Branding Issues for Mergers & Acquisitions

Branding issues are myriad for mergers & acquisitions.

First there is the question of why the merger or acquisition is even being considered. What is the purpose of the merger or acquisition? Is it to extend the company’s geographic range? Is it to extend the company’s appeal across new market segments? Is it to move the company’s offering upscale or downscale? Is it to fill in a product or service gap? Is it to fill in a technology gap? Is it to acquire a proprietary product feature or technology? Is it to round out the company’s brand portfolio? Is it to gain greater economies of scale? Is it to leverage potential synergies? Are you trying to pick up a distressed brand in a “fire sale”? If so, are you hoping to turn that brand around with smart management? Do you have a deep understanding of what that brand’s problems are? Or is the acquisition a non-strategic investment to make use of excess cash flow?

Once the reason for the merger or acquisition is clear, then it is time to think about what the terms of the deal will be. There are at least a few brand-related questions at this stage. What is each brand’s value? How much should you pay for the acquired brand? What intangible benefits does the acquired brand bring to you? What is the brand’s awareness level among key customer segments? What are the brand’s associations? Are the associations mostly positive, mostly negative or something in between? Does this brand complement your existing brand in some way or is it redundant? Or, worse yet, is it associated with things that you do not want your brand associated with?

There are also the questions regarding merged cultures and how that is likely to play out. Which elements of each culture should remain and which ones should be changed? These decisions will affect how the remaining brands will be perceived in the marketplace.

The next thing to decide is which brands stay and which brands go. Was the original intention to move to one brand or to build a brand portfolio? Combining brands may or may not make sense given the relative awareness and associations of each brand. You must also consider how these play out with different target customers and audiences. Combining brands is likely to save money in the long run but is also likely to cost money in the nearer term because the brand’s identity on signage, business cards, vehicles, employee uniforms and other media must change along with any brand change.

Keeping one, the other or both brands are not the only three options. You might decide it is best to create an entirely new brand for the newly combined organization. Or you might decide on a sub-brand or endorsed brand structure, in which you use two or (hopefully not) more brands together.

Once you have decided on the brand portfolio and architecture, then you must decide how you will transition from your current brand structure to the post merger or acquisition structure.  It can be a one- or two-step process and the steps might be triggered by external benchmarks such as degree of brand equity transfer. Finally, you must decide if everything will change at once for each transition step or if it will happen gradually based on budget constraints, depletion of inventories and natural obsolescence.

Ideally, the publicity generated by the merger or acquisition and any brand change creates the perfect opportunity to announce any new mission, vision or strategies to the world (or at least your target audiences). You should have carefully thought this through and scripted the messaging in time for the marketplace announcement.

Another thing we have noticed is that companies that participate in mergers & acquisitions usually don’t stop at one. More M&A activity is typically in process or on the way. This must be taken into consideration too. The approach one takes to address today’s merger or acquisition must be flexible enough to accommodate future mergers & acquisitions.  Sometimes you need to slow the process down or speed it up to address a string of mergers or acquisitions.

And I haven’t even touched on the brand identity considerations themselves, including naming, icons, color palettes, typography and visual styles. These are all tactics after the strategies have been determined.

The entire process should be based on the organization’s strategic intent informed by market research.

I hope this has helped you think through some of the branding implications of mergers & acquisitions.

Brand Portfolio Decisions

Question:

We have multiple brands (12) across the organization with varying identities. What are the best practices for deciding on when to add or eliminate a brand?

Answer:

In general, fewer brands are better. Having fewer brands reduces the required marketing resources and makes it easier to build brand awareness more quickly.

Each brand should have its own promise and positioning. Given that, each brand should have customer segments or customer need segments to which it most appeals. Brands that have similar or the same brand promises or positionings are candidates for rationalization. Further, if the products or services sold under those different brands are similar or the same, you should consider consolidating those products or services under one brand.

Another reason to consider eliminating a brand is if its brand associations are negative. If you eliminate the brand, you will need to address the underlying problem that caused the negative brand associations so that it does not taint the new brand.

I would only add a brand when a current brand could not work for a new product or service.  This is most often the case if the new product or service would not be credible under an existing brand, especially to a new target market to whom the existing brand has negative connotations.

Another instance in which a new brand may be necessary is if you intend the new products or services to be sold in an entirely different price range. For instance, if the existing brand is a luxury brand and you have designed the new products to be sold at low prices points to price conscious customers.  It is difficult for a brand to successfully span down to lower price segments from a luxury position.

If many of your brands exist primarily because your organization has acquired a number of brands over time, again you may want to consider consolidating some of those brands.  This is easiest to do for the brands that have very low awareness or negative associations. I would keep the brands that have the highest awareness, the most positive associations and the most loyal customers.  You need to make sure you have measured awareness among the right customer segments so that you do not sacrifice sales when you consolidate the brands.

Another option to consider is to have one or more parent brands under which a variety of sub-brands can exist. But again, you need to be judicious about creating sub-brands as each brand or sub-brand will need some level of marketing support.

Ultimately, brand portfolio decisions are based on strategic intent informed by solid marketing research. Regardless of what you decide, you will need to have a carefully though out brand migration plan that determines when the changes are made and in what ways.

There are financial and practical considerations like the cost of new signage and the cost of discarding existing packaging versus waiting for the brand change until you have sold all of the products using the old packaging. There is also the necessity of transferring equity from one brand to another before the first brand is eliminated. Finally, there is the required communication campaign, which is not insignificant, so that customers understand the changes that are being made.

Changes in a brand portfolio can be complicated, however the end result is greater marketing efficiency and effectiveness and greater customer clarity. Brand rationalization can also result in making the remaining brands stronger.

I wish you great success in making your brand portfolio decisions.

Brand Portfolio Strategy

Why do some companies maintain multiple brands within the same category even though it is more expensive to do so? Here are some of the reasons companies maintain multiple brands in their portfolios:

• The brands appeal to different market segments and have different positions in the market
• The company maintains multiple brands to encourage vigorous competition between brand managers
• One brand is an upscale or premium brand
• One brand is a no frills brand targeted at price conscious consumers
• The additional brand uses an older formulation or technology and may be sold as a “cash cow”
• The second brand could draw on the core brand’s quality and service perceptions without being that brand. This is useful with market segments that are more price conscious but that still appreciate high quality and service levels.
• The additional brand is created to establish a higher reference price in the category (often increasing the perceived value of the core brand)
• One is a “flanker” brand, designed specifically to compete directly with other brands in the category, while protecting the company’s flagship brand from direct competition
• One or more brands are created to reduce or eliminate channel conflict issues
• The new brand may be a way to take a company’s products [and, in some cases, a variation of the core brand] out to new channels or customers without alienating current customers
• Some brands are created to meet specific retailers’ needs within the category
• The additional brands may be created as “private label” brands for specific retailers
• The additional brand may allow the company to acquire more shelf space
• The company can use the additional brand to experiment within new channels without affecting the core brand(s)
• To create more perceived variety at retail without giving sales up to the competition

Depending on the reason(s) for the additional brand(s), their link to the first or core brand might be non-existent, through a subtle endorsement, as a sub-brand or as some variation of the first brand. Or, the association may only be talked about by salespeople to the trade but not referenced on the product or its packaging.

Each brand in a company’s portfolio needs to have a clearly defined role. Ideally, that role is in support of key business or marketing strategies. If a brand is no longer serving any purpose in the portfolio, consider repositioning it or eliminating it.

I wish you great success in crafting your brand portfolio strategy.