Friday, 6 February 2009

The Death of Kinko's Brand

Managing brands within a conglomerate environment is a challenging task, even when the economy around you is flourishing, and even more so in times of economic turmoil. What is true of goods is even more so when speaking of branded services.

This is especially so when a company with a world-bearing service brand acquires well-known service brand and attempts to meld the two within one overarching services environment.
The fate of Kinko, after its 2004 acquisition by FedEx, as described in the January 5th issue of Business Week ("What FedEx is not Delivering", by Christopher Palmeri), is a cautionary tale of what can go wrong, culminating in the recent elimination of the Kinko brand.

For those readers who are not familiar, Kinko's is a US-based purveyor of photocopy and related services. Starting out from a college campus in California in the 1970s, it took on an iconic status with students, office workers, and just about anyone else that needed heavy-duty copying, fax, and related services. When FedEx acquired Kinko's, the chain (over 1,200 locations) had been owned for 8 years by a New York buy-out firm (Clayton, Dubilier & Rice), and already during that period there was a sense that the distinctive culture that had been synonymous with the Kinko name was deteriorating.

Kinko as heart-throb

No matter: as the legendary owner of FedEx, Frederick Smith, declared at the time of the acquisition--"FedEx and Kinko's share a similar heritage, culture, and commitment to a superior service." The vision was a seamless melding of their respective services, which would leverage both the FedEx and Kinko's brands. But it was not to be: In 2008 FedEx announced a $890 million write-off the Kinko purchase and three CEO's have tried to right the Kinko ship during the last four years.

A variety of factors for Kinko's decline were cited, starting with changes in technology that puts the printing and office services within the reach of homes and offices, effectively disintermediating the need for relying on Kinko's outlets. Quality of service also continued to be a problem, dating back to the earlier sale to the buy-out firm in the 1990's.

Beware of disintermediaries bearing gifts

And so what was the branding solution offered by FedEx? Simple, eliminate the Kinko brand. From now on, the services will be known as "FedEx Office", meaning that the iconic name Kinko's is no more. On the one hand, the adoption of FedEx Office can be viewed a vote of confidence by FedEx in its ability to turn the copying services entity around, so much so that it is willing to risk FedEx brand as being identified with these services.

But on the other hand, the decision to eliminate the Kinko brand shows just how sensitive service branding can be. First came the disruption to the Kinko culture following the purchase by the buy-out company. The brand survived, but impaired and vulnerable. Then came the attempt at merger and integration. This dual whammy proved to be more than the Kinko brand could endure. Whether FedEx Office will succeed where Kinko's did not remains very much an open question.

1 comment:

Mary Adams said...

Good post Neil. Intangibles do not get the attention they deserve in mergers--the planning and modelling focuses on the financials. I believe that the outcome would have been different if there had been an inventory of culture, competencies, processes and brands of each company as part of the integration plan. Why pay for value if you are going to destroy it?