A brand's value to a company lies in the premium consumers place on it to navigate a seemingly endless array of options. "You have more choices out there than any consumer can adequately evaluate," said Matt Ross, senior partner at the advertising firm Ogilvy & Mather. "Brands form a shorthand. They guarantee performance. With a good brand, you know what you're going to get time and time again."
Companies mess with successful brands at their own peril. But sometimes, there's no choice.
Toys R Us has said it is considering getting out of the toy business to focus on its profitable baby accessory unit.
(Brian Branch-price -- AP)
While companies have always faced demand to switch up their product lines and evolve to meet new needs, that's been increasingly true in recent years as technological change has accelerated. The changes have forced a growing number of companies to abandon ship on the products or services that brought them to prominence in the first place. Old-line manufacturing companies -- many of which were the country's best-known brands in the 20th century -- have been especially affected as their products become commodities, and they have to make the switch to higher-margin services.
"They can either not do it and gradually go out of business, or they can try to make the shift," said Roland Rust, chairman of the marketing department at the University of Maryland. "The smart managers try to make the shift. Some succeed. Some still go out of business. It's hard."
Occasionally, a company pulls it off with few noticing. Ford Motor Co., for instance, now makes more profit financing the sale of cars than it does on the cars themselves, although few outside of Wall Street know it.
Other companies have chosen to change their names when they spread into new lines of business, so that they wouldn't be trapped by references in their brand to specific products. That can be a risky proposition, however. United Airlines joined forces with Hertz rental cars, Westin Hotels and Hilton International under the umbrella name Allegis Corp. in the late 1980s. The idea was to create a one-stop shopping experience for travel, but consumers complained the new name sounded like a disease. The conglomerate was soon chopped up, and United's parent company went back to the abbreviation UAL.
The tactic of using abbreviations and acronyms is one that many companies have adopted over the last half-century because they're catchy -- and they're non-specific, so the company won't have to change its name every time it switches its offerings.
Names are also at issue when companies merge or acquire other businesses.
After British Petroleum PLC and Amoco Corp. merged, the new company was reluctant to lose the value of either name, so BP gas stations dispensing Amoco fuels began to pop up.
Similarly, now that Cingular Wireless LLC has taken over AT&T Wireless Services Inc., the brand is shifting to Cingular, but its advertisements contain the blue of AT&T plus the tag line "raising the bar," which had been an element of AT&T Wireless's ads.