| BUSINESSWEEK ONLINE : NOVEMBER 15, 1999 ISSUE | ||||||||
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| NEWS: ANALYSIS & COMMENTARY
Commentary: Nynex, We Hardly Knew Ye Somewhere up in corporate heaven, Studebaker is still making cars. You can still make a deposit at Chemical Bank, get a Digital Equipment Corp. computer, fly a new McDonnell Douglas jet, ride the Atchison, Topeka & Santa Fe Railway, and buy shares from Shearson Loeb Rhoades. But not here on earth. All of those corporate brands, once household names that limned daily life, died when the companies that bore them were acquired. Boeing bought McDonnell Douglas and expunged its name. Shearson disappeared inside American Express. And so on. Mergers are hell on corporate brands. And that puts an interesting perspective on the image-building efforts of young e-commerce companies such as Yahoo!, Priceline.com, and eBay. Many of those names won't be on their own in five years. While some may survive as brands, others will be extinguished entirely. In other words, immense sums are going to build brand skyscrapers that will be torn down before their time. This is creative destruction with a vengeance. Killing a corporate name, much as it pains the copywriters who nurtured it, is often the sensible thing to do. Economists remind us to ignore sunk costs--all those Super Bowl ad extravaganzas--in determining a brand's fate. The money is spent, and there's no getting it back. What's more, some venerable names, such as New York's Chemical Bank, just don't cut it after awhile. When it bought Chase Manhattan in 1996, Chemical assumed Chase's identity in a maneuver that recalls the movie Invasion of the Body Snatchers. Ditto for Westinghouse's acquisition of CBS Corp. NO RESPECT. Still, brand gurus say many merger-happy CEOs don't show enough respect for the brands they acquire. One of their cases in point is Bernard J. Ebbers, the cowboy chairman of MCI WorldCom who bought MCI Communications last year and is lassoing Sprint Corp. for a record $130 billion, including assumption of debt. MCI and Sprint are two powerful brands. Competitive Media Reporting, an ad-tracking firm, ranked MCI No. 2 in the nation and Sprint No. 9 among 1998's top 100 brands. Ebbers paid about $25 billion over book value for MCI and is paying about $100 billion over book value for Sprint. Much of the premium is for the brands. Yet Ebbers hasn't decided exactly how to use them. Probably, they will be applied to different market segments. What's sure is that the corporate name will be reduced to its least-recognized element, WorldCom. ''They're damaging brands that have taken years and years to develop,'' says James R. Gregory, CEO of Corporate Branding, a Stamford (Conn.) consultancy. Companies that continually change are bound to have a hard time creating an identity. Take Nynex Corp., a phone company that sounded like a stock exchange. Few tears fell in 1998 when it disappeared into Bell Atlantic Corp. Next year, Bell Atlantic will vanish, dropping its name after buying GTE Corp. Odds are, its new name will lack both history (Bell) or geography (Atlantic). And it will start life with zero brand equity. Then again, it only has to last until the next megamerger. By Peter Coy _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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RELATED ITEMS Net Branding: The Name's the Thing TABLE: The Cost of Building a Brand Commentary: Nynex, We Hardly Knew Ye INTERACT E-Mail to Business Week Online | |||
