (Lindemann, 2006).
Is it allowed? Fair? In the next chapter I’ll focus on this matter,
talking about what should be done, what is actually done and which are
the methods used when appraising brand equity.
30
3. BRAND EQUITY
______________________________________
A former McDonald’s CEO stated: “Even if all our resources, each
building, each facility were destroyed by a natural catastrophe we would
anyway be able to borrow all the necessary funds to replace them in a
short time, relying on our brand equity”.
For most of the last century, tangible assets such as facilities, land
and buildings, receivable and investments, were considered as the
main source of business value. The market was aware of intangibles
but their estimated value remained unclear and was not specifically
clarified. This does not mean that management failed to recognize the
importance of intangibles: brands, technology, patents and employees
were always at the heart of corporate success, but rarely explicitly
valued.
3.1 ECONOMIC VALUE
______________________________________
A study by the US Federal Reserve Board showed the considerable
increase in the importance of intangibles in relation to the overall
amount of assets during the second half
of the 20th century.
Considering the increasing rate of patents issued worldwide from 2000
to 2007, +38,9% (WIPO, 2009) and the systematic rise in brand value
common to many brands (in 2011 Ranking of the top 100 brands, only
14 brands out of 100 registered a decreasing value) today it is still
possible to argue that, in general, the majority of business value is
derived from intangibles.
31
Brands are special intangibles that in many businesses are the
most important assets: they influence the choices of consumers,
employees, investors and government authorities and such influence is
crucial for commercial success and the creation of shareholder value.
Even non-profit organizations have started to take advantage of the
brand as a key asset for obtaining donations, sponsorships and
volunteers: one above all is Emergency, which relies upon its brand to
raise donations (+18,7% between 2009 and 2010) and exploit its
merchandising potential. All this would have not be possible without a
strong and reliable brand on behind.
32
Several studies have tried to estimate the contribution that brands
make to shareholder value. A study by Interbrand in association with JP
Morgan concluded that on average brands account for more than one
third of shareholder value. The Coca-Cola brand alone accounted for
54% of the stock-market value of the Coca-Cola Company and all this,
despite the fact that the company owns a large portfolio of other drinks
brands such as Sprite and Fanta. Even the McDonald’s brand
accounted for 48% of shareholder value.
It has also been shown that a portfolio weighted by the brand
values of the Best Global Brands performs significantly better than
Morgan Stanley’s global MSCI index and the American-focused S&P
500 index (Lindemann, 2006).
Economic value creation becomes the focus of brand management
and all brand-related investment decisions: companies as diverse as
American Express, IBM, Samsung, Accenture, United Way of America
and Fujitsu have used brand valuation to help themselves refocus their
businesses on their brands and to create an economic justification for
branding decisions and investments. Many companies have made also
brand value creation part of the remuneration criteria for senior
marketing executives. Despite all this, unlike other assets such as
stocks, bonds, commodities and real estate, there is no active market in
brands that would provide faithful values so, a number of brands
evaluation models, more or less valid, have been developed.
I’ll dedicate just a short paragraph to research-based approaches,
which use consumer researches to assess the relative performance of
brands. They do not put a financial value on brands, instead they
measure consumers’ behavior and attitudes that have an impact on the
economic performance of brands. Although the sophistication and
complexity of such models vary -they all try to explain, interpret and
measure consumers’ perceptions that influence purchase behaviorthey are insufficient for assessing the economic value of brands.
33
From now on I’ll focus on financially driven approaches, more
usable in economic terms, but still not univocal in terms of methods
adopted. Despite the
commercial
importance
of brands,
their
management is still lacking compared to the one of their tangible
counterparts: even though measurement has become the mantra of
modern management, it is astonishing how few agreed systems and
processes exist to manage the brand asset.
3.1.1 COST-BASED APPROACHES
______________________________________
They define the value of a brand as the aggregation of all historic
costs incurred or replacement costs required in bringing the brand to its
current state (development costs, marketing costs, advertising costs
and other communication costs,…). These approaches fail because
there is no direct correlation between the financial investment made and
the value added by a brand. The investment needs to go beyond the
obvious advertising and promotion, and include R&D, employees
training, packaging and product design, retail design and so on
(Lindemann, 2006). In short, since more elements combined together
give contribution to the building and growing of a strong brand at the
same time, it’s not possible to confine the selection to just some of
them. This method could therefore provide values not in line with the
true economic potential of the brand.
34
3.1.2 COMPARABLES
______________________________________
Another approach is to arrive at a value for a brand on the basis of
something comparable, a kind of multiples analysis’ inspired method.
But comparability is difficult in the case of brands as by definition they
should be differentiated and thus not comparable. Furthermore, the
value created by two comparable brands can be very different due to so
many details connected to consumers reactions to advertising, price
promotions and distribution channel, that is unlikely to expect an
objective assessment. Despite comparables can provide a worthy
cross-check appraisal, they should never be relied on solely for valuing
brand values.
3.1.3 PREMIUM PRICE
______________________________________
In the premium price method, the value is calculated as the net
present value of future price premiums that a branded product would
impose compared to an unbranded or generic equivalent. Nevertheless,
the primary purpose of many brands is not necessarily to obtain a price
premium but rather to secure the highest level of future demand. The
value generation of these brands lies in securing future volumes rather
than securing premium price and this is true for many durable and nondurable consumer goods categories. In addition to this, the method is
defective because there are rarely generic equivalents to which the
premium price of a branded product can be compared: today almost
everything is branded and in some cases store brands can be as strong
as producer brands charging the same or similar prices. The price
35
difference between a brand and competing products can be an indicator
of its strength, but it does not represent the only and most important
value contribution a brand makes to the underlying business.
3.1.4 ECONOMIC USE
______________________________________
The economic use approach combines brand equity and financial
measures, and has become the most widely recognized and accepted
methodology for brand evaluation. It’s based on both fundamental
marketing and financial principles, and that’s the reason why it’s
adequate, unlike the previous ones:
- The marketing principle relates to the commercial function that
brands perform within businesses. First of all, brands help to
generate customer demand which can be made of individual
consumers as well as corporate consumers, depending on the
nature of the business and the purchase situation. Customer
demand translates into revenues through purchase volume,
price and frequency. Second point, brands secure customer
demand for the long term through repurchase and loyalty.
- The financial principle relates to the net present value of future
expected earnings, a concept widely used in business. The
brand’s future earnings are identified and then discounted to a
net present value using a discount rate that reflects the risk of
those earnings being realized.
Economic use valuations assume that brands provide their owners
with a constant level of demand along time. In the short run a
manufacturer without a brand might enjoy the same sales, the same
36
economies of scale, even the same premium prices as the
manufacturer with a brand. However, the non-branded manufacturer
could not rely on the same security of knowing that the brand's
customers this year are likely to be customers of the brand next year,
and for many years after that.
3.1.5 INTERBRAND EVALUATION METHOD
______________________________________
Given the frequent references made to its Ranking of the Top 100
Brands, I thought it was appropriated to report the method used by
Interbrand, world’s largest brand consultancy agency, while drafting its
annual chart.
Interbrand’s procedure looks at the ongoing investment and
management of the brand as a business asset: this means that it takes
into account all the possible different ways in which a brand affects its
organization, from attracting and retaining talents to delivering on
consumers’ expectations. The ultimate aim is to provide a value which
should be used to guide brand management, so that managers can
make better and more informed decisions.
There are three key aspects that contribute to the assessment: the
financial performance of the branded products or services, the role of
brand in the purchase decision process and the strengths of the brand.
I’ll proceed analyzing them separately:
- Financial performance: it measures an organization’s raw
financial return to the investors. For this reason, it is analyzed as
economic profit, a concept similar to Economic Value Added
(EVA). To determine economic profit, they remove taxes from
37
net operating profit to get to net operating profit after tax
(NOPAT). From NOPAT, a capital charge is subtracted to
account for the capital used to generate the brand’s revenues:
this provides the economic profit for each analyzed year. For
purposes of the rankings, the capital charge rate is set by the
industry weighted average cost of capital (WACC). The financial
performance is analyzed for a five-years forecast and for a
terminal value. The terminal value represents the brand’s
expected performance beyond the forecast period. The
economic profit that is calculated is then multiplied against the
role of brand to determine the branded earnings that contribute
to the total valuation as noted earlier.
- Role of brand: it measures the portion of the purchasing
decision that is attributable to brand. Conceptually, the role of
the brand reflects the portion of demand for a branded product
or service that exceeds what the demand would be for the same
product or service if this were unbranded. The role of brand
determinations for this study derive, depending on the brand,
from one of three methods: primary research, a review of
historical roles of brand for companies in that industry, or expert
panel assessment. The percentage for the role of brand is
multiplied by the economic profit of the branded products or
services to determine the amount of branded earnings that
contribute to the total valuation.
- Brand strength: it measures the ability of the brand to secure
the delivery of expected future earnings. Brand strength is
reported on a 0 to 100 scale, where 100 is perfect, based on an
evaluation across 10 dimensions of brand activation. Among
internal factors, clarity about what the brand stands for,
commitment to the brand, its protection and the ability to
respond to market changes are the dimensions taken into
account. On the external factors’ side authenticity, relevance,
38
differentiation, consistency, presence and understanding are the
variables considered. The performance in these dimensions is
judged in relation to other brands in the industry, and in the case
of exceptional brands, relative to other world-class brands. The
brand strength inversely determines, through a proprietary
algorithm, a discount rate. That rate is used to discount branded
earnings back to a present value based on the likelihood that the
brand will be able to withstand challenges and deliver the
expected earnings (Interbrand.com).
Operating Profits
Taxes
NOPAT
WACC
=
=
Economic Profit X
Role of Brand =
ECONOMIC PROFIT
BRANDED EARNINGS
Branded Earnings x
Brand Strength
Discount Rate = $
BRAND VALUE
Source: Interbrand
3.1.6 BRANDS
INTERNATIONAL ACCOUNTING TREATMENT
______________________________________
The wave of brand acquisitions in the late 80s resulted in large
amounts of goodwill that most accounting standards could not deal with
in an economically sensible way. Transactions that triggered the debate
about accounting for goodwill on the balance sheet included Nestlé’s
purchase of Rowntree, Grand Metropolitan acquiring Pillsbury and
Danone buying Nabisco’s European businesses. They had to suffer
39
either massive amortization charges on their profit and loss accounts or
they had to write off the amount to reserves and in many cases ended
up with a lower asset base than before the acquisition.
Then the recognition of brands as intangible assets made use of a
grey area of accounting, at least in UK and France, whereby companies
were not encouraged to include brands on the balance sheet but nor
they were prevented from doing so: Reckitt & Colman, a UK-based
company, put a value on its balance sheet for the Airwick brand that it
had previously bought. In 1988, Rank Hovis McDougall (RHM), a
leading UK food conglomerate, relied heavily on the power of its brands
to successfully defend an hostile takeover bid by Goodman Fielder
Wattie (GFW): RHM’s defense strategy consisted on the demonstration
of the value of its brand portfolio. This was the first independent brand
evaluation establishing that it was possible to value brands not only
when they had been acquired, but also when they had been created by
the company itself. After successfully fending off the GFW bid, RHM
included in its 1988 financial accounts the value of both the internally
generated and acquired brands under “intangible assets” on the
balance sheet. In 1989, the London Stock Exchange endorsed the
concept of brand valuation as used by RHM by allowing the inclusion of
intangible assets in the class tests for shareholder approvals during
takeovers (Lindemann, 2006).
As shown, measuring the value of intangible assets, brands above
all of them, is very tough and challenging: intangibles are normally firm
specific so the estimation of fair value is difficult and non-reliable, on the
other hand they account for the greatest part of the balance sheet so it’s
not possible to omit them. IAS 38 regulate the intangible assets’
accounting treatment.
By saying intangible asset, it means an identifiable nonmonetary
asset without physical substance that can be controlled and which will
generate future economic benefits. It can be recognized if and only if it
40
is probable that future economic benefits that are attributable to the
asset will flow to its major entity and the cost of the asset can be
measured reliably. The value of the asset “brand” can be initially
recognized at cost and then, due to its indefinite useful life, tested for
impairment annually: if the value is the same or higher than initial
valuation, the asset value on the balance sheet remains the same; if the
impairment value is lower, the asset needs to be written down to the
lower value. When it is not possible to assess a single asset for
impairment because it generates cash flows only in combination with
other assets, companies identify the smallest group of assets that can
be identified that generate cash flows independently of the cash flows
from other assets. There are some cases in which the company
deliberately chose to recognize the brand as an asset with finite useful
life: in this case the procedure requires annual amortization.
It must be reconfirm that no great consistence is in current brand
evaluation treatment because companies act with a certain degree of
discretion when drafting budgets. More transparency would be obtained
as long as a more strict and severe regulation will be created.
3.2 SOCIAL VALUE
______________________________________
The economic value of brands to their owners is now widely
accepted, but their social value is less clear. Do brands create value for
anyone other than their owners? It’s widely believed that brands restrict
competition and tarnish the virtues of the capitalist system by
encouraging monopoly and limiting consumers’ choice, is it correct?
There is evidence that companies which promote their brands more
heavily than others in their categories do, also tend to be the more
41
innovative. A study by PIMS Europe for the European Brands
Association revealed that non branded businesses launch fewer
products, invest significantly less in development and have fewer
product advantages than their branded counterparts: the need to keep
brands relevant promotes increased investments in R&D, which in turn
leads to a continuous process of products improvement and
development.
Building and protecting a brand reputation is not just a question of
maintaining a consistent visual identity and commissioning memorable
advertising campaigns, it means being seen as a good place to work, a
trustworthy business partner and a fair neighbor, welcome in any
community. These values are the building blocks for Corporate Social
Responsibility (CSR), the commitment by business to behave ethically
and contribute to economic development while improving the quality of
life of the workforce and their families as well as of the local community
and society at large (Hilton, 2006).
Nike is one of the world bigger footwear and sportswear retailer,
employing 1,000,000 people just in factories. Approximately all its
products
were
manufactured
and
by
still
are
independent
contractors located in developing
countries, where labor regulations
do not support workers, such as
China,
Taiwan,
Indonesia. Naomi
Korea,
Klein,
in
her
widely read book "No Logo" deals
quite
extensively
accusing
it
of
with
Nike,
abandoning
Countries as they develop better
pay and employment rights in favor
of other Countries, where these are less of a cost; in addition to this she
brought new attention to a photo published in 1996 showing children in
42
Pakistan stitching Nike footballs as an example of the use of child
labor. Nike’s response has been the development of a more transparent
management of the manufacturing centers, posting all information on
www.nikeresponsibility.com. The concern of multinational companies is
understandable, considering that a 5% drop in sales could result in a
reduction in revenues of 1 billion dollars, it’s in their economic interest to
behave ethically.
The point is that practices like child labor and forced overtime were
not certainly created by Nike, but without such strong brand there would
not have been any awareness of the problem. The truth is no logo, no
knowledge of what is going on in the developing world because global
and well-known brands make the connection on a mass scale between
consumer choices here, and the economic and social realities, there
(Hilton, 2006).
The last component of brands’ social value is perhaps the least
tangible, but it relates to a fundamental human desire: to come together
with other people, feel part of great family. Brands promote social
cohesion, both nationally and globally, by enabling their participation in
aspirational as more concrete projects. After suffering a slump a few
years back, Starbucks, the world's leading coffee retailer has revitalized
its business and its brand by getting back to its original promise of
bringing people together, helping them to create connections: from the
free Wi-Fi to the in-store music to the large tables with room for groups
and meetings, the company's stores are designed to help customers
interact, everything in there is about connection. People all over the
world that come into the store prove their outgoing mood and their
willingness to share their lives with others: who thinks that coffee time
has to be a pleasure enjoyed in solitude will go somewhere else.
In the years ahead, the challenge for brands will be to champion
new ideas, new stories, new and more inclusive ways to achieve social
43
solidarity and while doing it, they will continue to make an incalculable
contribution to social progress.
44
4. THE REBRANDING PROCESS
______________________________________
The visual distinctiveness of a brand may be the combination of
many elements, starting from the name, a symbol, a slogan, but also a
color or a particular typeface. Among all them, the name is the most
important one as its use provides a universal reference point and, as a
consequence of this, it is also the element that should never change.
This is not to say that brands achieve true visual distinctiveness through
their names alone: Nike without its swoosh, Camel cigarettes without
Old Joe, Michelin without Monsieur Bibendum, McDonald’s without its
golden arches would be certainly less effective, but it’s proved that the
name is the real main point of reference (Blackett, 2006).
Taking advantage of Shakespeare’s words, the brand name should
be like Caesar, as constant as the northern star. So why do companies
break the rule? Is it a prudent move to deprive consumers and the
company itself from the guarantee of a well-established and emotionally
satisfying brand? This practice carries a high level of reputation risk as
well as a significant investment of resources.
This said, in certain markets where the use of branding is highly
developed and consumers are particularly sophisticated, this rule is
sometimes tested: Polo Ralph Lauren abandoned the Polo part last
year, Gianni Versace became simply Versace after his founder death,
Christian Dior Monsieur turned successfully into Dior Homme in 2001,
and now is the turn of Saint Laurent Paris. What does it happen to other
business areas?
Generally speaking a rebranding transaction is unlikely to occur if
the organization itself has not changed: the main drivers for rebranding
are, therefore, decisions, events or processes implying a change in a
company’s structure, strategy or performance large enough to suggest
the need for a fundamental redefinition of its identity. Considering all the
45
possible different drivers and their declinations within each company, I
would say that it’s not possible to derive a single rule universally
applicable, but rather recognize similar strategies enforced in analogous
situations.
There are no magic formulas to follow, except from balance,
consistency and clarity so pursuing the analysis I’ll place side by side
theoretical notions and practical examples.
4.1 WHAT IS REBRANDING?
______________________________________
Rebranding is the creation of a new name, term, symbol, design or
combination of them for an established brand with the intention of
developing a differentiated new position in the mind of stakeholders and
competitors (Muzellec and Lambkin, 2006).
The first part of the description refers to changes in marketing
aesthetics and the question that arises is weather all elements must be
changed or only some of them to get
the label rebranding: there is indeed
a continuum in rebranding from
the evolutionary modification of
the
logo
and
slogan
to
the
revolutionary creation of a new
name. The second part of the
definition relates to the positioning
of the brand, weather it changes
or stays the same in the course of
rebranding.
46
This descriptive model takes into consideration the two fundamental
dimensions of rebranding and allows for variation in the degree to which
each change occurs: according to this, rebranding can be characterized
as evolutionary or revolutionary.
The former consists of a minor change in company’s positioning
and aesthetics over time, through a series of cumulative adjustments
and innovations. What is now one of the biggest soft drinks company,
was initially named as Brad’s Drink after its founder Caleb Bradham
(1890). The name was quickly changed to
Pepsi-Cola, which is visible in the first 1898
logo. The major breakthrough in the Pepsi
logo design came in 1940, when Walter
1906
Mack, former Pepsi CEO, came up with the idea
of a new bottle design, with a crown having the
Pepsi logo: the blue, red and white “Pepsi
Globe” emerged when USA was in World War II,
to support the Country’s war efforts.
1991
Unlike the early years, in the recent phase the concept expressed
through the logo has remained the same because no relevant changes
occurred within the company: that’s an example of evolutionary
rebranding.
1998
Revolutionary
2003
rebranding,
in
contrast,
CURRENT LOGO
describes
a
major,
identifiable change in positioning and aesthetics that fundamentally
redefines the company: this change is usually symbolized by a change
of name and so this variable is used as an identifier for cases of
47
revolutionary rebranding. For a new name to be launched, however, the
old name has to be abandoned, an action that is likely to nullify years of
branding efforts in terms of creating awareness: the underlying value of
a brand name is its set of associations, so rebranding involving a
change of name could theoretically wipe out the positive mental images
that the brand usually stimulates (Kapferer, 2002).
In 2009, Eni, italian multinational oil and gas
company, decided to start a rebranding process of its
network of gas stations from Agip to eni. A 600 million
Euro process spread over five years, which aimed at
totally erase the old brand name in favor of the
corporate one. Paolo Scaroni, eni CEO declared: “Our
name is eni, but our fuel is Agip: in this dichotomy lays an inefficiency”.
This is not just a restyling, it’s a necessary evolution of the image
through which they present themselves in Italy and in
all the other countries, required also from the
increasingly competitive market which brought the
company to rethink itself as a single entity, operating
in many sectors but that speaks with one voice and
one brand.
As the name is the anchor for brand equity, the change of name
might not only damage the brand equity, but the whole performance. On
the other hand, an asymmetry of the name, compared to the offer,
confuses company’s stakeholders both inside and outside: the name
must be an instrument of representation and at the same time a mean
for internal sharing so in some cases it is preferable to change it rather
than keep it intact.
48
4.2 WHY DO COMPANIES REBRAND?
______________________________________
The main reason for a rebrand is to communicate a new message
regarding the company, something that has evolved or that the board of
directors think is appropriate to clarify. It can be applied to new
products, mature industries or businesses-to-be, anything that can
generate more potential if positioned differently.
I’m aware that such explanation might sound too general, it’s meant
to be that, but in the next paragraphs I’ll analyze more in details all the
different causes.
- In case of mergers and acquisitions: during M&A, all eyes are
on the brand as it becomes a lifeline to reassure continuous
value earning for stakeholders and a symbol of what they can
expect in the future. Thus, when handled properly, rebranding in
M&As can be an important vehicle to communicate the new
strategic intent and to confirm that a
productive relationship is maintained
and
enhanced
with
employees,
customers and investors. As part of a
massive
rebranding
campaign
in
2006, Cisco Systems adopted the
shortened name “Cisco”: these efforts
were
meant
to
make
Cisco
an
household brand to support the lowend Linksys products and future consumer products such as Flip
Video camera (acquired in 2009).
- In case of Spin-offs: as mentioned early for M&A, even during a
spin-off it’s important to confirm the persistence of all original
values despite the name change. Brands develop awareness
and associations in consumers’ memory so they know which
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one best serve their needs, but they must be consistent with the
new offer. Rumors say that quite probably Hewlett-Packard is
rebranding its WebOS Global Business Unit as a new company
called GRAM. The following internal memo by HP Senior VP
Martin Risau, helps to realize the importance of this task:
“Thank you for all of your enthusiasm at yesterday's new brand
announcement: GRAM. We hope you will fall in love with the
brand just as lots of us have already. Please note that our
Mission, Values, and Plan of Action are the same. (...) Yes, this
is a new brand, it is just the beginning, and there is so much
more to do. And yet unveiling the new brand is also a Call to
Action: Try it on. We don't expect you to love it overnight. We
are no longer a consumer hardware brand, we are a
different company with focus on software, User Experience,
Cloud, engineering, and partnering. This change in identity
will take time getting used to and that's normal. (...) You can
wear the logo, help build the momentum of the new identity, talk
to your families and friends about it. If someone from the outside
asks, you can say, "GRAM is a new company. We are in stealth
mode on our product offering." (...) Be the culture. Spread our
Values:
People
Matter.
Integrity
and
Trust.
Deliberate
Innovation. Act small, deliver big. Best, Martin”
- To shed a negative brand image and to rationalize the
brands portfolio: given the huge economic potential of brands,
is not a cost-efficient behavior to erode the potential of a
business just because of the negative appeal of the brand. For
instance, some analysts consider Philip Morris’s change of
name to Altria as an attempt to distance itself from its reputation
as the world largest cigarette manufacturer. Louis Camilleri,
CEO of Altria, put a great emphasis on the need to rationalize
the brand portfolio:
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“All our researches showed that the name Philip Morris and
Philip Morris Companies was solely associated with tobacco.
And I would defy you to find anybody who knew that Kraft was
part of Philip Morris. (...) But they also don’t understand the
structure, the actual corporate structure (...). And I think having a
different name establishes that clarity. Because people are
confused. Even if Kraft is part of Philip Morris, who owns Kraft?
Is it Philip Morris tobacco that owns Kraft?”
- For international harmonization: many global companies like
Nike, Google and Intel choose to use the same brand name in
multiple countries, others are forced to change their names
because subjected to misinterpretations across different places
or just because an already existing name sounds more familiar
to local consumers. Using store names that are familiar to local
consumers is part of Walmart’s attempt to succeed in the
international marketplace. It's a challenge for Walmart to enter
into foreign markets so they adopted the strategy of acquiring or
forming partnerships with established local retailers: in
most
cases, Walmart decides to
keep the name of the local
retailer so shoppers will be
familiar with the brand and
that’s the reason why the
company’s
international
brand names’ list includes
BestPrice Modern Wholesale in India, Asda Supercentre in
Great Britain, Seiyu in Japan, and TrustMart in China.
One of
the classic brand name stumble is the one of Irish Mist, a golden
whiskey liqueur produced in Dublin, Ireland: while the beverage
name sounds good in English, when the C & C Group tried to
launch it in Germany, they realized that sales performances
were not satisfactory and the reason for this is that "mist"
actually means “manure” in German.
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Many other drivers could be included in this list, many of them occur
less frequently such as legal obligations, bankruptcy or going public,
others are more firm-specific, such as the need to update the brand
image or refresh its appeal: according to the experience gained during
my internship, I personally think that the latter one is the cause of Saint
Laurent Paris’ rebranding, a sort of returning back to the origins of the
label, which in recent years has improved its economic performance
thanks to the accessories branch but still suffers of a clothing line off
target.
4.3 HOW TO DEAL WITH A
REBRANDING PROCESS
______________________________________
Far from just a change of visual identity, rebranding should be part
of an overall brand strategy for a product or service, based on an
extensive analysis of the consumers’ perceptions and the firm’s
weaknesses, in order to align the new identity to the new promise: it’s
astonishing how many companies simply do not think that strategic
elements such as an effective customer service or a careful product
functionality have anything to do with their brands.
Due to the huge impact that renaming and rebranding can have on
a company, it’s crucial to shepherd stakeholders with great sensitivity
and care: there’s no absolute method to follow, just a methodical
process that involves accurate strategy, memorable visuals and
personal interactions, all of which must speak in unison for a customer
to place full trust and invest his emotions in what is on offer (Haig,
2003). The new company identity and brand should also be launched in
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a meticulous and tidy manner in order to avoid a massive departure of
old consumers, while aiming at attract new business prospects.
If the decision at the top implies a new identity for the company,
product or service, then a detailed research has to be conducted to
finalize the aspects of brand identity and design: consumers’
purchasing behaviors should be thoroughly studied since useful
information on existing products and brands’ perceptions are the
foundation of future changes. A new visual identity has to be selected
after meticulous threads among all stakeholders, including managers,
financiers, employees, external customers and shareholders. A
transparent communication program should start throughout the
organization: internal stakeholders, especially employees of the firm,
from top to bottom, should be taken into great consideration as they are
the torchbearers of the rebranding task, the major brand ambassadors
to the external world. It is so important that employees have understood
the necessity of rebranding and can deliver correctly the new brand to
consumers that various training programs must be set up to educate
promptly to changes. During the changeover, proper monitoring
activities and market researches should be initiated to study consumers’
reactions: for this, the existing distribution channels can be used along
with extensive public relations, advertising and promotion. Planning the
timing of each activity is as important as the execution of the activities
themselves.
I will clarify this matter through the following practical case study of
double rebranding. Merloni Elettrodomestici was founded in 1930 by
Aristide
Merloni
Ancona,
in
company
near
Italy;
has
the
always
dealt with the production of appliances for domestic use on a
multinational basis. In 1958 it gave
rise to the brand Ariston, wellrecognized mainly within the Italian
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market. The first considerable business move dates back to 1987, when
Merloni Elettrodomestici acquired its major foreign competitor, Indesit.
In order to pursue an international expansion, in 2001 it acquired the
brand Hotpoint: internationalization and unification of the European
market didn’t erase the Italian identity of the company, which stayed
loyal to the values that have made it the second white goods maker in
Europe. Such a company structure, made of several valuable brands,
no more exclusively Italian-focused, prompted the management to
rebrand the entire company from
Merloni Elettrodomestici to Indesit
Company.
In 2007 Indesit Company, following the path
of harmonization started in 2005, presented the
new Group’s brand architecture by entering the
brand Hotpoint-Ariston, the middle stage of the
transition. The ultimate phase consisted in the presentation of the new
brand Hotpoint, in 2011, the final chapter of a well-built integration
strategy
made
also
through
brand
management.
What must be kept into consideration, is that if managed properly,
brands can be a valuable asset, both from an economic and relational
point of view: the aim of a good rebranding process should be to make
clear to everybody the reasons of the change, even if this would require
a gradual change. Following an accurate plan the economic value of the
brand will not be affected.
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4.4 A DOUBLE EDGED SWORD:
MAIN CONSEQUENCES
______________________________________
As it happens in many situations, there are no means which
guarantee only positive effects, there’s always a b-side from whom
derives potential threats: if used wisely, rebranding could rejuvenate the
label and widen the consumers’ base, on the other hand, if not based
on market researches and proper planning it could erase brand equity
and weaken economic performances. At the end of the day, consumer
is the king: when he accepts the rebrand and deems it necessary, it will
be a success, otherwise a failure.
As always I will analyze separately the two perspectives,
proceeding side by side with practical examples which will help
understand why several companies have benefited from rebranding and
others not, why some had decided to invest resources in such projects
and then came back to the old brand.
4.4.1 POSITIVE RESULTS
______________________________________
Throughout this thesis I provided several insights on the branding
and rebranding phenomenon: whether a rebranding follow from
corporate strategy or only concerns a product line, it aims at enhancing,
regaining, transferring and or recreating brand equity. An useful
example of a well-planned and successful rebranding concerns the then
Omnitel, now Vodafone, one of world major telecommunication service
provider.
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The more competitive an industry is, the more important company’s
brands and images are and, as a consequence of this, the more risks it
takes on deciding to change or modify the brand. This is particularly
true in the mobile phone industry in Europe, where the number of
mobile telephones outnumbers the population by about 50% (Sexton,
2009).
Vodafone, the world’s largest mobile phone vehicle, faced a critical
branding-transition challenge in 2000 when it acquired a smaller
European provider along with its assets,
including
Omnitel,
the
second
largest
mobile phone company in Italy. Through
this acquisition Vodafone owned 77% of Omnitel, while Verizon
Communications, then the largest telephone company in the U.S.,
owned the remaining 23%.
The Omnitel brand was strong in Italy, where the company had a
reputation for innovation and high quality service, on the other hand
Vodafone, based in the United Kingdom, was not well-known in Italy,
even though the company had a global identity.
Vodafone needed to find a way of putting
Omnitel
under
the
Vodafone
umbrella
by
transferring its brand equity to Vodafone Italy.
Vodafone did its homework: it conducted
market surveys to determine the strengths of the
Omnitel and Vodafone brands in Italy and to
establish a baseline from which measures
progress towards the Vodafone brand.
For two years Vodafone provided to create
in consumers’ minds an association between
Omnitel and the Vodafone brand: this steps
included brand advertising and sponsorships that introduced the new
brand alongside the existing one. This enabled Vodafone to transit from
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Omnitel brand (created in 1994) to Omnitel-Vodafone (2000), then
Vodafone-Omnitel (2002) and finally to Vodafone (2003), all without any
deterioration of the market survey results.
At the end of a two-years period survey, it showed that the positive
image of the Omnitel brand has been maintained and successfully
engaged to the Vodafone brand in Italy. This example to underline once
again that if managed properly and supported by specific researches,
rebranding can be an effective strategy to achieve the desired results.
4.4.2 NEGATIVE EFFECTS
______________________________________
As competition heats up and sales start to stagnate, companies
often seek to breathe new life into brands though rebranding. In too
many cases however, those expensive rebranding efforts fail to yield
the desired business results, on the contrary they impact even more
heavily on an already instable situation. Although rebranding constitutes
one of the most spectacular aspects of brand management, it is one of
the most risky because it is costly and time-consuming, and it’s proved
that as the number of rebranding practice increases, the failure rate is
high compared to the successes (Haig, 2003):
generally, the most
common risks are the loss of loyal customers and market share, from
which can flow major problems such as a fall in profits and a
consequent minor credit rating.
Tommy Hilfiger’s logo has always been
its key branding strength, to be honest the
Tommy
Hilfiger
brand
is
pure
logo:
consumers associate it with the symbol of
the US flag and drew it to a sense of
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belonging to US citizenship. However in 1999 Tommy Hilfiger relied on
a change of logo to give the label a trendier feel, they believed that
consumers wanted a rebranding. There has been a revision in the
brand philosophy and positioning which aimed at compete with highend brands such as Gucci and Prada: with this in mind the company
launched “Red Label”, a sub brand without the Tommy Hilfiger’s logo
which targeted the upper segment of the society. Clearly Red Label’s
offer was out of the reach of the average Tommy Hilfiger’s customers
and also location strategy was mistaken, since young clients don’t go to
London’s Bond Street or Beverly Hills’ Rodeo Drive. As a consequence,
sales reduced drastically and the company’s share price fell from 40$
per share in 1999 to 22.62$ in 2000, which further reduced to half by
the end of 2000. Since 2001 tough, Tommy Hilfiger has learned from
his mistake and went back to basics: “As result of learning from our
errors, we went back to our roots: classics with a twist. We are about
colors, we are about preppy and classic, we are about America!” The
company lost a great amount of customers and it had to invest a lot of
time and money to get them back, but as a result of its turnaround, both
customers and investors are now comfortable again with the Tommy
Hilfiger brand.
This is just one example of the possible negative consequences of
rebranding: if not based on appropriate research, the decision of
change identity would be disconnected from the context and achieve
the opposite target, something that big companies can’t allow. Deviate
from a tried and tested formula or compete with not adequate rivals
make products lose their recognition, which inevitably manifests itself in
a loss of brand credibility.
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________________________ CONCLUSIONS
At the end of this analysis, and of my internship, I’ve learned that
brands have different identities: if on one hand they summarize and
picture a symbol of the story and philosophy of a company, on the other
one, they are changeable and subjective, due to each different value
they assume for consumers, as well as their evolution over time.
Companies make products and consumers buy brands: clarified
that, the rest comes by itself.
As potential resources of inexhaustible value, they do require to be
treated as an investment, not a cost: strong brands can ensure
business continuity in time of difficulty so, to remain relevant in the
minds of consumers, sufficient investments must be made in advertising
and marketing as well as in new product development.
Although this might seem a difficult task, which indeed it is,
sometimes the toughest decision to abandon what has been built must
be taken: the only certainty in this universe of consumers’ perceptions is
that such kind of move can’t be improvised. Sufficiently in-depth
analysis should be performed prior putting everything into play, current
investment efforts and future earnings above all.
Sometimes companies to keep stay relevant must necessarily
break with the past, others have to look to their past for new
inspirations: the latter one is the case of the “newly” Saint Laurent Paris,
hanging in the balance at present between past and future.
Slimane’s project is ambitious and honorable from a creative point
of view, and at this time the attention now paid worldwide to the brand
have no precedent in previous years: if the offer will meet consumers’
59
expectations, the rebranding might also be accepted willingly, even
from a sunglasses’ point of view.
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61
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_________________________ REFERENCES
BBDO, Brand Equity Excellence: Volume 1, Brand Equity Review,
2003
Charlotte Seeling, MODA: 150 anni di Stilisti, Designer, Atelier,
Gribaudo, 2011
Donald E. Sexton, Value above Cost, Warthon School Publishing,
2009
Laurent Muzellec and Mary Lambkin, Corporate rebranding:
destroying, transferring or creating brand equity?, European Journal of
Marketing Vol. 40 No. 7/8, 2006
Matt Haig, Brand Failures, Kogan Page, 2003
Michel
Chevalier
and
Gerald
Mazzalovo,
Luxury
Brand
Management: A World of Privilege, John Wiley & Sons Singapore Pte.
Ltd, 2012
Philip Kotler and Gary Armstrong, Principi di Marketing, Pearson,
2010
Rita Clifton and John Simmons, Brands and Branding, The
Economist book, 2006
WIPO, World Intellectual Properties Indicators, 2009
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____________________________SITE LINKS
http://www.brandchannel.com/home/post/2012/06/21/YSLRebranding-Hedi-Slimane-062112.aspx
http://www.businessinside.org/acquisizioni-e-fusioni-levoluzionedel-brand/
http://www.businessoffashion.com/2012/07/making-sense-of-theysl-retrobranding.html
http://www.corriere.it/economia/11_maggio_10/skype-acquistomicrosoft
http://www.famousnamechanges.net/html/corporate.htm
http://www.instantshift.com/2009/01/29/20-corporate-brand-logoevolution/
http://www.interbrand.com/en/best-global-brands/best-globalbrands-2008/best-global-brands-2011.aspx
http://www.mallenbaker.net/csr/CSRfiles/nike.html
http://www.ppr.com/en/brands/luxury/yves-saint-laurent
http://www.rivistastudio.com/editoriali/media-innovazione/cambiarei-connotati-del-brand/
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