Why Do We Rename Products?

Here it comes again - OpenText is phasing out the Vignette brand, IBM got rid of the Lotus brand for its WCM offering and Adobe keeps talking all about CEM while de-emphasising the Day and Omniture brands. As a result, the market is unhappy because these changes make no sense. Or do they?

When acquiring another company, the buyer rarely does so to keep things the way there were. In many situations, the acquired company was in distress, its stock had dropped because of a revenue shortfall and there is usually a reason for that. The performance has to be addressed and the inevitable changes often include re-branding.

The vendor also usually buys the company with the idea to complement existing offerings. The goal is to strengthen the overall portfolio by creating a more comprehensive solution set. Product A together with product B can do something that the individual products weren’t able to do. That  is hard to convey to customers when the brands are completely different. How would OpenText get credibly across that Vignette and Artesia are well integrated and together part of a greater solution? Re-branding helps to get across that the combination is a new and better offering.

In the end, it gets down to the vendor’s product brand strategy. There are two fundamental approaches called the house of brands and the branded house.

The house of brands is a company that puts the respective product brands above the company brand and does not mind having several of them. General Motors is an example of such company. Its brands such as Cadillac, Pontiac, Chevrolet, Opel or Vauxhall are what the market sees and often customers don’t realize that they come from the same company. This is a fairly costly branding strategy since the vendor has to promote each brand individually and the brands don’t benefit from each other - the German customers buying an Opel don’t know that Vauxhall is one of the most popular car makes in the UK. The benefit of this strategy is, however, that the company can have multiple independent business that can maximize its performance.

The branded house strategy is primarily focused on a single brand, usually the company’s name. BMW is a perfect example of such strategy. The benefit of this strategy is that the strengths of one product projects on other products. If you think that the BMW 325 is cool and sporty then the BMW X5 must be cool and sporty. This branding strategy is fairly efficient since it is very focused on a single brand. And as a result, that single brand is usually much stronger than the individual brands in the house of brands strategy. Just think about the difference in brand strength between BMW and Pontiac (Interbrand estimates BMW to be the 15th world’s most valuable brand while not a single GM brand made it to the top 100). The challenge is to convey the value proposition of the individual products - what’s the difference between the 320 and 325 and 525?

Many software companies pursue the branded house strategy because they hope the branding strategy will support their product strategy which is usually based on a technology vision with a logical architecture. They want to project the benefits of one product to another and suggest how the products relate to each other. Only when they enter truly different markets - which usually doesn’t happen until they are well past the billion dollar mark - they start diversifying their branding into a house of brands. IBM is a good example of such strategy as their brands such as Tivoli, Rational, DB2 or Lotus really don’t relate to each other. But even the mighty Apple has chosen the branded house strategy for its main business with the collection of iBrands (iMac, iTunes, iPod, iPad, iPhone, etc.) - clearly to convey the integration and relationship between the products. Does anyone doubt that they relate?

Changing a brand is never a trivial issue and the vendor usually weighs all the pros and cons. The major cons are the inevitable confusion that a name change causes and the cost of the transition. The benefit is the support of the overall product and corporate strategy as outlined above. Depending on the existing brand equity, the strategy might win over confusion which is usually only temporary. Unlike consumer software, enterprise software rarely enjoys much brand equity outside the circle of experts. And the experts are usually well capable of learning the new branding quickly - that’s why they are experts.

In the end, the response to a brand change is an emotional issue because it is a change. And change is always emotional. But it is first and foremost a business decision and emotions have to give way to rationality. And when considering the context of the company’s strategy, re-branding is usually a very rational business decision.