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SchmidPreissler Brand Equity+Performance©  Programm

 
 

Issue: 11/200

Next Issue: Week 48/2007

 

 

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Does a change of a company name endanger hard-earned Brand Equity?
Franz Maximilian Schmid-Preissler

Repeatedly in recent years one could witness that companies choose neologisms over traditional company names. The reasons for this are obvious: today companies are frequently facing an identity crisis. Many have lost their “inner compass” – and through this, the trust of employees, customers, investors and the public. Or, as an employee of a major German Bank puts it:” That what was natural in the past – accomplishment through passion – we have to print of posters today.” That what used to be the inner motor of a firm is now debauched to be a marketing slogan, it becomes an empty platitude. An organization though which feels robbed of its own drive, its own identity, is much like a ship without a captain, it loses its course. In times of low earnings, with high revenue expectations and strategic reorientation in place, company renaming and redefining seems to be an appropriate instrument to signal that products and services will change fundamentally.

For example the current restructuring of the business group KarstadtQuelle through the changing the company name into Arcandor is aimed at distancing the firm from the negative image of being an unprofitable store chain. Betawin changed into bwin; the conglomerate RAG that emerged out of the Ruhrkohle AG is attempting, by changing its Name to Evonik, to distance itself from mining industry and to attract international investors.

So far so good one could be compelled to think, but, all theory and strategic considerations aside, who is considering the preservation of the value of the brand?

The value of brands and products and therefore the price they fetch and hence value added that is included in the price is evermore dependant on the reputation of the house they originate from. The assumption that quality is decisive for the success of a product or brand is outdated; quality today is a natural expectation. Studies of renowned institutes from all over the world confirm that quality indeed only creates a minor level of differentiation within the marketplace.

Strong company names give brands a history also in situations when times are tight. History is a part of a brands personality and that brand personality allows a company, within the economic framework (increasing intensity of competition, tough price- and terms negotiations, increasingly similar products and services being offered by competitors, generally high levels of quality, et cetera), to advance toward a competitive advantage.

As with most immaterial assets the economic weight and the potential of brands is rarely visible in balance sheets, even though, in the course of the IAS developments, the possibilities of activating such assets has been discussed for a long time in terms of providing transparent and realistic mechanisms to account for these immaterial assets in the financial statements. Many managers though still do not include this aspect in their decision making processes.

It may be, that in distinct cases there is a necessity to send a signal with a new company name, yet such a step should be very well considered. 

 

 

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