Brands are strategic assets of companies. Companies consistently invest in building, nurturing, and maintaining their brands by investing financial, reputational, and managerial resources over time. Companies also strive hard to create strong loyalty among customers by promoting the unique value propositions of brands.
Consider for example one of the largest automotive companies in the world, General Motors (GM). GM has created some of the most cherished brands such as Pontiac, Saturn, Cadillac, and Chevrolet. For almost four decades GM has invested in creating an extensive network of dealers, hoards of advertising campaigns, and an array of brand activities to build customer loyalty to each of those brands. However, instead of continuing to grow these brands, GM did the unthinkable—kill its brands.
As valuable as brands are to companies, they can become a strategic liability over time under varied circumstances. In such scenarios, the question for companies is to choose between trying to revive the brand into a cash cow that can be milked in the long term and to kill the brand to ensure that the rest of the brand portfolio and the corporate brand are not negatively impacted.
Given that there are enormous amount of advice, common sense and even precedence about building brands and not terminating them when they turn into liabilities, it is not surprising that companies and top managements find it very challenging to kill brands. This article offers some advice on how to kill brands.
What Is Brand Killing?
Before deliberating how can companies decide to kill brands, it is important to understand the scope of such a concept. What does killing a brand mean? Consider the following examples.
Apple Computers had an early product called the Newton Computer, an early version of a tablet computer that quickly attained a cult status. Despite such cult status, Apple discontinued the product.
Harley Davidson launched lighter versions of its flagship bikes in response to the onslaught of Honda and Kawasaki bikes in the US market. Such lighter bikes got considerable traction in the market, but eventually Harley decided to stop making such bikes.
Coca-Cola acquired the immensely popular Indian soft-drink called Thumbs-Up and despite its huge national following, decided to kill the brand. So much was the public remorse for such a move that Coca-Cola was eventually forced to launch it back. And, Thumbs-Up has proven to be one of the star brands in Coke’s brand portfolio in India.
As can be seen from these examples, killing a brand can vary along a continuum. At its very core, brand killing refers to removing the brand from the market. Companies may decide to remove the entire line of products within a product brand as was done in the case of GM killing the Saturn brand. Companies may also decide to selectively pull back certain variants of a given product, as happened in the case of Harley’s lighter bikes.
When to Kill a Brand
As with everything, companies kill brands under a variety of circumstances. Some of the main reasons are discussed in this section:
Financial contribution of the brand: One of the most common reasons that companies decide to kill brands is the overall financial contribution of the brand in the company’s brand portfolio. Building, nurturing and maintaining brands over long periods of time tends to be extremely expensive. When such brands fail to gain a competitive standing in the market, fail to generate considerable brand loyalty and when they fail to bring in revenues exceeding the costs involved, companies have an easy decision to make.
Branding contribution of the brand: Companies also kill brands that are extremely profitable, as was in the case of Coke killing Thumbs-Up. In such cases, the reason is not the financial viability of the brand, but rather the compatibility of the brand in the overall brand portfolio.
From this perspective, companies may kill the brand for two primary reasons.
First, the brand might be an external addition into the original portfolio. That is, when a company acquires a brand, the acquired brand may have a different image and personality and may not fit with the overall portfolio of the acquiring company. When the overall identity of the corporate brand or the overall brand portfolio has moved on to a different identity and the specific brand no longer fits, the compatibility of the brand and brand portfolio suffers. This happens more so in the technology space.
In the case of Apple, the Newton Computer, despite its very high popularity, was perceived by the company as stuck in time. Given the advances in technology, Apple had aggressively progressed on to newer and slicker technology. As such, any association of Apple’s corporate brand with Newton Computers would have negatively impacted the brand moving further. Thus, Apple killed the brand, although it might have been financially lucrative
Second, the brand that is killed might have been perceived as a competitor in the market to another brand in the portfolio and the company may want to minimize cannibalization. When Coca-Cola entered the Indian market, Thumbs-Up was the market leader in soft beverages. Coke, given its market prowess, acquired the leading brand in order to gain a strong foothold in the Indian market. However, if Coke were to acquire market shared, it had to maintain one single corporate brand. Thumbs-Up was seen as a direct competitor. As such, despite its huge popularity, Coke killed the Thumbs-Up brand.
Over the years, as Coke gained a strong market presence, it relaunched the Thumbs-Up brand to a very positive reception by customers.
How to Kill a Brand
The most challenging task for companies is to know how best to kill a brand. Brands are truly systems that have their own communities made up of loyal customers, and their own meaning systems for customers across multitude of scenarios. Furthermore, when companies decide to kill a brand, they also will have to ensure that they don’t lose those customers but transition them to a different brand in the portfolio.
Therefore, irrespective of the reason for killing a brand, companies should tread this strategic action carefully. This section offers two such strategic for companies to kill the brand but retain the customer.
Transitions through promotional selling: The most important aspect of killing a brand is to make sure the customers are still retained. Thus, transitioning them to other brands in the brand portfolio is crucial. One strategy to achieve such transition is through promotional selling. Whenever a brand is to be killed, the transition process can be initiated even before the actual withdrawal of the brand.
For example, when GM decided to kill some of the car brands, it offered customers lucrative discounts to buy the last of the cars. As the brands were anyway being removed from the portfolio, the concern for GM was to clear the inventory, even at low prices. Moreover, such a move also helped GM to retain customers by luring them with lower prices. Finally, given that those customers have had a positive experience with GM of having bought cars at lower prices, when those cars are to be replaced, those customers would return to the GM brand. As such, this strategy could lead to a win-win scenario for both the brand and the customers.
Transitions through extended service: A strategy that differs from promotional selling is one of active collaboration with customers. Whenever a brand is to be killed, brands can initiate a collaborative discussion with its customer base to ensure that they stay within the brand family by either offering them exchanges to other brands in the portfolio or extend them service facilities that may continue even after the product (brand) is killed.
The purpose of this strategy is also to retain the customers. But instead of playing the price strategy, this involves implementing the services strategy. Brands can extend attractive exchange schemes that would convince customers to stay with the brand. Such schemes could involve exchanging for other brands in the portfolio. Or even more tactful would be to extend service contracts that could be lucrative for the customers and would stay on even after the brand dies. Such strategies would allow companies to effectively retain customers.
Killing a brand is a difficult thing to do for companies. Not only does it have the potential to dilute the equity of the overall portfolio, but is also poses a real danger of alienating loyal customers. However, brands can become a liability and the strategic move to protect the overall brand portfolio would be to kill the brand. As was discussed in this article, such a move can and should be handled in a very strategic manner. The broad guidelines offered here can aid companies and top managements to tread this difficult strategic action in a much competent manner.
Martin Roll is a leading global expert and advisor. His clients include Fortune 500, Asian businesses, and start-ups. A frequent guest lecturer at INSEAD and other global business schools, he is the author of the bestseller Asian Brand Strategy. You may visit his website at www.martinroll.com.
Print ed: 09/10