Who says Latin is a dead language? All over the world, companies are reviving the language of Caesar to create new global identities to promote their neo-imperial ambitions. Philip Morris is adopting Altria, Bell Atlantic cobbled together Verizon, Bell Labs became Lucent, and one of the starters of the neoclassical trend was Venator.
Some names claim to be investment brands, others are consumer brands, and some are both, but what’s their effect on shareholder value? For dire example, Venator produced a damp squib of an investment brand on the ashes of a historic consumer brand, Woolworth’s, and lately changed to the prosaic Foot Locker Inc. Dana Pilsbury, branding maven at GA Kraut Company, says a name change is only good for improving IR if ‘it serves to clarify what business the company is in by helping investors put the company in the right peer group, or to signal a dramatic change in corporate strategy or structure, for example a huge merger or big spin-off.’
Pilsbury says that, in general, the intangibles that matter to investors are those that provide assurance that a company will be able to financially perform up to scratch in the future. ‘The two top intangibles that matter are good performance, and excellent predictability. Anything that doesn’t link to them just isn’t going to have an impact. For investors, a new name doesn’t provide performance or predictability-related associations per se, as an old name with a lot of history of performance and predictability might.’
However, she notes, a new name can signal a serious intention to change strategy or management or some other important intangible. ‘If the company then doesn’t succeed in making those changes, it will have failed to deliver on its promise – a sin of the first magnitude in investors’ minds.’ At that point, she says, the new name just signals: tried to take me for a ride.
According to Jim Gregory, founder of international branding firm Corporate Branding, one of the most successful renominations he has been involved in was American Brands’ reinvention of itself as Fortune Brands. ‘It had owned American Tobacco and sold it off to BAT. It was still only followed by the tobacco analysts even though it had no tobacco. Fortune magazine kept running American Brands as its most admired tobacco company – which was probably because it had no tobacco products. We advised them to change the name since it was the only way to break away. It helped a good bit.’
Indeed, even now Fortune Brands’ web site history vacuums away every whiff of smoke – it explains the name change by saying the company made ‘significant divestitures in 1994, and in 1997 spun-off its remaining non-core subsidiary.’
Corporate Branding tracks companies across 34 industries and continues to track them even after they’ve gone out of business or merged. ‘We can plot the decay rate of the brand,’ explains Gregory. ‘It’s amazing how long they last, and how long they take to decay. For example, when Travelers merged with Citicorp to become Citigroup, we tracked how much familiarity they lost, and it was huge drop. The market value of that drop – 30 points of brand power – is the equivalent of $30 bn in market value. That is the gap between where they were going before on the projections, and what they achieved afterwards over time.’
Reinforcing the point, Dana Pilsbury points to Goodrich’s continuing (and not entirely successful) efforts to erase its tread marks. It deflated its tire business in 1986 and only last year announced that ‘BFGoodrich becomes Goodrich Corporation to reflect the growing, dynamic company it has become.’ Yet, for a generation or so, one can’t help thinking that lots of people will continue to think rubber when they see the historic name.
Verizon revised
One of the most successful recent rebranding exercises was Verizon’s. Corporate Branding’s tracking shows that the transmutation was handled ‘brilliantly’. In one year the company created a brand that was more powerful than its two predecessors on almost every count of reputation, familiarity and brand power.
It was no accident. ‘The bells! The bells!’ Quasimodo shouted, and Verizon’s executive director for brand management, Dan Klika, knows just how he felt, dealing with Baby Bells ringing in new companies. He had only just finished rebranding Nynex to Bell Atlantic when the merger with GTE sent him back to the drawing board. ‘We had to consider the impact on investors, consumers and employers. Bell Atlantic and GTE were two good, solid brands,’ he explains.
The company considered carrying on using the two brands, but that would have ‘signaled more of the same, and we really wanted to compete outside with one very strong, singular voice. We could even have introduced different brands for different products – data, wireless, and so on. In the end, we decided that strategically we needed a complete service brand to compete. One brand was the way to go,’ Klika recalls.
However, that was only the beginning. The next step was to come up with a name. They considered following the oil companies’ lead and string the names together, but decided against it. ‘Atlantic is not too good if you’re serving Hawaii or Alaska,’ Klika says.
And the company rejected the industry generics – the tels and coms. In the end, it came up with Verizon: a combination of the words veritas (Latin for truth) and horizon.
While most of the work was done in-house, they engaged graphic designers to help. ‘Eighty to 90 percent of logo designs are blue, which is a very safe color, but we wanted to look elsewhere. So we thought red would signify the technology and the v – the check mark – signified energy and forward movement,’ explains Klika.
It is no use building a name unless you launch it, and it was the department of Kim Goldsmith, executive director for business and marketing communications, that set it in motion. ‘We really had a blitz to change the name since we were going from a very low awareness of a brand name – around 5 percent – to almost 80 percent awareness throughout our footprint. It took three weeks and three stages,’ she says.
The first step was the announcement: ‘We are now Verizon, which we hammered home to everyone, including investors, to the point that people begged us to stop,’ Goldsmith admits. ‘The second week we repeated the message but added in reassurance that the products were all the same. At that point you begin to see hints of the whole fresh approach of Verizon. By the third week you are really setting the stage, so we began to explain what Verizon is about in the new day. This was the coming together of two behemoths and the last thing we wanted was investors to go away with the idea that it was just big. That’s not always a good thing, and you have to explain what else you stand for.’
Customers helped to boost awareness. ‘Investors are customers as well,’ Goldsmith points out, ‘and of course 56 mn phone bills dropping into mailboxes helped a lot as well. Between that and the TV and newspaper ads, the analysts’ meetings and the one-on-ones, by the end we had transferred our brand equity successfully.’
No-smoke signals
Philip Morris’s moniker change to Altria was both a long time coming and a surprise. An age had passed since the cigarette company established Marlboro as a successful cigarette brand in its own right, and the name Philip Morris had become primarily an investment brand. From Altria’s point of view, the name change resulted from cumulative changes in the company’s composition and accelerated changes in corporate culture. Most of the company’s revenue now comes from Kraft (partially spun-off last year), Nabisco, Miller, and other nicotine-free brands.
Philip Morris Management’s corporate communications officer, Frank Gomez, joined the company in 1988. ‘As far back as 1989 I was on a committee to examine a name change, but obviously nothing happened. As the food operations grew, it became apparent that a name associated with tobacco – like Philip Morris – no longer worked. There was a lot of confusion out there about a company that had five different units all called PM something,’ Gomez explains. There was Philip Morris Incorporated, Management Corp, International, USA and Capital Corporation, not to mention Miller and Kraft with their own separate identities. ‘All those units except the holding and support companies will keep their separate names, so PM International and USA will retain their names – symptomatic as it were of tobacco.’
Gomez says the decade-long process really began to accelerate two years ago when the company began to deal with public perceptions. ‘We began to try to communicate more effectively what we stand for, our values as a company and as a corporate citizen.’
In fact, anyone who has had dealings with Philip Morris will notice the culture changes. The old Philip Morris would probably have fought the settlement with the states on tobacco litigation – and it would certainly not have criticized the state governments for not spending the settlement money on campaigns against youth smoking. ‘Philip Morris has adhered to the letter and the spirit of the agreement,’ says Gomez proudly. ‘We found we weren’t in step with society’s expectations and we had to change to match the culture. [CEO] Geoff Bible was the main driver of that process.’
Indeed, the company’s tobacco roots have held, despite the name change. While many big American companies are incorporated in business-friendly Delaware, PM is incorporated in tobacco-friendly Virginia. The name change still needs shareholder consent, and IRO Nick Rolli was busy sending out proxies explaining the change even as he spoke to Investor Relations. ‘Naturally, the financial community was one of the prime audiences we needed to communicate with, and we wanted to make sure they were clear about our intentions,’ he explains. ‘We began with an analyst conference call, addressed by corporate affairs chief Steve Parrish, before Geoff Bible did the media and TV stuff.’
A rose by any other name doesn’t always smell so sweet in the corporate world. Rowley explains, ‘When we picked the name, we had to consider where we want to be in the future. We want to be a peak performer, financially; a good, responsible marketer and citizen; we want to be able to deliver shareholder value.’ So far only a few individual shareholders have called to query the decision, he reports, and the big institutions seem happy with it. The vote at the company’s April annual meeting is expected to go smoothly.
Jim Gregory charges that Philip Morris’s internal changes were really not substantial enough to justify a name change. ‘Fortune Brands had a reason,’ he concedes. ‘But when Altria did it, it was clear that they were only doing it to try to boost their stock price. The name change is a good idea, but I worry about the timing. They should have actually launched the name at the same time that they did the Kraft IPO. That’s my objection to it. That’s a change in approach, rather than a change in substance.’
Of course, Philip Morris has had to struggle with the so-called sin-discount, which is really a litigation discount, and an irrational one at that. If there were any serious legal threat, it would involve Altria/PM spin-off Kraft as well. Frank Gomez says that as far as he knows, no studies were made of the name change’s effect on the stock prices. However last year’s limited Kraft IPO, which sold off 15 percent of the food subsidiary, left the new stock trading at a P/E ratio of 24 compared to PM’s 13. This probably points the way to where Altria would eventually like to be. If calling a stock Kraft can have that effect, then as part of the incremental process of blowing away the smoke clouds from investor perceptions, calling the parent Altria will certainly do no harm.
