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.

Brands Must Transcend Product Categories

When I was named director of brand management and marketing at Hallmark, most of the company’s leadership team viewed the company as a greeting card manufacturing company.

With the advent of the Internet, it was easy to foresee the demise of “ink on paper” greeting cards.  I felt it was my duty to get the company’s leadership team to think about our business more broadly. Ideally, brands stand for customer values and benefits, not specific products.

It was clear through research that Hallmark helped people maintain their relationships and express their feelings. Based on this, we determined that Hallmark should stand for “caring shared.”

At the time, Hallmark was mostly manufacturing “ink on paper” products – greeting cards, giftwrap, paper plates and napkins and related products. It also produced calendars and day planners. It outsourced collectable Christmas ornaments and other small gifts. Most of these were produced in Asia.

I saw an opportunity for giftable candy and flowers and other “just a little something” gifts.  In fact, we worked with another Kansas City company, Russell Stover, to produce a co-branded upscale giftable chocolate collection.  And a group of us proposed a national florist network acquisition that far exceeded all of the company’s financial hurdles for new businesses and provided a platform for online order processing and significant add-on sales.  The best part of that acquisition is that the revenue and profit streams were very predictable for five years into the future due to outstanding yellow pages contracts (guaranteed first full page ad under “florist” across the nation). The best part is that Hallmark did not need to handle the flowers. It just recruited the right high quality florists, gave them a portfolio of floral arrangements to sell and processed people’s purchases by credit card. The company’s leadership team turned this opportunity down due to risk aversion.

I led the company into the digital age by innovating and launching “The Birthday Times,” “Letter from Santa,” “Peanuts Personalized Cartoon Strips” and other personalized social expression products printed in card shops using Tandy computers. I also developed a joint venture with Microsoft to create “Greetings Workshop,” greeting card software for the home. After that, I was on the advisory committee for the first website that would produce Hallmark’s online greeting cards. And I developed the concept and business plan for a joint venture with Kodak that focused on personalizing wine labels, ties, calendars, scrapbooks, t-shirts and a wide variety of other products with personalized photos and messaging. This joint venture (Image Gallery) was headquartered in Colorado and lasted for a few years.

In an earlier career role, as a new business strategist in Hallmark’s Product Discovery & Development division, I developed and tested the concepts for experiences and services as gifts, “just a little something” gifts and products for grandparents to share with their grandchildren. We also determined that it was possible for Hallmark to stretch the brand as far as offering branded romantic cruises for couples.

So, what happened to all of these endeavors to move Hallmark from a company reliant on manufacturing greeting cards, to a company known for helping people share their feelings and enhance their relationships? The comfort zones of the senior most leaders in the company. They knew how to manufacture greeting cards and sell them through card shops (and later, the mass channels). But they felt far less comfortable with other types of business models.

I left soon after discovering that Hallmark would never move that far from its roots, unnecessarily stunting its future growth prospects.  In fact, many senior managers left shortly after the corporate officers passed on acquiring the florist network, an acquisition that to this day I believe could have been transformational for Hallmark.

So, what are the key takeaways from this example?

• Do not define your brand as a product category. It will limit its growth potential and eventually lead to its demise.
• A brand should stand for something and share values with its customers or at least promise customer benefits, especially emotional benefits.
• The more different types of products that can be offered to deliver on a brand’s promise, the stronger that promise becomes.
• Defining a brand’s promise based on values or benefits (versus product categories) potentially extends a brand’s life indefinitely.
• Senior leadership must buy into the brand’s promise and not be afraid to invest in new product and service categories to deliver on that promise.
• Brands can enter new product or service categories through mergers, acquisitions, joint ventures, licensing or internal development.  Don’t limit the way you extend your brand into new categories to internal development only.

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 Inundation/Depravation Testing

Do you want to better understand the benefits that your brand’s product or service delivers? Do you want to discover ways to increase use of your brand’s products and services? Try this: Identify a group of very light users and ask them to use your product or service as frequently as your heaviest users do for an extended period of time (at least through several usage cycles). Identify a group of heavy users and ask them to refrain from using your product or service for the same period of time. Ask the latter group to articulate what they used in lieu of your product or service to accomplish the same result. Ask both groups to keep a journal of their thoughts and feelings as they use or refrain from using your product or service. Follow up with in-depth, one-on-one interviews to better understand the role your brand’s products and services play in their lives. I guarantee you that this exercise will provide profound insight into the full potential for your brand’s products and services.

Excerpted from Brand Aid, second edition, available here.

Seven Ways to Damage a Brand

As important as it is to know how to manage a brand well, it is equally as important to know what can damage a brand so that you can avoid those sources of damage. Here are seven things that can damage a brand:

• No one in the organization is actively managing the brand. There are no brand metrics. There is not a brand scorecard. No one is responsible for the brand.
• The CEO does not understand brands or their value. He or she thinks of marketing as a cost center and possibly a necessary evil.
• Thinking that a strong brand will overcome an inferior product. While that has happened on rare occasions when the brand was particularly well conceived, mostly it does not.
• Not managing the brand as if it were a person. That is, the brand does not stand for something, does not share values with its customers, does not have a carefully crafted personality, does not make customer promises and does not try to connect with its customers on an emotional level. Generally, this happens when management thinks of the brand as nothing more than a logo or an identity system.
• A new chief marketing officer arrives and wants to put his or her personal stamp on the brand by changing its identity and messaging. If this happens too often, and especially if it is not based on careful research, customers begin to get confused about the brand’s identity and what it stands for.
• Not managing a crisis well. Not being adequately prepared for a crisis and not turning the crisis into an opportunity to amaze customers with an unexpected positive solution backed by extraordinary service.
• There is a change in ownership and the new owner wants to make the company look better financially but not by investing in its long-term future but rather by cutting costs, stripping assets and neglecting investments, leading to diminished customer value. The intention is to flip the company before the lack of investment catches up with the brand.