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How soon after an acquisition should transfer take place? in Strategic Brand Management 11093

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How soon after an acquisition should transfer take place?

There are two paths to growth: organic, internal growth, or the acquisition of brands and products from elsewhere. Companies are increasingly coming to rely on external growth. In fact, we are used to hearing that one company has bought another: Google buys YouTube or MySpace.

In industrial electrical equipment, Hager grows in Europe through buying out local leaders (such as Ashley and Klik in the United Kingdom) – leaders that have market share, reputation, a loyal client base and the respect of distributors. The question then arises of whether these brand names, with their reputations at the local or technical specialist level, should be retained.

Four factors explain the enthusiasm for external growth:

It is a consequence of saturated markets: growth is achieved by buying the market share of another company, linked to a headline product, an innovation and a brand.We can also note a degree of dissatisfaction with internal innovation. Spotting external tendencies and snapping them up is the faster route.It is the end result of the tendency to fall back on the ‘core business’, on what the company is best at and where its competitive advantage is greatest. This is why groups sell their so-called peripheral businesses. Thus Bel (Laughing Cow, Kiri, and so on) sold its ‘regional’ cheese business (for example le Rouy) to Lactalis (Président and Société) in 2003. During these acquisitions, the question of names and architectures raises its head. For example, should le Rouy be called le Rouy by Président?Finally, these acquisitions are often part of a strategic plan consisting not only of buying market share, but also of developing a European or world brand.

The question of architecture immediately arises for innovations stemming from external growth. Can the acquiring company impose its name from the start, without losing customers – in both senses of the word ‘lose’? For example, Philips bought the Sonicare company (no relation to Sony), a specialist in oral hygiene the world over. Sonicare sold an innovative product under its name, a revolutionary electric toothbrush, which had become the reference among dentists.

What should this innovation be called once it had entered the Philips fold, and what brand(s) should it have? Sonicare has a good reputation in the United States and Japan, but less so in Europe. The reverse is true for Philips. Should it then follow the same architecture, in accordance with the dogma of globalisation? Or should it adapt to the markets?

Fundamentally, three phases of the decision process can be identified:

First is the question of coherence. Is this innovation coherent with the brand the organisation hopes to build? Imagine that Philips wished to reinvent its brand worldwide around the values of sense and simplicity. Philips wants to be recognised – to a greater extent than current image studies show – as a leader in innovation with sense, innovation that is close to and simplifies daily life. This kernel identity of two values allows it to carry out an initial sorting of innovations that do or do not follow this direction, and of companies to buy and not to buy. Sonicare was in fact coherent with Philips’ new desired identity. In contrast, when we worked with Citroen on its repositioning, the brand’s executive director reminded us that since the products designed three or four years ago had not yet been launched on the market, it was impossible to enact a public repositioning. It would have been immediately contradicted by the models to be launched, themselves the fruit of a previous vision of what Citroen would become.The question of strategy: should the product be launched alone, or should it be part of a strategic alliance? In the case of an alliance, the daughter brand is almost obligatory, since with co-branding neither brand can innovate graphically.

For example, Philips allied itself with the Dutch coffee giant Douwe Egberts to create Senseo, a coffee-maker that makes the best coffee at home, without having to pay the high prices for Nespresso. Note that in the latter case, Nestlé appears to have retained mastery over the project, since the daughter brand is a variation on the word Nestlé, combined with the generic word espresso, whereas the coffee maker is made by Krups, part of the Seb group.

The third question is that of acceptability to the market. In short, there may be a difference between the brand’s 10-year vision and its current situation among particular targets. One must not mistake desire for reality. In this case, the brand cannot act alone. It needs an ally, an intermediary: this is the role of the daughter brand. For example, in order to penetrate and dominate the feminine shaving market, Gillette uses a worldwide daughter brand, Venus. Furthermore, it follows the endorsement brand architecture. Venus is written in large type, with Gillette mentioned in small letters at the bottom of the packaging.

In truth, Gillette is a masculine brand – some might even say macho. ‘Masculine perfection’ is the brand’s international slogan. This image profile is hardly likely to generate value among the majority of women. They insist on maintaining their self-concept – even though there are genuine advantages to the product. Gillette remained pragmatic and discreet, and emphasised Venus, a reassuring hymn to femininity. This example shows clearly how the choice of a name arises from the choice of an architecture. The product is indeed Venus – by Gillette.

Depending on the gap that exists between the brand’s current profile and the expectations of the target of the innovation in question, different architectures will be selected. The more the image is a handicap, the more likely it is that reduced visibility will be selected (maker’s mark architecture). Otherwise, it is possible to go as far as dual branding architecture, or source branding.

The fourth question is planned evolution. In fact, the architecture selected in the first phase is only provisional. Remember that one of the functions of the innovation is to provide the brand’s identity kernel with traits that it had previously lacked. Once these traits have been acquired, and the gulf that existed between the brand and the target has been reduced, the architecture originally chosen no longer has any reason for existing. It needs to evolve. This is expressed in Figure below, showing a decision-making model developed with the Dutch consultancy agency VODW.

A stepwise approach to brand transfers (relating the type of transfer to the image gap) (Kapferer/VODW)

If everyone is in agreement with the final objective of a brand transfer, the timetable and the phases of the operation are crucial. As the schema shows, as the brand becomes more coherent with the market’s expectations, under the effects of communication and time, the brand can take greater visibility on the product and move from a discreet endorsement or maker’s mark to that of the unique source or masterbrand in the final phase.

The decision-making tree is based on the image diagnosis among the targeted clients – whether and how much the overall brand (later to become the only brand) is in step with the specific category expectations in the country in question. If it is already at 100 per cent, then a rapid brand change is desirable.

If it is low, then the image of the generalist brand risks causing offence and damaging the product’s sales, making the competing sales forces’ job easier. This is typically the case during the takeover by a generalist of a highly specialised brand, fetishised by a particular segment,. It is important to not forget the final objective (to finally arrive at a single name), but to proceed in stages.

We have sketched out the stages to indicate the different phases to be followed in the graphical relationship between the product brand and the global brand. Through the different stages, an evolution of perception occurs, bringing the global brand’s image closer to the expectations of the category’s or segment’s customers in the country, or the segment in question.

This makes it possible to move to the final stage, above. This process should be undertaken at a regional level: even for global brands, business is always local. Therefore, these progressive transfers should be implemented along a local timetable, determined according to the local image diagnostic.