corporate branding

"What's in a name?" is a fundamental question in business. The titles of a company and its products or services are brands - and brands have never been more valuable than today. At Coca-Cola, the entire management strategy is geared to protecting and building the world's most famous brand: small wonder, since that brand explains the gigantic gap between Coke's assets of $19 billion and its market value - $169 billion.

Coke enjoys the luxury of a single dominant brand that shares the company name. The benefits can be volatile, though: Coke's corporate value surged far ahead of its rise in sales when Robert C.Goizueta was at the helm, only to stagnate in two years under his abruptly departed successor. A separate product brand is linked only to the product. The corporate brand is the sum total of changing perceptions about all aspects of the company.

A change of company name, like that of Gardner Merchant to Sodexho, therefore has major strategic implications. In GM's case, the move signifies fundamental changes: a global company needs a global name to cover its activities in all markets. The proof of the global pudding, however, must continue to lie in the excellence of local performance at the point of delivery.

Whatever happens to the corporation, though, product brands do have remarkable persistence. They can outlive their corporate hosts and even survive their own seeming destruction by inept management. Take the MG car. Successive managers led an onslaught against the brand. They dropped its exclusive association with high-class, low-priced, small sports-cars; they used MG for "brand engineering", sticking it on ordinary cars to convey a sportier image; they lapsed in quality; they finally withdrew the brand altogether.

The guilty corporate brand, originally the British Motor Corporation, itself vanished during a series of failed mergers. Yet 'MG' still proved strong enough for the fairly recent and successful resurrection to its pristine state - as the brand, once more, of a high-class, low-priced, small sports-car. Corporate brands, though, disappear suddenly, and for keeps, some because the companies collapse, some because of merger, some because management - as with Sodexho - needs to create a new brand to convey a new destiny.

The twin advents of e-commerce and globalism have intensified the latter need. British Telecom is an obvious handicap for a telecoms company with large global ambitions: "BT" gets rid of that difficulty, but does not solve the e-problem - how do you persuade people to recognise the company as a fast-growing, large presence on the internet, while still promoting conventional telecoms with might and main?

In tackling such problems, name changes spring quickly to mind. But they must be handled with care, since nobody wants to risk the goodwill built up, sometimes expensively, over time. When Peugeot bought Britain's Rootes Group, its now-forgotten attempt to establish the Talbot name aroused nothing but ridicule. But Peugeot is both a product and a corporate brand, which makes changes in either particularly tricky.

The car industry contains extreme examples of alternative strategies. General Motors sells no cars under the corporate name, but all Ford cars bear both the corporate brand and a product brand (Ka, Mondeo, etc). A Mercedes or BMW has only the corporate brand with a number attached. You could argue that GM has suffered because the corporate brand gets no reinforcement from the corporation's products or services. The companies within this company - especially Opel and Vauxhall in Europe - have faced real difficulties, since they are neither corporate nor product brands, but in-between.

Car product brands, anyway, are not renewable for ever: in other markets, as with Coke, brand life does appear to be infinite - which explains why the attempted relaunch of the core product as New Coke was such a dangerous risk, and almost a calamitous one. In services, the situation is easier. Branding is generally much weaker: even though High Street banks, etc. spend fortunes on advertising, brand loyalty remains low in financial services. The public thinks (not without reason) that banks, insurance companies, mortgage lenders, etc. are all much of a muchness.

Imposing the HSBC brand on the Midland Bank consequently caused no pain on either side of the counter. Similarly, nobody much minded the adoption of the initials HSBC as the Hongkong and Shanghai Banking Corporation sought to escape from past Oriental trappings, and join the global banking league. But HSBC has some strong separate brands (like First Direct), so differentiation will not be easy.

Differentiation is the object of building both the corporate and the product/service brand. It really does depend on being truly different, in quality, or performance, or image, or service efficiency - or some combination of these qualities - that will take the brand clear of the competition. That task can't be left to local options. Once multinationals could entrust their business to national companies which, while under the same ownership, had almost total autonomy. Today, however, the globalism exemplified long ago by IBM is sweeping all before it: one company, one strategy, one set of policies, one product range - and, literally above all, one brand.

Successive waves of mega-merging have been partly responsible. Combinations, especially of supposed equals or across borders, may make name changes mandatory. Sometimes two brands can just be stuck together, as in DaimlerChrysler or the proposed AOL Time Warner. When Guinness wed Grand Metropolitan, that solution was clearly not appropriate. In any case, neither pre-merger name conveyed the real business nature of the drinks behemoths. So Diageo was chosen for the combined global enterprise, conveying just as little: but then, what is signified by Exxon, Arcadia, Invensys?

The first was once Standard Oil of New Jersey, the second the clothing-based retailer, Burton Group, and the third a merger of the engineering conglomerates, BTR and Serck. In the fullness of time, the original names will be totally forgotten, and the new ones will shine or not, depending on the corporate performance. But can the name actually enhance that performance? Sir Richard Branson certainly believes so: he argues that his beloved Virgin brand facilitates market entry and enlarges sales wherever it appears.

Not everybody agrees. The connection between an airline and personal finance products is tenuous in the extreme. The substantial (though unprofitable) business rapidly garnered by Virgin's investment offerings owed more to its hard-sell consumer marketing, spearheaded by Branson's personal image, than to the brand-name. Marks & Spencer also made a big dent in the same market, but without any benefit of marketing - the new personal finance venture simply rode on the coat-tails and store traffic of the established and hugely powerful retail brand.

The awesome decline in that brand's power over the past year or so demonstrates that even the greatest corporate name can be undermined by a collapse in customer perceptions. 'St.Michael', the product brand, has little strength of its own: M&S or 'Marks & Sparks' was overwhelmingly dominant in the public mind. It was associated with a strong image of value for money - you might pay more for an M&S garment or ready-cooked meal, but it was worth the difference. When that perception weakened, so did the whole business.

For all that, the M&S brand (or 'customer franchise') still has more than enough strength to make a comeback. No companies have ever lost semi-monopolistic market shares more rapidly or deeply than Xerox and IBM. Yet both brands still have great global appeal; IBM's has proved solid enough to support a vast and rapidly growing business in services, led by its e-commerce offerings. But here IBM has an advantage over its competitors - its brand extends naturally into cyberspace.

That does not apply if you're the Prudential or the Halifax, and you want to launch direct banking, or an Internet bank, or both. The old company is indelibly associated with the old services: call your direct bank Egg (which was the Pru's smash-hit choice) and you symbolise to the customers and your own people alike that this is a new enterprise, having nothing in common with the old except ultimate ownership, and doing new things in new ways.

Halifax used its own name for direct banking, without vast success: long before, the former Midland's direct pioneer had won heavily under the distinctive and separate name, mentioned above, of First Direct. So the new Halifax Internet bank will have its own identity. It's a fair bet that most victorious corporate e-ventures will trade under completely new e-brands - even though some analysts criticise such a strategy. They argue that the benefit of decades of brand-building outweighs the advantages of starting afresh.

That is plainly not true in cyberspace, where Yahoo!, Amazon, e-Bay, AOL, etc. have become global super-brands in months, rather than decades. The prevailing wisdom is that pouring new wine into bottles with old labels does neither the wine nor the bottle any good. And the prevailing wisdom, for once, is right.