Brand name is one of the most crucial components of the company. This is a direct link between company’s product and customer. It helps to create brand awareness, provides with greater customers’ interest in the product, and to generate larger revenues. The success of the company does not only depend on the high quality of their products or services, without a strong brand name company may lose large portion of their income. Whenever company decides to change its brand name or make a brand transaction, it should carefully think through all the possible outcomes this act might bring. Changing brand name resulted in sales decreases for many companies in the past and is still a big issue. Before making any changes in the name, company must consider reaction of their customers, possible dissatisfaction with the new name, and the possible loss of brand recognition.
Paul Logan, Inc. was faced with the problem of brand transition in 2005, when it decided to give its part of the business to Manchester Products for an acquisition. Paul Logan was a very successful company, which was producing fashionable consumer goods, by that time. It had four divisions, among which Paul Logan’s Furniture division was the weakest. Company’s biggest advantages were talented design team and partnership with the leading distribution channels. Since company decided to focus more on its other three divisions, it decided to free itself from the weakest one by giving it away to Manchester Products.
At that time Manchester Products was one of the leading companies in the office furniture. It was well-known for its conservative and fashionable furniture. The idea of an acquisition of Paul Logan’s Furniture Division came into CEO’s mind when he decided it was a right time to expand and to enter a household furniture market. Since Paul Logan’s was a famous company with a strong brand name and good distribution channels, Manchester Products decided it was a right time to act. The most crucial aspect, which attracted Manchester Products’ attention, was the strong connection of Paul Logan with a large number of its distributors. It was the biggest issue for the company when deciding on the expansion and on adding an additional division. Paul Logan could be a perfect solution for this problem.
Apart from the positive sides of the Manchester Products’ decision to acquire Paul Logan’s Furniture Division, both companies’ management teams were faced with certain obstacles.
Manchester Products’ acquisition
When Manchester Products and Paul Logan have agreed on the acquisition, the latter company decided that it will give a right to Manchester Products to use its brand name only for three years. This meant that after three years Manchester Products would have to change Paul Logan’s name to its own. The brand transition would mean two things: Paul Logan could lose its reputation and, consequently, its consumers, and Manchester Products could lose strong distribution channels, which Paul Logan used to have before the acquisition. Already after the rumors of the acquisition started to spread, one of the main furniture buyers has called Paul Logan to express her dissatisfaction. The change in the name, which was well-known by consumers in the past, in three years could result in the decrease of sales for all the distributors. It was crucial for both companies to make a transition of the brand as unnoticeably as was possible in order for nobody to feel a significant difference. Both companies had to think through all the options and potential results they would bring.
Options for the brand transition
During the meeting, Manchester Products’ management team has come up with three different approaches to the problem. First idea was to change Paul Logan’s brand name as soon as possible, so Manchester Products’ consumers would see how confident company is about its own name and reputation. This approach is logical, because it takes into consideration company’s consumers’ response to the whole acquisition situation. However, this would be too risky for the company. Manchester Products is a company with the strong brand in the office, but not in household furniture industry. It has no experience in this area and, consequently, no large and influencing partners. Without such a large name as Paul Logan Manchester Products would lose all the distribution channels already in the beginning. Certain safe period of time should pass before the company will proceed with the brand transition. It should first make sure, its customers realize the connection between two companies and get used to the fact that now the Paul Logan’s Furniture Division is a part of the Manchester Products. Through this they can assure their distribution channels of their safe collaboration in the future. In any case, every change demands time.
The second approach was the total opposite of the first one and suggested to wait with the change in the name for as long as possible. This suggestion was based on the fact that Manchester Products does not have a strong enough brand name in order to remove Paul Logan’s name from the distributors’ shelves. This would result in the reluctance of distributors to purchase products, which have no awareness and no value in the market. This idea is also extreme, since waiting for too long could be perceived by the customers as uncertainty of Manchester Products in their own brand name. There’s also no guarantee that after three years, when the company will no longer be able to use Paul Logan’s brand name, it will not lose its distribution channels and reputation in the market. Manchester Products needs to make sure that its new household furniture division will be recognized and accepted before the period of three years passes.
Finally, the third option suggested proceeding with the brand transition step by step. This means that in the course of three years Manchester Products must constantly make changes toward the complete name change. This would be done through choosing several separate products and starting to change their brand name from Paul Logan to Manchester Products. This method will help in two areas: first, there will be no sudden change in the brand name and no shock for both consumers and partners, second, company will be able to watch the progress and analyze the situation as it will move forward (or backward). It will then be able to make required steps in case a certain risk will occur. This approach seems to be the most logical and suitable for this particular situation, since it combines two previous suggestions and allows company to take control over the process of brand transition. There is another significant advantage of this suggestion. In case the change of the name of the separate items will be successful, Manchester Products can change its household furniture division’s brand name completely before the three-years period will pass.
Another issue, which Manchester Products’ CEO was faced with, is whether they should change Paul Logan’s name to their own name or to a name of the famous designer. This would be a good strategy to make a contract with a designer with big reputation in the furniture industry, who would be designing company’s household furniture for a certain period of time. It would add competitive advantage to the company, since this would be a fresh decision, which would help to attract consumers’ attention. However, changing the name of its division for a completely different name would mean the same uncertainty as it would mean in case of waiting for too long before removing Paul Logan’s name. Manchester Products’ consumers would perceive it as a weak position of the company in the market.
Using celebrity designer could serve as another strategy for the brand transition. Paul Logan has agreed to leave its name for Manchester Products for three more years after an acquisition. During this time, while the name is still not changed, Manchester Products was not allowed to make any changes or introduce any new items in the production of the household furniture division. However, the rate of the brand transition success remained very important to Paul Logan. Therefore, it has agreed to support Manchester Products throughout this process. In order to make the transition more successful, Manchester Products could agree with Paul Logan to hire a famous designer for both household and office furniture divisions. When the new designs are out and are accepted by the customers, it will be easier for them to associate two companies. Company would then use its advertising campaign, which will aim at combining three names at once. Whenever customers will become aware of the collaboration of two brands with the same designer, it will partially bring these two companies for them to a more or less the same level.
Push vs. Pull Promotional Strategy
When deciding on the advertising campaign, there were two completely opposite suggestions. One was to mention both companies’ names together, another to mention only Manchester Products name leaving Paul Logan’s name out. The reason for leaving Paul Logan’s brand name out of the campaign was that it only has three years left to exist. However, this is exactly the issue in this situation. It is extremely important for Manchester Products’ new household furniture division to be mentioned together with its initial owner for a certain period of time in the beginning. In case Paul Logan’s name will not be mentioned, consumers will never get to know, what the connection between these two brands is, and where did the Manchester Products household furniture division came from. The last strategy, which was suggested in the previous chapter, would definitely demand both companies appearing in the same ads. It is crucial for Manchester Products to leave Paul Logan’s name in its advertising campaign at least in the beginning. It could remove it after some time, when customers will be aware of the transition.
There was a debate between two companies’ marketing teams. Paul Logan’s company suggested applying push strategy through using volume rebates or purchase allowances. According to this method, company is “pushing” its products to the market through mass advertising and discounts for the distribution channels. Paul Logan was supporting its suggestion with the fact that it is producing to sell. Manchester Products, on the other hand, believed that it should have used pull strategy, since its production is concentrated on the end product and its consumers’ preferences. Since each company produces furniture in mid, upper-mid, and upper-price points. Therefore, they could decide on the different advertising campaigns for each point. For example, Manchester Products could identify both companies’ products in mid and upper-mid points and to use push strategy for them. Consequently, it would be better to use pull strategy for the upper-price products, since production of such items requires consumers’ involvement and could be produced only when ordered.
Manchester Products’ decision to enter a household furniture market will definitely help it to increase its sales. While office furniture market does not seem to be very stable, there is a big demand in the market of the household furniture. In case company will perform the brand transition correctly, it will gain a competitive advantage and will be able to compete in both markets. It is crucial for the company to change household furniture division’s name as smoothly as possible. Summing up all the strategies mentioned above, it becomes clear that it is better for Manchester Products to change Paul Logan’s name in steps, which will allow the company to take control over the situation. It is also better for Manchester Products to use both companies’ names in its advertising campaign in order to create a link between two brand names. Finally, company should use push promotional strategy for mid and upper-mid products, and pull strategy for the upper-price products.
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