A while ago in the ‘50s, when everything was about the products, the name of a company was everything. This was because every company was specialised in certain products. But things evolved, and technological progress turned companies into conglomerates with no focus on a specific field. The fact that they can operate in any industry allows them to record major capital gains.
Procter&Gamble is a good example: it produces cleaning agents, personal care products, toothpastes, shampoos, baby products, shaving products, etc.
Unilever owns brands focusing on foods, personal care, fragrance, spices, cleaning agents, etc.
Some don’t like conglomerate companies, while others defend the former company structures. The truth is that in the absence of such conglomerates, we would have had a near-monopolistic market. Even when the conglomerates expand through affiliates (e.g. Gillette purchased by P&G), they provide the necessary budgets for keep their competitors alive.
In this context, we identified two expansion strategies that big corporations relay on: internal development or affiliation. Consequently, we also notice two naming strategies. Usually, the corporate companies’ ego imposes that names of the products developed inside the company include the parent company’s name. This is no longer valid when the company develops a product line by its affiliates. Nevertheless, the naming should consider the Charles Lindbergh syndrome.
When you are the first to get into your potential consumer’s mind, any name can be successful. Failing to do this and selecting a wrong name makes you the perfect candidate to failure. The typical cycle of a brand starts from the idea of an entrepreneur. There are only two cases that can guarantee the taking over of a brand that started from a successful idea: death and taxes.
A new product needs a new brand: linking this new product to an already known one is wrong. The reason is absolutely clear and real. A famous name became known because it represents something and is already set into the consumer’s mind. A known famous name always ranks first in the buying options of the regular consumer. If we change the context and range, we also change this ranking. Therefore, we need a new name go to on top.
It is very difficult to fight our impulsive instinct of choosing the name we know, because the idea that the target audience can easily accept a new product if we link its name to an already known one is a trap. But the history proved the contrary: Xerox spent almost one billion dollars to purchase Scientific Data Systems, a profitable computer company, whose name was quite suitable. What Xerox did next was to change the name into Xerox Data Systems, relying on the assumption that its mystical name reputation would definitely help. But this was a huge mistake: xerox means copy machines, not computers (if you ask for a photocopy, no one will bring you a data CD or a central processing unit) and, according to the teeter-totter principle, when a name represents two distinct products, one product goes up, and the other goes down.
In this case, it is wise to create a new name for a new product, especially when you know that an anonymous name can be a good resource: “Publicity is like eating” (state Al Ries and Jack Trout). Nothing can satisfy your appetite more than a good meal. Similarly, nothing can ruin your image faster than a front page story in a national magazine. We should never forget that we don’t advertise for the sake of publicity and we don’t communicate for the sake of communication: we do this because we want to conquer solid positioning into the consumer’s mind. We must not overwhelm our audience, but create the premises for capital gain.
There are many conditions for expanding a product line (usually by borrowing the already famous name of the parent company) that also relate to the market competitors, the sales volume (if small), as well as those related to the absence of competitors, advertising, and the goal of positioning yourself into your potential consumer’s mind.
The rules of the game are:
Ciprian Dron
CEO Unity Group