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The Whiteboard: When one brand absorbs another, remember the customer is still king

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In 1961, the Glenn L. Martin Co. merged with American-Marietta Corp. to form Martin Marietta. In 1993, Martin Marietta acquired GE Aerospace. In 1995, Martin Marietta merged with Lockheed Corp. to form Lockheed Martin, now one of the nation's leading defense contractors.

These two major brands merged to become a mega-brand, absorbing many other brands along the way, while maintaining two of the founding brand names, and it serves as a mini case history around the question of when to absorb an acquired brand, and when to keep it in the marketplace. These decisions can be difficult, but asking a few good questions can help.

Does the acquired brand

bring unique value or just more market share?

Bank mergers a perfect example of this. Bank brands are almost as fungible as the cash in their vaults for two main reasons. First, banks offer largely identical product lines of checking, savings and lending products. Rates and fees may vary a bit, but competition keeps them from being substantially different.

Secondly, banking relationships are illiquid, in that it can be a huge hassle to move a checking account from one bank to another, given the network of direct deposit and auto-payment links that many people have installed. The reality is that many bank customers are loyal because it’s just easier. So, when one bank brand buys another, the acquired brand is routinely transitioned as quickly as possible to the acquiring brand, and the old brand will soon disappear.

The old brand has equity, but for how long?

Let’s assume the acquired brand is bringing some new capabilities to the table. Now it gets harder to make a decision. Combining brand names, the way Lockheed Martin chose to do, signals to the marketplace that your two companies are roughly equal halves of their previous selves, at least until a period of adjustment to the new name can occur. But many firms would rather not send that signal, and will have to choose between calling the new brand a division of their company, a sub-branded product line within the firm, or executing a plan to phase out the brand entirely.

The choice is critical because any confusion can hurt one or both brands involved. Customers may think the two are still independent, especially when the acquired company fails to correct their misconceptions out of loyalty to their own brand. Acquired brands are often reluctant to see their names relegated to the timeline in an annual report, particularly in the case of family businesses that finally sell the enterprise. Be prepared for the acquiring brand to argue to keep the name as long as possible, but keep in mind their view of the brand and your customers’ view may be different.

What about your customers’ point of view?

Every merger in the history of commerce has been presented to the customers of both brands as a step toward better products, services, innovation, best practices, relationships and so forth, and might even seem that way in some instances.

But in far too many cases, what really happens is that the customers of the acquiring brand hardly notice, while the customers of the acquired brand endure transitions in product changeovers, cost increases or shifts in billing and ordering, turnover of key personnel and relationships and more. Customers of the acquired brand will normally be worried about what the change is going to bring. Too often their fears are well founded, and rather than convert to the new brand, they become alienated and may leave altogether.

Commit and avoid brand limbo

If there’s a strong case for joint brand equity over a long period, by all means consider a dual brand name moving forward, as Lockheed Martin and many others have managed to accomplish. But if it’s clear that the acquired brand is subordinate, then most companies would do well to commit to a planned process of conversion, and avoid becoming stuck in the limbo of waiting a little longer to phase out the brand. Put another way, just because you bought the brand, that doesn’t mean you bought the customers of that brand. You will have to convert them to your brand to convince them it is truly a better deal. And this process will likely take more work than a warm letter and a bonus coupon.

David Taylor is president of Lancaster-based Taylor Brand Group, which specializes in brand development and marketing technology. Contact him via www.taylor

brandgroup.com.

Write to the Editorial Department at editorial@cpbj.com

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