Where will the Great Brand Odwalla Land?

In a past post, I wrote about how great brands and products never die.  I provided two examples: the first, was Sesame Street; and the second, was Hostess products.  There’s another example of a great brand and product that is on the chopping block: Odwalla smoothies and juices.  Coca-Cola has announced that it is terminating the Odwalla brand.  According to CNN, this is a reaction, in part, to changing consumer demand and simplifying their supply chain.  Those smoothies do have a lot of sugar!  

Notably, Coca-Cola has over 500 brands.  Unlike Hostess, which was in bankruptcy, it will be interesting to see whether Coca-Cola will sell the brand.  If Coca-Cola truly wants to exit the smoothie business, then perhaps they won’t be concerned about a future competitor in that business line.  Coca-Cola does have other juice products.  However, even if demand for smoothies is falling off, I do wonder whether the demand will pick up again.  Interestingly, last year, Coca-Cola offered a zero calorie smoothie—perhaps they didn’t invest enough in marketing the new product.  For sure, it does take a while for trademark abandonment to kick in.  We’ll have to wait and see what happens.  Oh, and by the way, Odwalla was purchased for US $181 million almost two decades ago.  (And, if you are curious about my children's politics--now 15, 12 and 11--they think "cancel culture" is very troubling (everybody makes mistakes, redemption and what happened to free speech). They would vote for Biden if they could, but are relatively lost about what he stands for except that he's the alternative to President Trump--I think some debates will help.  They are concerned about Biden's comments about how if African Americans don't vote for him then they're not black and are somewhat mollified by his back-tracking.)

Hotel branding: how peculiar sometimes!

As the major hotel brand owners consolidate, more and more brands identifying hotels of differing types of luxury and status (and therefore of

price?) are finding themselves under a single ownership roof. This poses special branding challenges, as the conglomerates seek the best way to maintain brand equity in the house mark while at the same time attempting to distinguish each of the separate branded hotels. This can lead to some interesting results. Let us consider two examples.

The first relates to a situation where the company is apparently prepared to tolerate actual confusion between two hotels, each owned by the same company. In connection with the 2015 International Trademark Association Annual Meeting in San Diego, this blogger made his way to what he thought was the Hotel Palomar. Upon arriving at the hotel and making some inquires, he was told: “Sir, you are at the wrong hotel. You don’t want the Hotel Solamar, you want the Hotel Palomar” (which is about a 10-minute walk away). I then continued: “How often does it happen that a person confuses one hotel with the other”? The answer, “From time to time, but we don’t really care, since both the Hotel Solamar and the Hotel Palomar belong to the same group, the Kimpton Hotels.” So, there it was—as a consumer I had been confused, but from the point of view of the trade mark owner, confusion was less of concern, it would seem, than the time and expense of rebranding one of the two hotels.

The second refers to a recent piece that appeared on Bloomberg.com entitled “Marriot and Starwood Reveal the Future of Their Luxury Brands”. As readers may recall, Marriott’s acquisition of Starwood will result in expanding Marriott’s brand holdings (at 19 brands, already the biggest in the world) to 30 brands. What does Marriott intend to do with these multiple brands? In an interview with Bloomberg, Tina Edmundson, the global brand officer of Marriott, set out her company’s branding strategy. The following points made in the interview are particularly noteworthy.

1. For the moment, all 30 brands will remain, even if the author of the piece, Nikki Ekstein, commented--“We remain skeptical about that in the long run.” Interestingly, Edmundson had previously worked for Starwood for 18 years prior to joining Marriott, so her connection with all 30 brands is long-standing and intimate.

2. When one hears the words “Marriott” and “luxury”, he or she will likely think in terms of Ritz-Carton, Ritz-Carlton Reserve, Bvgari, St. Regis, Edition, the Luxury Collection and JW Marriott, all of which are designated “luxury” by the company. But not all Marriott luxury hotels are equally “luxurious”, it would seem. Ritz-Carton, St. Regis, and JW Marriott will all be identified as “classic luxury”, with the other hotels will all be designated as “distinctive luxury”. The first category focuses on traditional and business travelers, while the second addresses patrons seeking a modern, boutique-y hotel experience.

3. Of particular interest will be how the Ritz-Carlton and St. Regis brands, which Ekstein likened in the piece to two boxers “occup[ying] opposite corners of the same boxing ring”, and which are “very similar in style and taste”, will move from competing over the same type of customer to sharing them. The company apparently will do so by segmenting luxury customers into two distinct categories—the Ritz-Carlton consumer is about “discovery”, while that of the St. Regis patron is about “status and connoisseurship”; the Ritz-Carlton “is about connecting people to places”, while the St. Regis “itself is the place where people want to see and be seen.” Will this work, or will the two hotel brands simply cannibalize each other’s customers? Obviously, Edmundson thinks that it will succeed.

Whatever one’s lodging preferences, from the IP and branding point of view, what Marriott has embarked on in seeking to maintain 30 different brands, including eight different “luxury” brands, seems to be uncharted branding waters. Indeed, the success of the company in doing so may shed light on the the extent to which consolidation in the hotel industry involving companies of this size can work side by side with successfully supporting multiple brands.

Brand-building online: when shelf space is replaced by ...?

While brand building needs to take into account a large number of factors, at the end of the day, a brand is ultimately only as good as its last

sale. This certainly holds true for shoes and clothing. For sure, the producers of these products strive to promote their brands with the goal that the brand will continue to resonate with customers. However, unless producers can get their products into the hands of customers in an effective way, the goal of establishing a brand is doomed to failure. Successful execution of distribution and sale of these fashion products in the name of brand development may be even more challenging in the face of the rise of online sales.

An interesting aspect of this online challenge emerges from an article that appeared in the September 3rd issue of The Economist, entitled “Fashion Forward.” The piece describes the commercial success of Zalando, described as “Europe’s biggest online vendor of clothing and footwear”. Zalando is reported to have relationships with approximately 5,000 brands, most of which are described as “well-known labels”, and it supplies over 150,000 items.

What is in this for the brand owners themselves? We start with the premise that the brand owner recognizes the increasing importance of online sales. This is so, even if purchaser choice of clothing and footwear is a matter of individual taste and so, for generations, the visual/tactile experience of actually selecting an item in a store has been central to the purchasing experience. Zalando provides a partial solution by offering an extraordinarily generous return policy, good for 100 days following purchase. Almost 50% of purchased products (based on value) are returned, usually because of issues of fit or style. This arrangement may not be the functional equivalent of the on-site dressing room, but the ease of the terms of return seem to be sufficiently accommodating to establish the online purchasing experience as a viable alternative to the brick-and-mortar store.

But what is of even more interest is the observation in the article that—

“[a] lure for retailers and brands is that Zalando saves them from having to invest in e-commerce themselves.”

There is a sense that this position is analogous to the motivation for an enterprise opting for cloud-based services rather than maintaining the necessary computer hardware of their own. But such an observation only goes so far. In the pre-online world, a brand holder (unless it maintained a brick-and-mortar site) did not have to invest in distribution and sale infrastructure, which was the responsibility of third party retailers and the like. True, one had to fight for shelf space, but if your product could be successfully placed, it was the retailer that bore the rest of the sales burden.

On its face, the same approach is being adopted in the arrangements with online sellers, such as Zalando; the brand holder is freed from maintain its own online platform. But query whether the brand holder may be giving away too much control in the name of sparing itself from the need to invest in the infrastructure itself. The retort will likely be— “But we have no choice. Even a behemoth such as Walmart is struggling to successfully operate its online business. Whom am I, a mere minnow in the clothing space?” That may be so, or it may not. What does seem clear is that a brand holder tying itself to the likes of Zalando in this manner may be even more shackled to the distribution whims of a third party than it was with respect to its brick-and-mortar retailers.

And Zalando itself is itself potentially vulnerable from a challenge from the likes of the 800-pound gorilla in the e-marketing world, Amazon.com. For the moment, Zalando has a market-leading position, which may be difficult for Amazon to copy. But as noted--

“Eventually, though, Amazon will build a strong offering, and consumers will be called upon to decide: do they want a one-stop-shop for everything, from electric toothbrushes to Jimmy Choo shoes? Zalando’s hope is that there is still something special about shopping for fashion, even if it’s done while waiting for the bus.”

Should that come to pass, the position of the clothing and footwear brand holder within the online sales environment might be even more challenging. This is so, because the brand holder has merely exchanged a battle for shelf space for a struggle to obtain favorable terms with the likes of Amazon, with no apparent viable plan B.

Bye bye GE Appliances--but what about the brand?

If the measure of a brand is all of the market information embodied therein, then the GE brand has certainly attracted a lot of recent attention. The move of its corporate headquarters from suburban Connecticut to Boston

has been widely noted, including by this blogger. Of less notice, perhaps, was the report last week that GE had reached agreement with the China-based Qingdao Haier Co. Ltd., a unit of the Haier Group, for the sale of GE’s white goods appliance business, including such products as refrigerators, freezers, clothes washers and dryers. The transaction price was announced at $5.4 billion. To put this amount in perspective, GE was more or less forced to walk away in late 2015 from a $3.3 billion offer from Sweden’s Electrolux, due to opposition from the U.S. antitrust authorities. Electrolux, GE and Whirlpool are the three dominant players in this industry. Haier is reported to have merely a 5% market share, which is not expected to attract antitrust scrutiny (although the Committee on Foreign Investment in the United States may still weigh in the contrary).

What is interesting from the IP point of view are three points. First, the sale would seem to be consistent with the announced move of GE to Boston, to better enable the company to become a leading “high-tech global industrial company.” As much as white goods do not lack for high-tech features (think the “internet of things” and one’s ability at some point to activate his washer from afar), it would appear that it is not the high tech sort of activity GE seeks to engage in going forward, even at the apparent price of transferring the company’s technology in these areas to Haier.

Second is the fate of the GE trademarks that have anchored its white goods business for decades. The reports on this transaction suggest that Haier will receive rights in the relevant product marks, including MONOGRAM, CAFÉ, PROFILE and ARTISTRY, as well as the GE APPLIANCES brand. Indeed, as part of the deal, it is reported that following the acquisition, “GE Appliances will continue to market the current portfolio of GE brands for a period of 40 years (inclusive of two 10-year extensions)." This seems a different approach than that taken by Lenovo, when it acquired IBM’s PC business a decade ago. One would be hard-pressed to find anyone under 20 years of age who can recall the IBM brand in connection with the PC market. That will not be the case with respect to the GE brand in this case, which will continue to be used in connection with these white goods products for decades to come. How that will work as a branding strategy and redound to the GE brand going forward is an interesting question.

Third is the possible manner in which Haier will make use of GE’s distribution network for these products to seek and expand the company’s own product lines in this area. As one industry analyst, Johan Eliason, was reported by Reuters.com (see above) to have observed—

…over time I’d expect them to use GE’s excellent distribution network in the U.S. to source in more of their own Chinese low-priced products which will change the [pricing] dynamics to some extent.

If this will occur, Haier may then be relying on the same distribution network to move both higher and lower- end products, each under separate brands. How will the company juggle these potentially competing brands and support the brand equity that each enjoys? Will there be a strategy whereby the purchaser of a low-end product will be more likely to trade up as his/her financial circumstances improve, or will the brands stay separate? Could there even be a scenario whereby Haier might rely on a complementary distribution network for its lower-end products?

More generally, the effect on the GE brand, as the company seeks to reposition itself going forward, continues to bear close watch.

When iconic may not be enough: the saga of FAO Schwarz

"Iconic".  The Merriam-Webster dictionary defines it, inter alia, as follows: a: widely recognized and well-established" such as "an iconic brand name", or" "b: widely known and acknowledged especially for distinctive excellence", such as an iconic writer", or "a region's iconic wines."

What happens when an iconic store name is intertwined with one of the most iconic scenes in all of moviedom? Surely this must be a sure-fire recipe for brand success. Sadly, however, even being iconic is not enough—just ask FAO Schwarz, which announced last Friday that it was vacating its famous toy store on Fifth Avenue in Manhattan for a presumed relocation to a less pricey site.

I don't think I am unusual in saying that, when I first visited New York more than 50 years ago, one of the top destinations was the FAO Schwarz store. My aunts made a bee-line for several near-by retailers offering clothing that they could never afford. For me, however, there were only three places in Manhattan that I wanted to see—the Empire State Building, the Stature of Liberty and FAO Schwarz. I don't know how I came to know the saga of the store, growing up as I did many hundreds of miles away in a small town in Ohio. But so I did, as did all of my friends. By the time that I made it to New York, I knew that there were all kinds of toys in the store that we could never afford. No matter—it was enough to be able to enter and look at them, secure in my belief that the sons and daughters of the famous and wealthy would provide the custom to support the store.

If that were not enough, the store was the setting for the unforgettable scene in the 1988 movie—Big, in which Tom Hanks joined the boss of the mythical toy store (having been filmed at FAO Schwarz, something that we all recognized), as they played a duet on a foot-operated electronic keyboard, performing "Heart and Soul" and "Chopsticks." If any US toy store was iconic, it was surely FAO Schwarz, where the movie scene merely validated what I had long-known as a child—FAO Schwarz was a toy store like no other.

It was against that backdrop that I was so taken aback by the Reuters report that the store was leaving Fifth Avenue due to the high rent being charged and the other costs of operating the store at the Fifth Avenue location .By July 15th, the company, which was acquired in 2009 by the much less up-scale toy company, Toys "R" Us, will take an early exit from its lease. The exact financial details were not disclosed, although the store did state that it was looking for a new Manhattan location. Previously gone were the FAO Schwarz locations in other cities. At the most, the store advised, in addition to the relocation of the Manhattan site, it will maintain an online presence as well as some boutique presence in various stores of its parent, Toys "R" Us. The next day, Saturday, the store was packed with shoppers, many not even aware of the announcement of the previous day. Typical was.Laurent Orne, visiting from France with his family. He took a number of pictures of his six-year old daughter, aside the well-known toy soldiers adorned in red uniforms, observing that "we wanted to come here because this store is mythical".

Reflecting on all of this, it gives me pause to ask—what exactly is the value of such an "iconic", "mythical" name? True, the store is not apparently shutting its doors, but it is taking a step that will seemingly impair the aura of the name. Indeed, the question can be asked: is FAO Schwarz in the throes of a death-spiral, where the new store location struggles to find the combination of merchandise plus price points that will provide it with sufficient revenues? Will the typical customer in a Toys "R" Us store seriously consider paying the higher price tag of the boutique FAO Schwarz merchandise? However one looks at it, it seems to me that the brand is a fight for its long-term survival, no matter how iconic it is as part of American culture.

Interbrand Releases 2014 Brand Value Rankings: The Technology Brand Rules

CNN reports that Interbrand recently released its 2014 Brand Value Rankings.  Notably, two brands have a valuation of over 100 billion dollars: Apple (almost $119 billion) and Google (over $107 billion).  In 2013, Apple was valued around $98 billion and Google around $93 billion.  Also, the 2013 valuations were about 28% higher than the prior year for Apple and 34% higher than the prior year for Google.  Eleven of the top 20 are “technology sector” companies.  Coca-Cola and McDonalds are the only two food service companies in the top 20.  Four of the top 20 are from the automobile industry and Gillette, Louis Vuitton and Disney are also in the top 20.  Interestingly, HP, Louis Vuitton, GE, IBM and Gillette, all members of the top 20, dropped in value from the prior year.  The highest riser for the top 100 brands is Facebook—at a whopping 86% increase in value.  Audi, Volkswagen and Nissan also had double digit increases in value.  Barely making the list, Nintendo dropped 33% and Nokia dropped 44%.  The rankings are available, here.  The methodology is here. 

How “Deep” is the Connection with the Brand: Harris Interactive’s EquiTrend® Rankings

Harris Interactive has released its EquiTrend® Rankings of brands.  The rankings attempt to ascertain the connection between a brand and the consumer—in other words, “how deep is the connection between the brand and consumers.”  Harris Interactive EquiTrend®:

examines the predictors of in-market performance: Brand Equity, Consumer Connection, and Brand Momentum.

We capture and analyze the opinions of over 38,000 Americans on 1,500+ brands from 150+ industry categories and break responses down by 28 demographic attributes to help corporations target consumers, generate quality media coverage, support communication efforts, and inform future business strategy.

The capstone of the study is the Equity score, a snapshot of a brand’s strength, derived directly from consumer responses. Brands that are ranked highest in their categories receive a Harris Poll EquiTrend “Brand of the Year” award and the option to promote the award among their customers.    

The rankings are essentially broken down by industry and then product or service category.  The leading computer brand is Apple, which is followed by HP, Dell, and Sony.  The leading computer tablet is the IPad.  The next best are Kindle Fire, Google Nexus, Samsung Galaxy, and HP Slate.  In the consumer electronics category for cameras, the ranking is Canon, Nikon, and Sony.   And, in the food category for chocolate candy, Reese’s Peanut Butter Cups is first followed by M&Ms Peanut, M&Ms Milk Chocolate, Hershey’s Kisses, Hershey’s Milk Chocolate, Snickers, Kit Kat, and Reese’s Pieces.  For household products in the vacuum category, the ranking is Dyson, Hoover, Kenmore and LG.  The leading brand in telecommunications for mobile phone is Apple and is followed by HTC, Samsung, and LG.  There are over 23 "industries" and over 150 product or service categories.  Looking for a partner for branding purposes?  Enjoy! 

The Top 150 Licensors

On May 1, 2013, the Global License publication released its annual list of the top 150 (in the past this was a lower number) licensors.  According to Global License, the top 150 licensors account for around $230 billion in retail sales of licensed products and information.  The top 10 licensors on the list include: 1) Disney Consumer Products ($39.3 billion) (brands include Mickey Mouse and Avengers); 2) Iconix ($13 billion) (brands include Starter, Zoo York, Umbro and Buffalo); 3) PVH Corp. ($13 billion) (brands include Tommy Hilfiger, Calvin Klein and Izod); 4) Meredith ($11.2 billion) (brands include Better Homes and Garden and Parents); 5) Mattel ($7 billion) (brands include Barbie and Fisher-Price); 6) Sanrio ($7 billion) (brands include Hello Kitty); 7) Warner Bros. Consumer Products ($6 billion) (brands include Superman and Batman); 8) Nickelodeon Consumer Products ($5.5 billion) (brands include Dora the Explorer and Diego); 9) Major League Baseball ($5.2 billion) (brands include the NY Yankees); and 10) Hasbro (brands include Transformers and Nerf).  Other notables in the top 25 include Weight Watchers International, the Collegiate Licensing Company and Ralph Lauren.  The entire list along with commentary about the licensors is here.  Enjoy! 

The Bangladesh Building Collapse: the Challenge to Brands

With the horror of the collapse on 24 April 24 of the Rana Plaza building in Bangladesh still claiming more victims, now numbering over 1,000, and despite the remarkable news that one more survivor was recently found, attention has been drawn as well to the role of the various international brand holders whose products were manufactured at the site. The eight-story building housed five garment factories, at which clothing products for various well-known brands were made. A particularly interesting discussion on the issue appeared in a AP article dated 12 May ("Leaving Bangladesh: Not an Easy Choice for Brands", here). Brands mentioned in the article include Walmart, H&M, The Children's Place, Mango, J.C. Penney, Gap, Benetton, Sears, Disney and Joe Fresh.

As described in the article, the choice facing these brand holders is stark: "Stay and work to improve conditions. Or leave and face higher costs, similar or worse worker conditions in other low-wage countries and criticism for abandoning a poor nation where pre-capita gross domestic product is just $1,940 per year." As for the specific site itself, it is not clear how many brands had product being made there. It does not appear that there is a media rush by brand holders to admit publicly any manufacture at the site, given that there is supposed to be an auditing of the conditions to ensure that work and worker conditions are reasonable. There is talk of campus boycotts against certain brands (the Gap brand is mentioned) and angry postings on the Facebook pages of Joe Fresh, Mango and Benetton were reported. To this point, most of the retailers listed above do not appear to plan to leave Bangladesh. On the other hand, Disney announced that is stopping manufacture of its branded goods in Bangladesh. It is not clear whether any other owner of branded goods being manufactured in Bangladesh will follow.

Against this backdrop, it is interesting to consider the relationship how brands owners, especially those with an alleged connection with the collapsed site, might be affected by the Bangladesh tragedy. First, to this point there does not appear to be anything that would make any of the brand holders legally liable for the tragedy. Compare that with a situation in which the brand holder/manufacturer is directly connected with a faulty product bearing its mark. The J&J recall of the Tylenol product in 1982 comes to mind here. There, as well, an issue of life and death arose and the company faced a frontal attack on its fundamental goodwill and credibility, was wrapped up in the products bearing the Tylenol mark.

With respect to the Bangladesh tragedy, however, while mind-numbing in its scope, the events do not appear to be directly connected with the action of any of the brand holders. That makes the issue much more nuanced. The challenge to the integrity of the brand lies more in the sphere of morality and trust, more amorphous and less acute than the J&J/Tylenol-like situation. Further, the considerations of the branded retailer may differ from that of a product brand holder. The former may well have a much more complex supply chain in Bangladesh, making it much more difficult to complete an exit, a least in the near term. Moreover, threat of a boycott are difficult, if not possible, to maintain for very long against a retailer. There is also the issue of public memory; none of the brands, at least as of the time of this writing, has prominently been connected with the disaster. Under such circumstances, unless a particular company is subject to a board and management that places a special emphasis on issues of morality and ethics, the most likely scenario is that the matter will ultimately fade away for most companies.

Still, when the brands at issue are products rather than retail services, the risk may potentially be greater, In such a case, it may be easier for a pressure group (or even a single committed activist) to keep that specific product in the public's eye. Some companies, such as apparently Disney, may simply decide that the risk of adverse publicity is not worth it. A view was expressed in the article that, in the long run, other brands active in manufacture in Bangladesh will cut back or fully withdraw their operations over a period of time, despite the rock-bottom low labor costs in the country. It will be good to revisit in a year's time the roll call of brands actively having their products manufactured in Bangladesh to see how many have actually exited the country.

Great (IP) Brands (Products) Never Die

During the last election cycle, US Presidential candidate Mitt Romney attacked the beloved US children’s television show, Sesame Street, in a debate with Barack Obama.  In a bizarre exchange, Romney basically said he was going to shut down the Public Broadcasting Service show—Big Bird, the Grouch, the Count, Bert, Ernie and Elmo were in trouble.  My children, who watched the debate, were horrified.  At the time of the debate, my children were ages 8, 5 and 3 (we had to work to get them to focus).  After the debate, they would say things like, “We hate Romney,” and “Romney hates kids.”  I tried to explain to my kids that Romney is not against Sesame Street; Romney just doesn’t like the fact that the government is partially paying for the production of Sesame Street while our country has so much debt.  I also pointed out that Sesame Street is a very popular show and that a firm in the private sector would be sure to “pick it up”—they probably wouldn’t miss a show.  (trying to be objective here)  But, my kids were not having it.  They still, to this day, dislike Mitt Romney.  And, if you ask my now four year old what her religion is she says, “Democrat.”  (So much for Sunday school.  And, I do confess that there are other reasons my kids support the Democrats and they also think President Barack Obama is “very cool.”)

Here is another teaching moment.  The beloved American snack food and brand, the Twinkie, is reborn.  Last year, the Hostess company announced its bankruptcy.  Some of its brands were American icons such as Wonder Bread and Twinkies.  CNN reports that a joint venture of private equity firms is purchasing the Hostess snack food business, including Twinkies, for $410 million.  CNN has also reported that the “Wonder Bread” brand and Hostess bakeries has been purchased by Flower Foods for $360 million.  Looking forward to seeing Twinkies on the shelves again—although I confess I prefer Sno Balls. (I wonder if my kids are now going to love a joint venture of private equity firms.)

Apple v. Samsung: Don't Take Your Eyes Off the Brand and User App Ball

Should I or shouldn't I? Should I or shouldn't I? With so much commentary about last Friday's jury verdict in the Apple v Samsung trial in the U.S., I have thought long and hard about whether to share my observations about the decision. The answer ultimately being "yes", I want to focus on one major point, namely the interrelationship between patent infringement, content aggregation via smartphone apps and brand strength. 

The Apple case is distinguished by the way that its results will potentially enable Apple to maintain and even extend is preeminent position in what really matters--the strength of its brand and the superiority of its apps-based user ecology. With all of the conversation about the value of the victorious Apple patents, one should not lose sight of the fact that patent litigation seldom, if ever, has the result of reshaping the structure of any entire industry. At the most, a given or a small number of products may be affected and the defendant may have to pay a substantial amount of money in damages. However,with the pharma industry as the possible exception, I am hard-pressed to recall a patent decision that has had an industry-altering effect. 

Compare this with social media, where copyright litigation (think, e.g., Napster), thanks to network effects, has forced the losing party to alter the structure of its business. Shutting down the file-sharing function of Napster's service put Napster out of business and changed the way that file-sharing is carried out. As for the instant case, however, even if the court imposes a broad form of permanent injunction against certain Samsung products, that fact alone will not be the main reason, should Apple then see its position in the smartphone product strengthened. Rather, the case is simply another means by which Apple can enhance the brand strength and user ecology of its products. Without these results, even if Apple's coffers are enriched by one (or more) billion dollars, the patent case will not deemed a victory to Apple's long-term strategic vision. At the end of the day, it is the Apple brand and user experience, not any short-term restrictions on competitors, that will determine Apple's ultimate fate. 

Seen in this light, the discussion last week about how the jury's result may lead to an increase in innovation in the smartphone industry seems misplaced. This is mere cant that misses the essence of what is going on in the smartphone industry. The Teece truism that was so powerfully expressed nearly 30 years ago in his article, "Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing, and Public Policy", Research Policy (1986), namely that innovation per se is not what usually ensures commercial success, but rather complementary assets such as marketing and distribution skills, remains true today. Indeed, one might say that if Apple succeeds in severely diminishing the role of Android phones, it will have turned Teece partly on this head: enough an IP position for Apple to leverage the complementary assets that really matter.

 

If wants a technically competent competitor to the Apple smartphone that does not seem to be in the line of Apple's litigation fire, then one need go no further than the new Nokia-Microsoft device. But Nokia has little brand strength in the smartphone space, there are far too few apps, the chicken and egg problem of how to encourage more developers to develop new apps remains stalled, and whether or not Microsoft is the operating system for this smartphone is of little value in convincing a consumer to purchase this product. From the Teece perspective, the Apple brand and the iPhone user experience/ecology/Apps store reign supreme and will only be strengthened. No, innovation is not the issue but whether the decision will enable Apple to leverage its brand and ecosystem in a way that will make it that much more difficult for competitors to flourish.

If this view is correct, Nokia/Microsoft will have to hope that they can attract a critical mass of competing apps, that the Microsoft operating system replaces the Android as the credible alternative to the iPhone and that Nokia and Microsoft can then leverage these factors to build a competing brand presence of the industry. As we watch these developments play out, the ultimate impact of last week's decision regarding patent infringement may well be of less significance.

Loss Leaders and Bait and Switch: Marks and Brands in the Auto Industry

I have always thought that when a car company advertises a certain model, the primary intention is to sell as many units of that model as possible. It had never occurred to me that a given model might be promoted for marketing purposes other than the goal of necessarily selling that model. "Loss leaders"?-- that is for the local pharmacy; "bait and switch"--that is for the local supermarket. Surely neither of these marketing ploys could have any relevance for the marketing and promotion of an automobile brand.My, oh my -- was I wrong!

Consider the following two items that appeared in separate December 2011 issues of The Economist. In the first article ("Difference Engine: Volt farce") here, which appeared in the 8 December issue, the focus is on the challenge facing GM in dealing with questions over the safety of the electric battery, the technological centerpiece of the highly touted Volt electric car here.

Against that background, the article stated as follows:

"For General Motors, a good deal of the company’s recovery from its brush with bankruptcy is riding on the Chevrolet Volt (Opel or Vauxhall Ampera in Europe), its plug-in hybrid electric vehicle launched a year ago. Not that GM expects the sleek four-seater to be a cash cow. Indeed, the car company loses money on every one it makes. But the $41,000 (before tax breaks) Chevy Volt is a “halo” car designed to show the world what GM is capable of, and to lure customers into dealers’ showrooms—to marvel at the vehicle’s ingenious technology and its fuel economy of 60 miles per gallon (3.9litres/100km)—and then to drive off in one or other of GM’s bread-and-butter models."

Stated otherwise, the "Volt" brand is being promoted no less for the broader message that the brand is intended to convey about the technological capabilities of a reborn General Motors than for the the direct sales potential of the model (at least for the foreseeable future, which remains uncertain). While the Volt is not exactly a loss-leader, I am sure that GM wants to make a lot of money on this vehicle, if for no other reason than the costs of bringing a new car model to market. Still, the current tribulations of the Volt car point to the fact that GE cannot really allow customer perception of the vehicle as a symbol of the company's technological prowess, even if the model itself is not directly contributing to the company's bottom line.


But this is hardly the first time that an automobile model has been used to serve purposes other than the direct sale of the model in question. This was brought home in the article in the 17/24 December issue of the same magazine ("Retail Therapy: How Ernest Dichter, an acolyte of Sigmund Freund, revolutionised marketing") here. Dichter, while today largely forgotten, was a seminal figure in the marketing revolution that took place in the 1930s and 1940s, where the focus was how to exploit irrational purchasing behaviour for better sales performance. Dichter was a committed student of Freud, and his focus was on the Freudian preoccupations of the day, emphasizing the emotional, the irrational and the sexual.

In this context, perhaps Dichter's most creative marketing ploy was his approach to the then new line of Plymouth cars. The problem was that sales of the Plymouth brand were lagging. Dichter reasoned that the problem could be found in the slogan--""different from any other one you have ever tried." Dichter reasoned that the slogan triggered an unconscious fear of the unknown in purchasers. The solution that he fashioned was ingenious. Dichter gleaned from interviews that, while only 2% of car purchasers (in 1939) owned a convertible, they (especially middle-aged men) almost all dreamed of owning one.

And so the ploy. The male would be drawn into the showroom to look at the convertible--a symbol of "youth, freedom and the secret wish for a mistress". He would then return with his wife, who had no interest in sharing her husband with a mistress, even of the four-wheeled variety. The compromise was the purchase of a sensible sedan -- of the Plymouth variety of course. It was a clever scheme to leverage one model to encourage the purchase of another.

It would be overstated to suggest that the Volt is a "loss leader" in the traditional sense, or that the Plymouth convertible was a "bait and switch" tactic. Still, there are tantalizing points of similarity. In the auto industry as well,the interrelationship among the mark, the brand and the product are at once both more and less than that which meets the eye.

Chinese Brands: Does Privatisation Matter?

The challenge of creating durable brands, especially those with traction outside of one's home territory, is not unique to Chinese companies. But the sheer size and potential international reach of Chinese companies makes their branding potential a matter of particular interest. It is against this backdrop that I found some intriguing insights in an article that recently appeared in the September 3rd issue of The Economist ("Privatisation in China: Capitalism Confined") here. The focus of the article, based on a study by Professors Jie Gan, Yan Guo and Chenggang Xu, is a typology of privatisation of Chinese companies. The first category contains massive infrastructure and utlility providers (such as banks, transport, energy and telecoms). In effect, these companies still remain largely within the purview of government ministries. Branding appears to be a minor or non-existent consideration.

Of more interest are two other categories: (i) joint ventures, comprised of a private (usually a foreign entity) together with a firm backed by the Chinese government; and (ii) companies that are largely in private ownership, but over which the government still exercises various forms of influence. At the risk of generalization, it appears that the second category of company is more attuned to branding matters than the first category. Even with that distinction, certain types of industries appear more likely to be concerned with branding issues than others, for instance, the automobile industry. Let's expand those thoughts.

Joint ventures--As has been often described (and sometimes decried), in the joint venture arrangement, the private, usually Western partner, seeks to gain access to the Chinese market in exchange for sharing its know-how with its Chinese partner. Criticism of this arrangement has centred on the charge that either by premeditated design or by later developments, the foreign partner is pushed aside or even squeezed out.

With respect to branding, most attention has been drawn to the car industry. As attributed to Michael Dunn, a car-industry consultant, the Chinese government has pushed the foreign company "to form "indigenous brand' joint ventures with intellectual-property and export rights." However, the article goes on to observe that "the efforts of the Chinese joint-venture partners to develop their own brands have yet to produce much success, despite their access to Western technology, vast resources and political pull."

The reason seems to be that, although the Chinese partner is interested in the economic well-being of the company, there is an absence of the long-term commitment that is required to build a brand. In particular, the Chinese representative is more likely to be tied to the government (indeed, that may well be the reason that he was chosen) and therefore it is also likely that he will return to a politically-related position. Under such circumstances, the chances that a joint-venture arrangement will successfully develop a strong brand appear weak.

Largely Private Company--Here the Chinese government appears to have less, or no direct involvement (indirect involvement and financial incentives are a different matter, but perhaps not so different than the situation with Western car companies as well). Again, focusing on the automobile industry, it is here that Chinese car companies have been most successful in brand development, pointing to the BYD, Chery and Geely brands. Further afield, the same situation is said to apply to ZTE and Huawei in the telecoms industry, Lenovo, the PC maker, and TCL, an electronics manufacturer. The common denominator for this has been ascribed to the different type of Chinese management in such companies--"[t]he bosses are not political appointees but charismatic businessmen in pursuit of commercial goals."

There is a potential darker side to these developments. The article goes on to decribe other types of "largely private" companies, most of which are in industries that are characterized as "strategic", such as energy, medical equipment and drugs. Here, industrial policy is more blatant, with protection against foreign challengers, liberal R&D support, and subsidized government purchasers. The jury is still out about whether such companies will able to develop their brands overseas successfully, once they venture out of their supportive local environment.

In this context, it would be instructive to learn whether any research has compared the trajectory of these companies with the success of both Japanese and Korean companies to create world-famous companies with powerful brands spanning the globe. More generally, it will be interesting to track the success of Chinese brands as a function of the degree that such companies are more, or less, privatised.

A Riff on Brands: Black Swans, Perrier and Benoit Mandelbrot

It is my worst nightmare. After a multi-day celebration of the New Year holiday, I seem to have come down with with a bout of that most dreaded of maladies--writer's block. So many ideas swirling around my head, and all I can seem to export on to the computer screen are jumbled thoughts.

And still--there is a passage in the book of my weekend reading about the notion of brands and branding that continues to grab my attention. The passage is from The Black Swan, Nassim Taleb's world-wide best seller that does for the Gaussian distribution what Copernicus did for Ptolemaic astronomy. For those who love irreverence, you can't beat Nassim Taleb (although I prefer his earlier book, Fooled by Randomness --more focused, a clearer message, a bit less splenetic).

One passage in the book particularly grabbed by IP sensibilities. In a gushing description of Benoit Mandelbrot's development of fractals (more on fractals here), Taleb wrote (on p. 256 of the paperback edition) as follows:

"... [I]t was Mandelbrot who (a) connected dots, (b) linked randomness to geometry (and a special brand at that), and (c) took the subject to its natural conclusion.... "I had to invent my predecessors, so people take me seriously", he once told me and he used the credibility of big guns as a rhetorical device. One can almost always ferret out predecessors for any thought. You can always find someone who worked on a part of your argument and use his contribution as your backup. The scientific association with a big idea, the "brand name', goes to the one who connects the dots, not the one who makes a casual observation -- even Charles Darwin, whom uncultured scientists clain "invented" the survival of the fittest, was not the first to mention it. ...In the end it is those derive consequences and seize the importance of of the ideas, seeing their real value, who win the day. They are the ones who can talk about the subject."

What is striking is Taleb's use of the imagery of the language of "branding" to describe (popular) success in promoting new scientific thought. This is so, given that there is no single, agreed-upon definition of what we mean by "branding." IP types take various stabs at characterizing its elements. Consider this definition by Jeffrey Belson, author of the treatise Certification Marks:

Brand Equity--"The interest in the economic value of brands as corporate assets that creates wealth for the stakeholders in a corporation." Brand equity embraces brand-name awareness, brand loyalty, perceived brand quality and positive subjective associations. This leads to the proposition that brands are a form of intangible property which may be protected by the trade mark, copyright and patent laws, and by common law principles of passing off" (Belson, "Brand Protection in the Age of the Internet" [1999] EIPR 481).

The creative types, where "brands" are actually formulated, use language such as

that that was quoted in connection with recent Ogilvie & Mather Paris-inspired interactive mini-site, "PerrierbyDita" here, featuring the iconoclastic dancer and model Dita Von Teese here to promote Perrier products. Of the site, a representative of the ad agency was quoted as follows (26 July 2010, under the by-line of Simon Fuller):

"The aim was for Perrier to propose a unique experience to the consumer and generate conversations around the brand. The risque is part of Perrier's DNA: Perrier has always been daring in communication but always remains subtle and elegant. Perrier is not a shy brand, she tends to to be on the edge, and that is what alsays helped generate conversations around all Perrier communications."

 So, to use Taleb's term, if we try to connect all the dots connected to the meaning of branding, what do we find? Belson's understanding seems a galaxy away from that Ogilvey & Mather and Dita Von Teese. Are they talking about two aspects of the same overarching subject-matter, or do they use the same term for fundamentally different phenomena?

As for Taleb himself, the "brand" appears to be his way describing the force of authority that certain scientists enjoy in bringing "big ideas" to market. Whether his view of the "scientist as brand" is intended as a counterview to Thomas Kuhn's notion of the "paradigm shift" in scientific advancement, or merely a form literary metaphor to describe how scientists succeed, is not clear.

Whatever one's view on that is, however, there is an aspect of the "scientist as brand" that seems closer to the Belson formulation of the term. Under this view, the scientist as "superbrand" also carries with it the potential for collateral commercial success. After all, I understand that the image of Albert Einstein is one of the most successfully licensed IP-like properties around. Taleb's description of Mandelbrot and fractals suggest something vaguely similar. If so, Taleb's use of "brands' is not simply a metaphor, but reflects an awareness of the broad scope that the notion of brands can play in contemporary commercial space, embracing science and scientists as well.

Disney: Is It about Contents, Distribution, or Branding?

Way back, in the 17th century, when proto-copyright regimes were beginning to take shape, authors and publishers groped with finding models that could successfully marry the creation of contents with the means of distribution and sale of such contents. The struggle between contents and distribution remains unabated to this day.

I was reminded of this when I read a brief piece that appeared on October 25th in FT.com. Entiltled "Disney boss tells Hollywood to rewrite script", the article summarized an interview conducted by the Financial Times with Bob Iger, the chief executive of Disney. Iger's message was stark: the film business, i.e., the business model on which the film business rests, is "changing right before our eyes". As a result, "if we don't adapt to the change there won't be a business." In particular, the sale of DVDs, the mainstay of the film business over the last decade, has been on a steady decline and no alternative platform, including digital distribution, has yet emerged to take its place.

That said, Iger listed the following measures that Disney was taking to steady the Disney film business. They include the following:

1. Cost-cutting--A the direct Disney level, a reexamination of costs at both the production and marketing level, with an emphasis on R&D and risk-taking, together with a cut-back at Miramax studio.

2,. Outsourcing--Entering into a distribution agreement with Steven Spielberg's DreamWork studo, whereby DreamWork would apply the content and internalize the costs of film production.

3. New technologies -- For instance, next month will launch Keychest, a technology that will enable a person to store digital copies of films in a remote location with the capability to move the digitized film across multiple platforms, such as smart phones and games consoles.

4. Acquisitions--In early September, Disney announced agreement to purchase Marvel Entertainment, including its successful stable superheros, for an amount of $4bn, thereby seeking to reach out a different type of film viewer than is currently likely to view at Disney film, as well to possibly to expand the themes offered at the Disney entertainment parks.

5. Cultivating non-American Tastes-- Next week will see the launch of the movie Book of Masters, a film made explicitly for Russian a audience. ("We would not be able to grow the Disney brand ... if we just created product in the US and exported it to the rest of the world", said Mr. Iger).

I think that I need to have a word with my MBA students about all of this, because I am having a bit of difficulty finding a coherent alternative business model in the steps that were described. The "cost-cutting", "outsourcing" and "acquisitions" activities suggest that Disney is viewing itself less as a home-grown content creation company and more of an aggregator of contents developed both in-house and increasingly by third parties.

Plenty of Room for Contents

"Cultivating non-US tastes" certainly seems sensible, since the consensus is that the major drivers of growth will be developing national markets, such as Russia. But cracking such markets will involve making the right choices of content about foreign tastes and finding the appropriate price points for the various overseas markets. Here, as well, it seems that these contents will not likely be home-grown, putting further pressure on Disney's ability as a content aggregator.

The development of "new technologies" seems interesting, but no more. Enabling remote access to a plurality of delivery platforms sounds like an effort to take advantage of the cloud computing model. Disney, however, does not seem to be a likely candidate to be a leader in the cloud environment, such that exactly how much the Keychest technology will mark a sea-change (or even a mild sea-ripple), remains uncertain.

When I think about all of this, it seems to me that in truth Disney is going back to its most basic strength--its brand. While the article focuses on the classic challenge of contents versus distribution in monetizing works of creation, what really lies behind the measures described in a strategy to find various ways to strengthen the overall Disney brand. After all, it is the Disney brand that gives the company its unique position in the entertainment world. And of course, it is the brand that is Disney's to lose, if they get it wrong.

Are There Brands in Wal-Mart's Future?

One of the most talked-about retail events of the summer (other than the dismal retail sales figures being chalked up) is the Wal-Mart initiative called Project Impact. The idea seems that Wal-Mart needs to enhance its customer experience in order to bring into the stores more so-called up-scale customers. Such customers, as described in a June 15th article in Business Week ("Wal-Mart's Magic Moment") are viewed as having household incomes of over $50,000, and spend 40% more per visit than the typical Wal-Mart customer.

Or, as said on a Bloomberg podcast of last week, low food prices in the face of the recession have attracted these customers into Wal-Mart, but what will induce them to continue to seek the Wal-Mart experience after the recession comes to some kind of end. Surprisingly, at least to me, part of the answer seems to be--the custom of trade marks. I say "surprising", because the common wisdom is that the distribution clout of Wal-Mart had put paid to the role of trade marks: low prices and and the unparalleled retail excellence of Wal-Mart management, and not the draw of product brands, has been the centerpiece of the chain's success. What was crucial is whether your brand enjoyed a presence on a Wal-Mart shelf. The drawing power of the brand itself was far less important, if not largely irrelevant.

Against that backdrop, I was fascinated to read in the Business Week article about how brands may now play a potentially more crucial role in the success of Project Impact. While Wal-Mart will not be making a mad dash to become the preferred source of "aspirational goods" that so characterized up-scale retailing during this decade, it appears that the chain is paying closer attention to the brand mix of their products, under the view that the products themselves will hold and increase custom in the stores, at least for some product lines. Where once the only brand that really only mattered at the chain was the "Wal-Mart" service mark and brand, there is now a more balanced view of the relationship, at least for certain product categories.

This more balanced role of third-party manufacturing brands was described in the Business Week article as follows:

"The spruced-up aisles provide a more inviting home for brands that previously had little exposure in Wal-Mart but are now desperate to find customers. Newer offerings range from Danskinapparel to gadgets from Dell, Palm, and Sony .... The home department now features brands such as KitchenAid and Dyson, and a new line of products endorsed by celebrity chef Paul Deen."

This does not mean that Wal-Mart will suddenly become the advertising vehicle for these brands. As the article points out, Wal-Mart will be "putting pressure on manufacturers to advertise more in stores ..." But such increased advertising by manufacturers makes sense only if there is pereceived mutual benefit for both the brand owner and the retail chain itself. It remains to be seen how this will all play out. "Podcast-land" has weighed in both pro and con on the likelihood of success of this strategy.

Brands Desperate For Customers?

If the more up-scale customers desert Wal-Mart at the end of the recession, there may be a mis-match between the chain's typical customer and the product mix available at the stores. On the other hand, if the availability of these brands, especially under the tight price controls for which Wal-Mart is famous, helps to keep these customers in the stores, there may be a "win-win" situation. I say "may" and not "must", because I presume that Wal-Mart will seek to impose its pricing power on the cost of these branded goods to the chain.

Will the Apples and Sonys of the world be prepared to submit themselves to the purchasing dictates of Wal-Mart; if so, how will these pricing arrangements affect the relationship of these manufacturers and their brands to their other channels of distribution; will these brands ultimately reap a net benefit by their presence at Wal-Mart, or will the arrangement redound primarily to the benefit of Wal-Mart? Given Wal-Mart's clout, the answer to these questions will be carefully scrutinized in the years to come.

Marks, Brands and Customer Satisfaction

One of the toughest challenges in teaching trademark law is trying to explain the transformation of the 19th century mark, plain and simple, to the multi-faceted nature of the modern mark in commerce. It was less than a century ago that the English courts held that trademark licensing to be inconsistent with the bedrock trademark law principle (as it was then) of source identification. Under that view, a trademark license was legally ineffective because the owner of the mark was not the actual user of the mark, and vice versa, thus doing fatal harm to the principle of source identification. There was no other justification, at least legal, for trademarks.

How different things are today. Marks are no longer merely identifiers of source, but they are also badges of quality and even self-sustaining valuable rights standing on their own. Even more, marks have transmogrified into brands, with blurred boundaries between the two. So is a mark still primarily an indicator of source, or is badge of quality function paramount? The short answer: it all depends.

Consider an article in the March 2 issue of Business Week, that purported to rank companies on the basis of customer perceptions of service ("Customer Service Champs"). Relying on data gathered by J.D. Power & Associates, the article listed the 25 leading companies from the vantage of customer service. Topping the list was Amazon.com, followed by USAA Insurance, Jaguar, Lexus, The Ritz-Carleton, Publix Supermarkets, Zappos.com, HP, T. Rowe Price, Ace Hardware, Keybank, Four Season Hotels, Nordstrom, Cadillac, Amica, Enterprise Rent-a-Car, American Express, Trader Joe's, Jetblue Airways, Apple, Charles Schwab, BMW, True Value, LL Bean and JW Marriot Hotels. Clearly, the marks listed serve more than to merely designate the source of the goods or services.

I said "amazon.com", not "Amazon"

So what do we make of the list? First and foremost, with the exceptions of HP and Apple, virtually none of the companies listed appears to leader in their industry (at least on the basis of size alone). This suggests that size may be correlated inversely with perceived customer service--the larger the company, the less well-regarded the level of service provided by the company.

Second is the absence of any mega-bank or similar financial institution. The only bank mentioned is Keybank, a regional bank headquartered, I believe , in Ohio. One is tempted to say that this is an expected result, given the cratering of the entire financial industry and the accompanying negative goodwill. But I think that this result is not merely due to the current economic downturn. Rather, it supports the observation, sometimes forgotten, that for all of the size of the financial industry at the top, it remains at its core a person-to-person service industy. Or, stated otherwise, there are no economies of scale in the banking business.

Third, failure of the industry at the so-called top does not mean that all of the participants in that industry are necessarily painted by the consumer with a single, black brush. While none of the leading automobile house brands is mentioned, up-scale automobile brands continue to satisfy customers--witness the inclusion of Jaguar, Lexus, Cadillac, and BMW. Service and brand value are still valued, particularly for some luxury brands.

Fourth, however, customer service satisfaction is not necessarily a function of luxury. For every Four Seasons Hotel and Nordstrom store the is an Ace Hardware, True Value Hardware, Jetblue Airways and Charles Schwab.

Thinking back to our initial observation on the commercial development and evolution of trademarks, it would seem that the quality function of trademarks is not a synonym for brand value. Any list of the world's most valuable brands will have only a limited overlap with the list of brands as identifiers of perceived customer service satisfaction. It would be interesting to know whether profitability is more highly correlated with a company's ranking on the basis of customer service satisfaction or with overall brand value. If any readers have further information on this point, I would be delighted to hear about it.

But do customers still value their services?

The Branding of Financial Entities in Crisis: The BOA/Merrill Lynch Example

From the view of branding, one of the more bewildering fields has to be the banking and financial sector. Even in the relatively more staid days of the past, it was not an infrequent occurrence to witness the disappearance of a venerable investment house brand following merger or acquisition. More recently, the attempt by Citi and others to create so-called universal banks left the customer to wonder exactly what the Citi brand actually stood for in light of the bank's separately branded conglomerate companies.

The events of the last nine months have put to into bas relief the devilish difficulty in cobbling together the brands of the acquired and acquiring company in the financial and banking sector. Perhaps the most notable example is the acquisition, with not a bit of US government arm-twisting it would seem, of Merrill Lynch by Bank of America. (Keep in mind that Bank of America itself was the result of a number of mergers and acquisitions that transformed the bank from a West Coast banking operation to a fully national, and perhaps international brand.)

Both the BOA and Merill logos are well known, indeed, the Merrill bull has the status of a branding icon in the U.S. Not surprisingly, therefore, both names and both logos continue to be used to identity the combined company, which seeks to bring together the staid (at least until recent times) of the BOA banking operations with the more free-wheeling brokerage
and investment activities of Merrill. Truth be told, synergies seem to be few and far between for the two companies. In any event, both companies seem to have suffered since the merger,with BOA feeling the sucking sound of Merrill losses in its bottom line, and Merrill suffering a seemingly never-ending exodus of senior talent and, perhaps, some customer erosion.

Find the banking synergies

How has all of this played out from the branding perspective? Last month, Roben Farzed, a senior writer at Business Week, reported that the current loser seems to be Merrill. As he reported in his article in the March 9 issue ("Is BofA's Merrill Lynch Brand Losing Its Edge?"), the Merrill name seems to be heading straight to a branding cliff. Perhaps most notably, Farzed claims that BOA officials are telling their international people to underplay the Merrill name and famous bull logo when flogging the company's services in Europe. The bank denies that there has been a decision to de-emphasize the Merrill name and brand.

Nevertheless, research suggests that the BOA brand is now better received than is the Merrill brand and logo in Europe, a testimony to what corporate failure can do in short order to even a venerable name. If so, this is astonishing, given that the BOA brand is notable for the presence of a logo which suggests the U.S. flag, imagery that would not seem to play well outside of the U.S., and the Merrill bull is well-recognized in Europe. The article observes that "the Merrill Lynch brand is not quite dead yet. It's in hibernation, and it has been since Bank of America bought them," this according to Carri Degenhardt-Burke, a Wall Street executive recruiter. Degenhardt-Burke went to add poignantly,"[i]t's sad."

I am not fully convinced that the fate of the Merrill bull rises to the level of Greek tragedy. What is sad, nevertheless, is how quickly a venerable brand can lose its cache, which in a service industry must surely have a negative feed-back loop which further erodes the value of the brand. I suspect that service brands are even more vulnerable to a precipitous decline in their value than are marks for goods. We may have a way to test this hypothesis if GM enters in some form of bankruptcy, and the public is not convinced that it will reemerge in some form after reorganization, and even more so for Chrysler, where the likelihood of reorganization seems remote, unless Fiat somehow comes to the rescue.

Of course, the BOA/Merrill branding saga is only one of several branding stories that is taking place in the banking and finance area. As a final exam for those of you out there, please answer the following:

1. How is Wells Fargo being branded since it took over Wachovia?

2. What about J.P. Morgan, Washington Mutual (WAMU) and Bear Stearns?

3. How has Smith Barney been integrated brand-wise with Morgan Stanley?

4. What brands are still left at Citi (and was is the current form of the Citi house mark)?

5. Is the Lehman name still being used?

GM and Chrysler: What about the Brands?

Living as I do on the Eastern littoral of the Mediterranean, I have become an avid listener of podcast programs on my iPod. The juxtapose of two podcast programs last week on Bloomberg radio raised some interesting questions about the role of product brands in light of the continuing economic troubles at GM and Chrysler.

In the first podcast, Edward Altman, professor of Business at NYU and a recognized expert on distressed companies, argued in favor of GM declaring for bankruptcy under Chapter 11 of the U.S. bankruptcy laws. The purpose of chapter 11 is to allow a company to enjoy court protection under a detailed code of statute and regulation with the ultimate goal of enabling the company to get back on its economic feet. In Altman's view, Chapter 11 would serve GM well because it would allow it to continue to operate its business and to take advantage of certain provisions in the law that would make it easier for GM to raise financing during the bankruptcy process.

In the second, John Casesa, an authority on the automobile business, opined on the fate of brands in the event of a GM-Chrysler merger. He suggested that if such a marriage takes place, the combined company will likely jettison certain brands while leaving on the most robust brands in tact, such as JEEP from Chrysler and CHEVROLET from GM.

GM AND CHRYSLER: A SHOTGUN WEDDING?

The comments of Altman and Casesa put me to thinking. Let's say that GM does seek chapter 11 protection (the possibility of which was vigorously rejected again this weekend by the CEO of GM). How likely is it that GM could come out of the proceedings with at least its most valuable brands in tact? Are the two companies better-positioned to preserve at least the most valuable brands as a combined company?

A couple of initial thoughts. I note that many of the major U.S. air carriers have been in chapter 11 proceedings at one time or another, but they seem to have maintained their primary brands, more or less in tact. Once the public got over the fear that the airline ticket that they bought today would not be honored tomorrow, they continued to offer their custom to the airlines without much hesitation. That said, a service brand, especially in an industry with a limited number of options (at least for most hub airports), should be easier to maintain in bankruptcy, unless there is an absolute panic about the likelihood that the service will be halted immediately. That would seem to make it easier to preserve the quality of the brand.

Less so, it would seem, for a product-oriented company. Do I risk buying even the most robust car brand, if I am not certain that there will be any entity around to support it in a year (or two or three)? Maybe the answer is yes (after all, some other company will surely buy the rights to that brand of auto, because of the strength of the brand--witness JEEP). But maybe the answer is no (to paraphrase Captain Nemo from 20 Thousand Leagues under the Sea", when asked about the fate of the Nautilus submarine --"If GM goes down, the CHEVY goes down with it.") The answer to this question may go a long a way to determining the ultimate fate of the companies and their product lines.

CAPTAIN NEMO IN EARLIER TIMES

Of course, it might not make much difference at the end of day if GM chooses chapter 11, but the public remains unconvinced of its ability to come out of the proceedings, or if it merges with Chrysler, but the public remains unconvinced that two failing companies are no better than one. Brands are, at the end of day, intertwined with public trust and faith. Yesterday's killer brand is today's pariah. Just ask anyone who used to swear by Lehman Brothers.