Naming In The News

Change of Name Can Come with Risk

Customer loyalty often diminished

By Judy Artunian
Special to the Tribune
Published May 29, 2006

When America Online announced in April that it was officially changing its name to AOL, the news caused barely a ripple among AOL customers and investors.

The fact that the pioneering Internet company unofficially had been known as AOL for years may be one reason why. In addition, America Online, like most cyberspace brands, had yet to generate the kind of emotional bond that many consumers feel for brick-and-mortar establishments such as Marshall Field's, whose moniker is set to be switched to Macy's this fall.

Most company name changes are of the ho-hum variety. But when a change sparks vehement objections from longtime customers, it serves as a reminder to marketers that when you rename a company, you might be toying with customer loyalties.

"There is a certain amount of equity that comes with a brand name or company name. In most cases you don't want to risk losing customers who have come to know and trust that name," said Teena Massingill, manager of corporate public affairs for Safeway Stores based in Pleasanton, Calif.

Safeway Inc. acquired longtime Chicago grocery store chain Dominick's in 1998 but kept the Dominick's name intact.

"People had shopped at Dominick's for years. We wanted to keep those customers," she said.

Company names often are swallowed up after a merger or acquisition. But a company also might take on a new identity in order to spotlight a new product line, update its image or counter bad publicity.

A name change also can serve as a nudge to investors that a company is looking at new markets. Last year, Hershey Foods, long identified by its ubiquitous chocolate bars, switched back to its original name, The Hershey Co.

"It allows them to broaden their charter," said Bill Lozito, president of Strategic Name Development, a brand-name consultancy in Minneapolis. "It's subtle. It means nothing to consumers, but it's meaningful to investors. It lets Hershey buy a different type of company without people questioning it."

The ongoing consolidation in the retail community has led to a spike in the number of company name changes, which has captured national attention. Federated Department Stores Inc. decided to rechristen a number of regional department stores with the Macy's brand. The move helps Federated expand Macy's into a national brand and, in the process, help reduce national advertising costs.

But Lozito said the decision to replace a regional brand with a national one can derive from what he calls management ego.

"Management will look at their company name or their brand differently from the way a consumer looks at it. Management always thinks their name can be stretched to mean more than it does," he said.

Whether a name change will drive away customers who were loyal to the original brand depends largely on the quality of the alternatives, Lozito said. In the case of a retail store, shoppers who are disgruntled about a name change may stay away for a short time, but if there are no other stores that offer the merchandise, service and ambiance that shoppers valued, they will return eventually.

Longtime customers are more likely to stick around if vestiges of the old company remain.

"You have to figure out ways to let the brand loyalists feel heard," said Lynn Parker, principal of Parker LePla, a branding and communications company in Seattle.

Parker cited the decision by Seattle's Bon-Macy's (now Macy's) to acquire the rights to Frango mints, which were invented in Seattle and had been sold in the city's Fredrick & Nelson department stores from the 1920s until the chain closed in 1992. By linking to one of the city's icons, Bon-Macy's showed that it valued a local tradition, Parker said.

"Fredrick & Nelson may be gone, but customers are still able to get that brand hit," she said.

Macy's says it also will continue local traditions in Chicago during and after the transition from Marshall Field's to Macy's.

"Everyone who has been at the core of running our 62 stores is staying. And our traditions, like the Great Tree and Glamorama, won't change either," said Paul Cavalli, senior vice president, marketing and visual merchandising, for Macy's North division. Cavalli held the same position with Marshall Field's.

Taking on a name that is associated with a respected brand, such as when telecommunications company SBC Communications Inc. recently renamed itself AT&T Inc., can help customers feel more comfortable with the new brand, experts say. Another example is Chicago-based Bank One's change to Chase Bank after Bank One was acquired by JPMorgan Chase & Co. in 2004.

"Chase is well known. It opens the door to breaking the emotional bond that consumers may have with Bank One," said Lozito.

It helps that the change has been well managed, he added.

"The same employees are in the bank, and the employees seem to be well trained and are buying into the change," Lozito said.

Branding experts agree that winning employee support for a name change is a key to keeping customers from straying.

"In a company where vision and values aren't well communicated to employees, when you have a merger and you're rebranding or you're integrating a new brand, you're going to encounter challenges," said Kirsten Osolind, chief executive of Chicago-based Reinvention Inc.

Osolind was the national marketing director for Whole Foods Market in 2002 when the company incorporated two regional store chains, Fresh Fields and Bread & Circus, under the Whole Foods name.

"We had employee awareness sessions where we talked about what the Whole Foods brand stood for, and we reassured the employees that the name change wouldn't impact day-to-day business," she said.

According to a study by Strategic Name Development, there were just over 1,000 company name changes in the United States last year. As many as 75 of the new names were instigated by Chicago-area companies, and about 90 percent of the name changers nationwide were in the business-to-business arena.

Technology companies lead the pack, said Lozito, partly because it is a young industry with enterprises that sometimes change their focus to keep pace with new technologies.

"If you change what your company is doing, you often need to change the name," he said. Companies that serve the business community can adopt a new name with minimal fanfare because, unlike consumer companies, they rarely encounter customers who feel personally betrayed by the brand change. It also is easier for business-to-business firms to communicate the name change to their customers because their target markets tend to be smaller than those of a consumer company.

GTCR Golder Rauner LLC, a Chicago private-equity investment firm, acquired Honeywell Security in 2004 and immediately began laying the groundwork to change the name to HSM. A primary goal was to establish a corporate identity that would be independent from Honeywell, a century-old technology and manufacturing company.

"Rebranding often signals to the marketplace that there may be more energy and growth behind a business that customers have known for years," said Collin Roche, a principal at GTCR Golder Rauner.

Customers barely reacted to the name change, said Rebecca Covert, director of marketing for HSM, which is based in Jupiter, Fla., and has a field headquarters in Lisle. The new name was implemented in stages over an 18-month period during which the company name went from HSM-Honeywell Security Monitoring to HSM-Formerly Honeywell Security Monitoring and, finally, to HSM.

Experts say that whether a company takes two years or two weeks to switch to a new name, a successful transition requires careful consideration.

"A lot of companies are so busy with their merger or choosing their brand name they don't think through the implementation process," said Osolind. "Oftentimes the process, more than the name, is what will make the brand an enduring brand."