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May 31, 2006

How Important is Memorbility and Pronunciation in IPO Naming?

NameIf you want you want your IPO to do well, I have a tip for you: give it an easy to remember and easy to pronounce name.

Psychologists at Princeton have found a between an IPO's initial success and how easily its company name, and ticker symbol, rolls off the tongue. It doesn't seem to matter if the company is big or small, the only variable is how well people can remember you.

The psychologists tested their by having volunteers rank IPO names by how easy they are to remember and pronounce, and then cross referenced this ranking with how well the IPOs were doing in the American Stock Exchange and New York Stock Exchange.

The effect of this brand name research was so pronounced that if a person had invested $1,000 in the ten easiest to remember names (ones that sound like GOOG, as in Google), she or he would have made $333 more than the ten hardest (names like VYYO, as in Vyyo Inc).

I think this is due to the fact that people are more likely to remember to buy stocks with easy to remember symbols.

Research has also shown that people are more likely to remember aphorisms that rhyme (woes unite foes) over ones that do not (woes unite enemies).

Markets also appreciate on sunny days, it seems. Prof. Danny Oppenheimer explains this by pointing out that "people are not rational," even when it comes to their money - maybe especially so.

After all these years in the product naming business, I have to agree.

For more on this story about IPO naming, I thought Roland Piquepaille's Technology Trends blog had a .

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Posted by William Lozito at May 31, 2006 9:09 AM
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1 Comment

Perhaps this is a great opportunity to exploit a market inefficiency...

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