Is brand consolidation a good idea?
Sholto Lindsay-Smith, director of strategic brand consultancy Industry, weighs the options of whether or not brand consolidation is a good brand strategy, coming to the conclusion that it usually makes economic sense, but only if managed carefully.
Brand consolidation typically goes hand in hand with mergers and acquisitions. Yet, we know most acquisitions fail. According to the Harvard Business Review the failure rate is a staggering 70-90%. So, the right question to ask is whether the idea of brand consolidation is a good strategy.
There are many examples of acquisitions where the assimilation of the acquired brand results in the destruction of value, with both clients and employees fleeing as the culture and service ethos of the acquired firm is crushed in the squeeze to see a return on investment.
This is perhaps not surprising as most due diligence focuses on the financials. Little attention is paid to the brand or cultural fit of the target acquisition. Similarly supporting communications and the underpinning rationale for the acquisition will typically be directed at the investor rather than the customer or employee.
A more balanced appraisal is required to arrive at the right brand strategy.
The case for consolidation
There are three powerful arguments for brand consolidation.
1. Economies of scale. Supporting many brands is expensive. Consolidating your brand spend into one advertising budget, one sponsorship budget and one PR budget gives you more bang for your buck.
2. Brand presence. Operating multiple brands fragments your image and reduced your brand impact.
3. Cross fertilisation. Operating under one brand facilitates cross-selling of services and products.
In many respects, these arguments are so compelling they make brand consolidation the default option.
There are three contra arguments, that are often overlooked.
1. A sense of identity. This is not just about visual identity, but tribal identity. It is about the pride and identification with the brand by the people who work there, who have invested their blood, sweat and tears in making the company successful.
2. A sense of purpose. Smaller entrepreneurial businesses which are often the target of acquisitions usually have a clear founding purpose or mission that is deeply ingrained in the organisation. If this is not superseded by an equal or greater purpose, then the driving force of the busines and motivation goes with the change in name.
3. A sense of focus. Niche businesses who hold a dominant position and are specialists in their market are often attractive financial targets. They have typically built their business around a clear and focused market proposition. The risk is that this clear proposition is diluted once part of a bigger operation stretching across multiple markets and capabilities. In other words, the brand equity is squandered.
In summary, brand consolidation usually makes economic sense, but only if managed carefully.