Rebranding: Short-Term Pain for Long-Term Gain

It has been said that the only three certainties in life are birth, death, and taxes. Perhaps a fourth certainty should be on that list: Change. Whether you embrace it or detest it, change makes its way into our lives. Do you have Facebook friends who announce “I am out” after the latest tweaks? Yes, some people follow through and leave Facebook to convey their disdain for change while most others will continue on as their resistance withers. We may not like change but often accept it and adapt to it.

Rebranding as Change
Our relationship with change came to mind recently when St. Thomas Health, a nine-hospital system headquartered in Nashville, announced a rebranding initiative. St. Thomas Health has rebranded five facilities it acquired over a period of years under the parent brand St. Thomas. The change removes familiar brands from the local landscape such as Baptist Hospital (Nashville) and Middle Tennessee Medical Center (Murfreesboro). In their place is branding that prominently features the St. Thomas brand (St. Thomas Midtown Hospital and St. Thomas Rutherford Hospital, respectively). The rebrand will undoubtedly not be a cheap exercise. Think about all the places where old brands must be replaced- exterior and interior signage, websites, uniforms, business cards, brochures, and more. And, the rebranding announcement triggered a predictable reaction of sarcasm, disagreement, and disappointment. People who know the facilities by their current names see no reason for St. Thomas Health to change now.

Motivations for Rebranding
On the surface, one can understand why St. Thomas Health would be reluctant to rebrand. After all, the facilities acquired were known brands in their own right and could continue as is without a costly rebranding effort. But, there are two motivating factors for a brand owner to rebrand a portfolio to put brand assets under a single umbrella:

  1. Internal needs– As a company grows, particularly when growth involves acquiring other brands, it can be beneficial to create synergy in marketing efforts by having a core identity. St. Thomas Health acquired facilities that kept their old names for years. Perhaps the criticism of St. Thomas is not that it rebranded some of its hospitals but rather that it waited so long to do it. Now, St. Thomas will have a consistent identity across all of its hospital properties.
  2. External pressures– Rebranding may be needed to be more competitive. In the Nashville market, St. Thomas Health has a significant competitor in Vanderbilt Medical Center. The strength of the VMC brand (and the fact that all of its facilities reflect the corporate brand identity) likely influenced St. Thomas executives in its decision to develop a stronger corporate identity. 
Grin and Bear It
Change can sometimes be difficult to sell and challenging to implement. Branding can be likened to managing a physical space like a home or building. Sometimes, a property gets to the point where what is best for it is a period of time in which renovations are made. You may make a short-term mess by ripping out flooring or knocking down walls, but in the end the renovation creates a more valuable asset. Similarly, rebranding has the same objective. It can be messy while being carried out, but the payoff to the brand owner can be a stronger brand both in terms of greater marketing synergies as well as stronger association among consumers. Approach rebranding by being prepared for short-term pain in anticipation of the long-term gain that could result.

Who Owns Your Brand? Not You

One of my favorite quotes about brands comes from John Stuart, former chairman of Quaker Oats. He said “If this business were to be split up, I would be glad to take the brands, trademarks and goodwill and you could have all the bricks and mortar – and I would fare better than you.” In other words, the really valuable asset that is owned is the brand. I share this quote with students in my Promotion class early in the course to make a point about the importance of brands. After all, that is what we are “promoting” when using promotion tactics- building a brand by attempting to create awareness, build associations, achieve preference, or influence purchase.

It’s Not Yours
John Stuart’s legendary quote about the power of brands is poignant, but unfortunately it is misguided. His statement suggests the marketer owns the brands. Of course, the firm has legal rights to using the brand’s name and marks. But, who really owns the brand? The world around you, namely your customers and product users. One dimension of a brand is that it is an image, which is a collection of perceptions. Where do those perceptions reside? In the minds of customers and others. Another dimension of a brand is that it is an experience, an interactive consumption engagement. Who is the central figure? The customer, without whom there is no experience. Finally, a brand is also a relationship- no customers, no relationships, and no brand. So, three out of four dimensions of a brand (image, experience,and relationship) are customer owned.  If you don’t believe me, just ask the marketers responsible for Nutella.

Nutella Knows… Now
Nutella has been sold in the United States for more than 25 years. The hazelnut spread enjoys a committed fan community. Two Americans living in Italy, Sara Rosso and MichelleFabio, created World Nutella Day, a website that celebrates the product that they love. On February 5 of this year, the 7th annual World Nutella Day was observed. However, the future of World Nutella Day was uncertain when Rosso and Fabio received a letter from Ferrero, Nutella’s corporate owner, demanding they cease and desist use of the Nutella brand assets. Rosso took to her blog to let the Nutella fan community know about the action. Response was swift and condemning of Ferrero’s stance. The company backpedaled and said that after reaching out to Rosso a “positive conclusion” was reached. The company’s explanation for the threat of legal action was that “the case arose from a routine brand defense procedure…” triggered by alleged misuse of the Nutella brand on the World Nutella Day site. The legal explanation did not necessarily win over Nutella lovers, but the legal department was doing what it is charged with managing- the one dimension of the brand that Ferrero actually owns.

As one reads the events that unfolded in this situation the immediate thought is how many brands would love to have advocates so passionate that they start websites and create brand holidays? Nutella is fortunate to have built a passionate brand community (World Nutella Day has more than 40,000 likes on Facebook). You may own the legal rights to your brand, but understand your territorial dominance ends there. Customers, the community, and others interacting with your brand own the rest of it. This external domination of your brand is why it is crucial to be involved in building community. You do not have to own it, just as World Nutella Day is not corporately owned. But, you want to be an engaged member- it is your brand, after all (sort of).

Ad Age – Nutella Day Likely to Survive Unscathed

Build business or build brand? Yes.

Retail icon JC Penney (make that JCP) is under scrutiny by investors and the retail industry as it attempts to pull off a radical makeover. CEO Ron Johnson’s vision for JCP is to create a totally new shopping experience in stores. A major element in his marketing strategy was to introduce “fair and square” pricing. The plan called for substantial reductions in promotional pricing and accompanying newspaper advertising. Instead, shoppers would be able to buy products at everyday low prices. The response has been less than enthusiastic as evidenced by same-store sales declining 22% and Internet sales plunging 33% in the second quarter. Ouch!

JCP’s actions are curious in that management seems to have taken an either-or approach to marketing. The first months of Mr. Johnson’s tenure as CEO saw a pronounced shift toward brand building. The emphasis was on shaping perceptions and image of JCP. This emphasis occurred at the expense of tactics that were effective for generating store traffic. The result was a redefined brand but fewer shoppers in JCP stores. Now, the pendulum is swinging back the other way as business building is pushed to the forefront.

Now to address the question in the headline – should marketers focus on building their business? Yes. Should they focus on building their brands? Yes. It is unnecessary to choose one emphasis over the other. Such an approach will prove to be disastrous long-term. Different people in your target market are at different points in their relationship with you. Brand building is needed for customer acquisition, attracting new buyers to your products or services. Business building is important for retaining customers. JCP assumed its existing customers would stay with them after implementing the new pricing program, but many of them failed to see adequate value compared to the previous promotion-oriented pricing model. Thus, a dual focus is needed for marketing to concurrently build business and the brand.

Advertising Age – “JC Penney Looks to Newspapers in Revamped Marketing Push”

Do You Need a Brand?

An interesting question arose during our department’s annual strategic planning meeting yesterday. The department chair asked the faculty about the need to develop branding elements, namely a logo. It was obvious by the reaction of many faculty members that they had never thought about this question. To stir discussion, our chairperson asked the question “why would we need a brand?” It is a fair question that any organization should ask, and it is one that in typical cases should be answered with an unequivocal “yes.”

What would a brand do for an organization like the Department of Management and Marketing at Middle Tennessee State University? After all, we are associated with two brands already – the University brand and the College of Business brand. Brands serve three vital purposes:

  1. Bring mission and values to life – Brand names and logos are meaningless unless they relate to fundamental purposes for existence. We started the process by reviewing our department’s mission statement. In 12 years, I had never seen it, and after reading it I realized I had not missed anything! We will work on refining and shortening it. Once the mission is defined and the values we hold articulated, then (and only then) can we begin to think about branding our department.
  2.  Give direction to what we should be doing – One colleague answered the question of why we need a brand by saying that it would help us make decisions. What are our priorities? How can we better serve students? Are the needs of the business community being met? What courses are needed in our curriculum? These are questions that cannot be answered adequately until brand meaning is defined.
  3. Creates an identity – Oh yeah, brands are an outward expression of identity. Brand name and marks like a logo create awareness, aid in brand recall, and shape perceptions that form brand image. However, starting here is risky at best and can result in bad branding strategy. You cannot forge an identity until investing time in defining mission, values, and benefits provided to stakeholders.

I am excited about the possibilities of a branding initiative for our department, and not because we may end up with a nice logo. Rather, the clarity of purpose that could arise from the process will guide future strategic planning. Like many organizations, we sometimes are mired in day-to-day operational tasks and lose sight of long-range goals. Brands are like a compass that allow us to navigate the turbulent paths that an organization encounters. 

Find the Linsanity in Your Brand

The talk of the NBA, if not the American sports scene, in the past two weeks has been the play of Jeremy Lin. The New York Knicks guard is the latest overnight success (although there is no such thing), endearing himself to basketball fans and the New York market with great play and hitting clutch shots. The key to Lin’s connection with fans is his story. He is Asian-American, Harvard educated, and grounded in Christian faith. Lin has gone from unable to keep a spot on the roster at Golden State and Houston to one of the most talked about players in the NBA.

Jeremy Lin’s success on the court is one matter, but the phenomenon is fueled by his story of a rise from obscurity to stardom and the accompanying “Linsanity” that has swept New York and the sports world. Lin’s statistical performance is noteworthy- he averaged about 3 points per game last year. In his first four games as a starter for the Knicks, his average was nearly 20 points a game. But, the attraction of Jeremy Lin is his story. People want to know more about Lin and have favorable v of him because of the story behind his meteoric rise.

Can marketers capture Linsanity and use for their benefit in their organizations? Absolutely! The power of story should not be overlooked as a connector between a brand and the audience it seeks to engage. In his book Tell to Win, Peter Guber reminds us that stories serve a functional purpose, facilitating retention of information, as well as igniting an emotional response by creating empathy between storyteller and audience. Stories have the power to establish a common ground and humanize brands that are by their nature impersonal objects.

What are the stories that you have to share? Personal triumphs of employees, making a difference in the community, customer profiles, and company heritage are examples of storylines that can captivate an audience. Stories offer a departure from the one-way “our brand is great” messaging on which marketers tend to focus. We have a longing to relate to others with whom we share common interests and challenges. Stories can bring people and brands together, deepen relationships, and even create a phenomenon, as Linsanity has reminded us.

Can You Teach an Old Brand New Tricks?

I am a rather nostalgic guy- like many people I am drawn to the past. Things like retro architecture of baseball stadiums, classic ad campaigns, and branding from days gone by remind us of the past. To this day, I laugh when I think of the Calgon laundry detergent commercial in which a Chinese dry cleaners owner claims his cleaning formula is an “ancient Chinese secret” but his wife exposes him as a fraud… Calgon is his secret!

Another brand from the past that is at a crossroads in its history is Duck Head. The apparel brand has a heritage that dates back to 1865. However, the brand actually disappeared from the market when its owner, Goody’s Family Clothing, went out of business in 2009. The brand has been licensed by Eagle Dry Goods of Nashville (where the company originated) and returned to market. The obvious question now is whether Duck Head will succeed in connecting with men like me who wore the brand as a teen and young adult as well as capture the attention of that same market today.

For a brand with a heritage story like Duck Head, there are two key criteria that it will have to meet in order to gain traction in the market: 1) Be relevant to its target market and 2) differentiate the brand from the myriad of apparel options that men have. Relevance will be easier to establish with “alumni” who are familiar with Duck Head and wore its products in the past.

For the young male market, achieving relevance will be more challenging. It will take more than having a Facebook page and Twitter feed to be “cool.” Duck Head must figure out how to integrate the brand with young males’ lifestyles. For example, linking the brand with a Southern tradition like college football is a strategy that could raise consciousness of Duck Head among young males. Differentiation will be even more challenging- Duck Head must create a niche related to its relevance. Perhaps it is tapping the Southern traditions theme, or it can be done through linking the brand with a greater aim, as it has done with Soles 4 Souls, a charity that donates gently used shoes to people in need.

The bottom line question for a consumer in Duck Head’s target market is “Why should I buy your brand?” Right now, Duck Head is just another brand vying for attention. It must succeed in working its way into the lifestyles of the audience it seeks to reach. The nostalgia buff in me hopes Duck Head succeeds- I am ready to buy. The marketer in me is more skeptical, but if the brand can leverage its heritage to be a lifestyle brand it will prove that you can teach an old brand new tricks.

The Tennessean – “Can Duck Head Rise Again?”

A Brand is Meaningless without Integrity

What is a brand? Of course it is a name, logo, and colors that form its identity. The identity represents the tangible aspects of a brand. But, that is not why you and I are attracted to certain brands and become loyal customers. We are drawn to brands because of the promises they make and deliver against. Some promises are explicit, such as product warranties and service guarantees. Other promises are implied benefits that one can expect from a brand. Consistency, fairness, and integrity are three implied brand promises that can either strengthen or destroy customer relationships depending on how well a brand is managed.

A brand that finds itself at a decision point to manage an implied promise of demonstrating a high level of integrity is Penn State University. The institution is engulfed in a child sex abuse case against a former assistant football coach that has swept up the iconic head football coach, Joe Paterno. The purpose of this post is not to opine on Paterno’s culpability or whether he did the right thing when made aware of improprieties. In fact, the effect of this scandal on Joe Paterno should be of secondary concern to those persons entrusted to manage the Penn State brand, its trustees.

The overarching concern, besides the well being of the victims, is protecting the integrity of the Penn State University brand. Any crimes committed cannot be undone, but the institutional values of Penn State University can be affirmed, which could mean that Joe Paterno and other leaders who could have done more to prevent some of the alleged assaults must step down immediately.

A truly great brand is larger than any one leader or star employee. Remember, a brand is really owned by the stakeholders to whom the brand matters. Their interests must be served, and that can be best accomplished by making decisions that send signals that Penn State University is committed to being a high integrity brand.

Crisis as a Catalyst for Change

Even the strongest brands eventually face low moments or dark days. It is inevitable- if you operate in the outside world you are exposed to potential crisis. The key to coping with crisis is not trying to avoid it but how you respond to it.

We were reminded on Sunday of the lows that can be faced by a business. IndyCar lost one of its most vibrant personalities when driver Dan Wheldon was killed in a wreck during a race in Las Vegas. The sorrow of Wheldon’s death was great, and the unspoken question arising from the tragedy was “Now what, IndyCar?” What can you learn from this painful event to make racing safer?

History provides many examples of brands in crisis- think Tylenol, NASCAR, Mattel, Coca-Cola, and Toyota, to name a few. These brands experienced crisis related to product safety. In the end, process improvements were made to create quality safeguards that restored brand confidence.

Whether your brand is hurt by product recall, loss of key customers, negative publicity, or some other crisis, you will not be the first to go down that road. For IndyCar, here is hoping that the weight of heavy hearts inspires change that serves as a catalyst for transforming IndyCar into a stronger organization.

Beware the Incentive Escalator

Price-based incentives are effective for attracting buyers and generating trial or enticing customers to buy again. But, using price breaks to stimulate sales comes at a cost greater than the amount of discount offered to lure buyers. All efforts to craft a desired meaning for your brand can be negated by a promotion-intensive strategy. An unintended consequence can be that consumers believe your product is not really worth full price if discounts are offered frequently. Although incremental revenue generated from price-based promotions may be realized, the distinction of “work hard vs. work smart” comes to mind. We have to work harder (i.e., sell more) to cover the expense of discounting, yet the potential damage to brand equity can still occur.

Evidence of what I call the “incentive escalator” is found in a report by Experian Marketing Services on search terms related to retailers. Percent-off deals are among the most popular searches, and consumers’ expectations of retailers’ deals seem to be increasing. In 2009, 20% was the most common discount search term; that figure shifted to 30% in 2010. Deals sought by many consumers in 2009 were not sweet enough just one year later. Where does it end? Will 35% be the top discount-related search in 2011? How high will consumers’ expectations soar about the discounts they believe retailers can offer? Similarly, an increase in searches related to free shipping indicates that online shoppers expect to continue to have access to incentives from sellers once they have been exposed to them.

Choose whatever saying you want: the cat is out of the bag; the horse is out of the barn; the toothpaste is out of the tube. Once price-based incentives become a norm associated with your brand there is no turning back. Strive to build customer relationships that are not dependent on price to reduce the chances of finding your brand riding the incentive escalator. Look to brands that you admire- chances are they have succeeded in ways other than discounting.

Marketing Daily – The New Consumer: ‘30% Off Is The New 20%’

The Question Netflix Got Wrong

An interesting email appeared in my inbox Monday morning. It was from Reed Hastings, founder and CEO of Netflix. The subject line, “An Explanation and Some Reflections” got my attention. Was he writing to say that Netflix made a mistake when it implemented separate pricing for its DVD by mail and online streaming services? When I read the first three words of his message I was convinced- “I messed up” suggested Hastings was about to tell us Netflix had a change of heart about its new pricing structure.

Not so fast- he goes on to say “I owe you an explanation.” Hastings proceeds to provide justification for the decision to change the pricing structure. On top of that, he broke the news of Netflix splitting into two businesses, Netflix for online streaming and Qwikster for DVD by mail. Hastings’ message was genuine and the tone was that of someone who realized he had erred in handling the implementation of Netflix’s new business model. But, in the end the message was more of an attempt to save face… and stem the tide of customer defections. Netflix has lost an estimated 1 million subscribers since the change. With more than 20 million customers remaining, we will not shed a tear for Netflix, but the extent of customer defections is significant.

The mistake that Netflix made was that it incorrectly answered a huge question: What would customers do? What would they do after learning that their associations with Netflix of “entertainment delivered as you want it” no longer applied? The changes benefited Netflix only, or at least that was the perception of many subscribers. And, when it comes to brands, perception is reality. I remind my students often that the true owners of a brand are its customers. While a business owns the physical and intellectual property of a brand, its meaning comes from the relationships people form with it. For many subscribers, their relationship with Netflix was shattered when their ability to get entertainment however they wished changed.

I do not fault Netflix for arriving at a decision that changes were needed in its business model to preserve the long-term profitability of the business. But, most everyone (including Netflix management) realizes they damaged brand relationships in the process. So, any change in strategy should be evaluated fully in terms of how customers will react to change? Human nature is to resist change. Marketers must be prepared for the resistance by being able to make a strong case for how change is good for the brand’s real owners.