Branding Strategy Insider

HP Brand Was Slipping Before Hurd Ouster

Mark Hurd served as the CEO of HP since 2005. He was known on Wall Street as a cost-cutter. Cost cutters tend to be loved for their short-term financial gains, but there is a flaw to their management style in that they typically find it difficult to build the long-term value of their corporate brand.

I have no comment on Hurd's conduct that caused him to be fired but I do find it interesting that the board voted 6-4 to fire him based on the advice of a public relations consultant. Was the Board concerned about the corporate reputation of HP? Or, as Larry Ellison, CEO, Oracle, said, "the HP Board just made the worst personnel decision since the idiots on the Apple Board fired Steve Jobs many years ago."

If the board was concerned about the reputation of the company, they had a case. The corporate brand equity value (the value of its corporate reputation) has declined from 15.6% of HP's market cap in 2005 to 13.2% as of the 1st quarter 2010, which was worth $14.13 billion in brand equity value. Dropping 2.4% from market cap is significant, but the computer industry dropped 8.5% to 4.2% during this same period which averages half of the brand equity value of every company in the industry. So, during Hurd's tenure at the helm of HP he did a mediocre job of managing the corporate brand, but the industry did a whole lot worse.

Taking a broader view of the company, it is clear that HP's brand image hit its' high water mark in 2003. Leading up to that the brand had momentum and was energized. The decline of the corporate brand began in 2004 and picked up downward momentum through Hurd's tenure. The decline showed no abatement through the time of his dismissal.

What Marketers Can Learn From Ford

Alan Mulally turned 65 this month. You might not know the name, but you surely know the company he leads. Mulally is the CEO of Ford. That might sound a pretty unpleasant role with all the challenges of declining sales, government bail-outs and union action. But Ford is different. And it’s different because of Alan Mulally.

While General Motors and Chrysler were heading blindly over the edge of the cliff during the global financial crisis, Mulally steered his company in a very different direction. Almost as soon as he took over at Ford he went out and raised funds using the company as collateral.

Many onlookers questioned why Ford needed $26bn but the money, raised while credit was cheap and available, allowed Mulally the chance to totally restructure Ford and the way it made vehicles. It also enabled Ford to survive without the government bail-outs that both GM and Chrysler would later depend upon to stay afloat.

What GM Should Learn From The Brown Rat

Last Sunday, GM announced plans to introduce a new car brand into the Chinese market. Baojun - which means “treasured horse” in Mandarin - will go on sale later this year. Shen Yang, the general manager of SAIC-GM-Wuling, the joint venture responsible for the new car, was brimming with enthusiasm on launch day: “Baojun is being positioned as a reliable partner with an image that is confident, smart and dependable”. It all sounds very exciting but marketers with long memories might take the news with some degree of scepticism.

Only 18 months ago, GM was on the verge of disaster thanks to an over-sized portfolio of a dozen automotive brands. No bad thing you might think - after all there are many companies like Procter & Gamble or LVMH that manage much larger portfolios than twelve. GM, however, made the classic error of targeting the same brands at the same segments with the same positioning. Back in 2006, for example, it was not unusual to see Saturn, Buick, Pontiac, Chevrolet and GMC all competing on price to snare the same American consumer. The result was a company with huge marketing costs, poor margins and an abject lack of differentiation across its loss-making portfolio.
 
Meanwhile better-run competitors like Toyota and BMW used more parsimonious brand architecture to ensure superior levels of differentiation and profitability. In the end President Obama had to step in and save GM from bankruptcy with a $50bn injection of taxpayers’ money and a specific demand that GM shed some of its weaker brands. The company has since sold Saab, closed Saturn, Pontiac and Hummer and begun to make a profit again in the US as a result.

But while GM might be down to four core brands in the US, Baojun marks the company’s seventh brand in a Chinese portfolio that also includes Buick, Cadillac, Chevrolet, Opel, Wuling and Jiefang. GM China president Kevin Wale rejects any notion that his latest brand will detract from the existing portfolio: “The introduction of Baojun is part of GM’s multi-brand strategy in China. Baojun will complement our other brands sold in China; it will enable us to better address the increasingly segmented Chinese vehicle market.”

Aggression: A Worthy Brand Builder

Irish low-cost airline Ryanair was in trouble again last week. Chief executive Michael O’Leary was forced to apologise to easyJet founder, Sir Stelios Haji-Ioannou, for depicting him in the January ad campaign above as a Pinocchio who misleads clients about punctuality.

To avoid a court case, Ryanair agreed to pay Sir Stelios’ costs and damages of £50,000 which will be donated to a charity of the easyJet founder’s choosing. Stelios joined in by claiming O’Leary was the “ugly face of capitalism”.

The “ugly” face, however, was smiling broadly this week with the expected announcement that Ryanair would report first-quarter sales of £730m.
 
Despite angry volcanoes and even angrier competitors, Ryanair continues its transformation from a tiny brand that had only one plane to fly between Gatwick and Waterford in 1985 into Europe’s largest airline. More importantly, the brutal intelligence of Ryanair’s marketing strategy has once again proved itself.

Brand Crisis and Brand Survival

A brand crisis can take many forms, which can linger differing lengths of time depending on the survivability of the brand. Every corporate brand crisis is unique; each has a starting point when the CEO becomes responsible for the survival of the company. BP's bumbling management of its Gulf crisis, its seemingly endless decision making process, not to mention post-crisis effects that will last decades, make this crisis unprecedented.

Tyco, Texaco, Dynegy, IBM, Enron, Worldcom and Citigroup are a few of the crises we've studied. Some companies survived, not only intact, but emerged stronger than ever. Others were destroyed, or forced to merge. A handful limped on, weakened but not ruined.

In 2002, Tyco's CEO and CFO were accused of theft of over $600 million. With negative press around the scandal, brand familiarity increased dramatically, while brand favorability plummeted. The speed and magnitude of this brand's collapse indicates a brand catastrophe. Even after management had been changed and the company got back to business, the Tyco brand continued its downward slide for years.

Nationwide attention spotlighted Texaco for racial discrimination in 1995. The tremendous media exposure immediately heightened brand familiarity, while perceptions reduced favorability in the eyes of influentials. Texaco's immediate, focused response by senior management helped mitigate an adverse environment. Still, it took Texaco nearly five years to fully regain its previous brand strength, at which time management decided to merge with Chevron.

Negative Brand Equity: A BP Death Sentence?

Buy shares in BP. That was the bizarre advice from Royal Bank of Scotland analysts last week after those bright sparks worked out that even the worst possible costs of the Deepwater Horizon will total less than the actual drop in BP’s market value.

RBS has, of course, got it wrong again. Long after the costs have been paid and the oil cleaned up, BP will continue to live in infamy as one of the world’s most shamed brands. The official terminology for this kind of perilous state is negative brand equity. And it spells disaster and probable death for the company that was once known for being “Beyond Petroleum”.

Negative brand equity occurs when a company’s brand actually has a negative impact on its business - meaning that the company would be better off with no name at all. It happened in the Seventies when Tesco’s brand was so poorly perceived that Imperial Tobacco decided not to acquire the retailer for fear of being associated with such a tarnished and unpopular organisation. It happened again in the Nineties when Skoda discovered to its horror that it could not get British consumers to buy its cars despite spending millions on advertising. Consumer research later confirmed that two-thirds of its target market would literally not consider anything at any price that carried the Skoda badge.

And now we have BP. Like every case of negative brand equity before it, the peculiarities of the situation mean that all the traditional advantages of branding are now inverted. BP would be better off whitewashing its forecourts and removing all evidence of its Helios brand identity. That said, the actual impact of the Deepwater disaster on BP’s petrol pump sales is likely to be localised and temporary. We know from past history that petrol consumers are a fickle bunch. When the Exxon Valdez oil tanker spilled its load into Prince William Sound in 1989 the enduring impact on Exxon’s gas sales, even in the state of Alaska, was virtually zero.

Comcast Makes Classic Marketing Mistake

Comcast is in the process of rebranding some of its offerings to "Xfinity," although the company name will remain Comcast.

Consumers in 11 markets will have a choice of Xfinity TV, Xfinity Voice and Xfinity Internet. Presumably, Comcast will soon be rolling out these high-speed, high-definition services to other prospects in the 39 states the company serves.

Is this a good move?
Lawyers will tell you the best trademarks are "coined" names such as Kodak and Xerox. So we are seeing a raft of coined brand names you can't find in any dictionary, including Xfinity.

But wait a minute. There's a well-known automobile brand called "Infiniti." Isn't Comcast worried about the confusion between the two? If not, did Comcast consider using Xonda or Xundai or Xoyota?

But there is a bigger issue here. Comcast is a large company with revenues last year of $35.8 billion. In addition to its cable, telephone and internet services, Comcast has cable programming interests (G4, Versus and The Golf Channel) and also owns entertainment channel E!

Not to mention the company's 51% interest in NBC Universal, a joint venture with General Electric.

It makes sense for Comcast to have a pure "company" name like Procter & Gamble and have its services, programming and cable channels defined with their own brand names.

Internal vs. external
But what makes sense from an internal point of view often doesn't make sense from an external point of view.

BP: Beyond Petroleum or Broken Promise?

A brand is a source of a promise to its target audiences. Of greater importance than making the promise is keeping it. BP (Beyond Petroleum) promises energy that “doesn’t damage the environment.”

Indeed, BP does stand for “beyond petroleum,” not because of BP’s promise to produce energy that doesn’t damage the environment, but rather because an environmental and economic disaster of this magnitude can only accelerate the race to cleaner, more renewable alternative energy sources. BP has sounded the clarion to move away from petroleum in the most dramatic way.

This preventable disaster has called into question BP’s sincerity in delivering on its “green” brand promise. Its quickness to pass the buck to Transocean, Halliburton or government regulators only exacerbates the problem.  And its inability to stop the problem quickly demonstrates its unwillingness or inability to adequately plan for or address such disasters.  Finally, its slow, carefully controlled, legally crafted statements and responses to questions only add to the cynicism of the public toward BP.

Apple: Brand of Profits

Last week, Apple overtook Microsoft as the world’s most valuable technology company. How has it managed to be so successful? Pundits love to say “innovation”, but if you go beyond the generic answer and break down the specific steps in Apple’s business model, an intriguing picture emerges.

Let’s take the iPhone, and follow the stream of money from its origin of an initial consumer purchase all the way to the ocean that represents Apple’s incredible profits.

Our journey begins with a consumer who heads into O2, Vodafone or another network provider to purchase a new iPhone 3GS. If Apple was any normal company it would now expect to give away up to 15% of its revenues in margin for the retailer. But Apple’s brand strength combined with the latent threat of its own retail stores means it usually sells its products to retailers for virtually the same price as they will charge their consumers. That’s right - zero profit for the retailer. Apple can do this because it is a destination brand that every retailer wants and one that often confers lucrative peripheral sales.

Rebranding: Not Beyond Credibility

The bad news mounts for BP as the petrol giant has admitted that efforts to plug its Deepwater Horizon well and prevent any more crude oil escaping continue to fail.

One mile from the surface, and 50 miles from some of the most beautiful and valuable coastline on Earth, the leak continues unabated. And you can forget the estimates of how many gallons of oil are being pumped into the Gulf of Mexico each day, because BP has also conceded it has no clue exactly how much oil is leaking out.

These uncertainties add to the growing list of major imponderables facing the beleaguered British oil company. BP has said it does not know when the leak will be stopped, nor does it have any idea what the long-term ramifications for local communities and industries will be. It has also said it has no clue what the final cleanup bill will come to - except that it will be in the billions and that BP will be liable for every penny. Indeed, the implications are so inestimably huge at this stage that the only accurate bellwether of the kind of trouble BP now finds itself in has been the ashen, horrified look on chief executive Tony Hayward’s face. All the media training in the world cannot disguise the enormity of the problem now facing Hayward and his company.

Any oil company finding itself in this situation would be in trouble. But there is, of course, a very specific reason why BP, of all companies, is going to suffer more spectacularly than any other from this disaster. BP, as we now all know, now stands for “Beyond Petroleum”. In the most famous repositioning case of the century, Ogilvy and Landor helped BP to change its logo, its name and its positioning to reflect the fact that the company was now actively “exploring new ways to live without oil”.