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Business News/ Opinion / Online-views/  One brand too many

One brand too many

Does it make sense to maintain a dual brand strategy like it would be the case when Idea Cellular and Vodafone India complete their merger

Vodafone and Idea Cellular announced the merger of their India operations earlier this year, but the merged entity will continue to function under the two brands. Photo: ReutersPremium
Vodafone and Idea Cellular announced the merger of their India operations earlier this year, but the merged entity will continue to function under the two brands. Photo: Reuters

In an article published in the Advertising Age 20 years ago (21/1/1997), editor Rance Crane wrote: “When a packaged goods company buys a famous brand name, much of the cost of the purchase is attributed to the value of the brand name. But when a bank buys another bank, the brand name of the acquired bank is zero. What a waste."

I discovered the above quote when I was researching on the complexities of brand name changes in service industries. Crane made a strong point against the practice of large national banks dropping the name of the acquired (local) bank rather rapidly; he opined that this could leave an opportunity open for a strong local competitor to exploit the vacuum.

We learnt a few weeks ago that Vodafone and Idea are going to become one entity and in the news cycle that followed, it was reported that the two brand names, Vodafone and Idea, would continue. Numerous experts were quoted on how it made sense to retain both names since they came with certain specific brand characteristics and strengths.

I am now going out on a limb to say that it will be a highly sub-optimal decision to retain two brands.

Let me explain. Unlike a soap or a detergent, for a service brand, that too one which has some ‘locked-in’ features, a change in name does not always result in loss of customer base.

For instance, if you are a regular user of Pantene shampoo and you one day discover that the brand name has changed to PNX, you are going to get confused. You may stay with PNX if you had been made aware of the change through advertising that the product is the same. But you may be tempted to try Sunsilk or may be even Patanjali. Simply because the downside risk in the case of a shampoo is limited. Also it is easy to make the brand switch.

In the case of a locked-in service brand, there are some inherent barriers to change. This is the reason why when a bank changes its name it does not lose all its customers. For instance do you even remember what was the name of Axis Bank before it became Axis Bank, or HSBC before it became HSBC or even what became Citibank?

Or take the case of mobile service brands. Do you remember what Vodafone was earlier? That may be easy, but what was it before it became Hutch. And each time it changed its name, the brand did not lose all its past users.

My point is that unlike a soap or a detergent, a service brand can survive a brand name change as long as the new name continues to offer the same or better level of service. Even television channels have survived name changes (Star News to ABP News).

Coming to the Vodafone-Idea situation, does it make sense to maintain a dual-brand strategy? Some experts have opined that it makes great sense to keep them apart: Vodafone for the more sophisticated urban consumer and Idea for the ‘What an Idea Sirji’ semi-urban audience. But one cannot forget the fact that this duopoly will have to take on the single-brand might of Jio and Airtel. Those two brands do not differentiate between rural and urban consumers. In fact, when Airtel launched its prepaid service a decade or more ago, it called it Magic (endorsed by Airtel), but soon it dropped Magic when it realized that it was prepaid that was driving acquisitions.

Having two brands fight the might of Jio or Airtel is like trying to run a three-legged race against Usain Bolt. So should Vodafone and Idea move towards a single-brand strategy?

Marketing Week in an article a few years ago (7/11/2013) spoke about telecom rebranding as “if it is just change for change’s sake, or if someone new comes in and says the previous brand feels out of date, a rebrand could be risky and could look like a case of keeping up with the Joneses as opposed to what the company believes it stands for".

Just changing the brand name for the sake of unification may not be the solution.

The Marketing Week article also points us towards three key considerations in corporate rebranding: A corporate name change must represent a shift in direction; demonstrate the value to stakeholders of what can be an expensive exercise; and reactive rebrands can be risky.

Ideally the new brand should also stand for a new spirit, a new ethos that the brand wants to project. This ideally should be coupled with a slew of new services and new tariff offerings. And within the larger Aditya Birla Group, there could be some more synergies to be tapped into.

Having one brand has many advantages, starting with a huge saving in marketing and marketing communication costs. But that is not the only advantage. And if done right consumers will stay with the brand and chances are the new brand may be able to attract new users. Remember every year around 100 million new young consumers are entering the market.

So when the dust and the din around the merger goes down, the back end gets merged, and synergies are squeezed out, there is some serious thinking to be done on the branding front. Continuing with two brands may not be a good idea. And living with Vodafone and Idea, in my opinion, is one brand too many.

Ambi M G Parameswaran is brand strategist and founder., a brand advisory. He takes stock of consumers, brands and advertising every month. The views expressed are personal.

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Published: 28 Apr 2017, 01:46 AM IST
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