Take a product called Alka-Seltzer Plus. Let’s see if we can visualize how Alka-Seltzer Plus might have gotten its name.
A bunch of the boys are sitting around a conference table trying to name a new cold remedy designed to compete with Dristan and Contac.
“I have it,” says Harry. “Let’s call it Alka-Seltzer Plus. That way we can take advantage of the $20 million a year we’re already spending on the Alka-Seltzer name.”
“Good thinking, Harry,” and another money-saving idea is instantly accepted, as most money-saving ideas usually are.
But lo and behold, instead of eating into the Dristan and Contac market, the new product turns around and eats into the Alka-Seltzer market.
Every so often the makers of Alka-Seltzer Plus redesign the label. The “Alka-Seltzer” gets smaller and smaller, and the “Plus” gets bigger and bigger.
A better name for the product would have been Bromo-Seltzer Plus. That way they could have taken business away from the competition.
In the product era life was simpler. Each company specialized in a single line. The name told it all.
Standard Oil, U.S. Steel, U.S. Rubber, United Airlines, Pennsylvania Railroad.
But technological progress created opportunities. So companies started branching into new fields.
Enter the conglomerate. The company that specializes in nothing. By development or acquisition, the conglomerate is prepared to enter any field in which it thinks it can make a buck.
Take General Electric. GE makes everything from jet engines to nuclear power plants to plastics.
RCA is in satellite communications, solid-state electronics, and rent-a-cars.
Many people pooh-pooh the conglomerate. Companies should “stick to their knitting,” they say. But conglomerates have provided the capital to sustain vigorous competition in the marketplace. If it weren’t for the conglomerates, we would be a nation of semimonopolies.
Take copiers, for example. Xerox, the pioneer in the plain-paper field, now faces competition from the computer manufacturer (IBM), from a photo company (Kodak), and from a postage-meter company (Pitney Bowes).
Even when conglomerates grow by acquisition (RCA’s purchase of Hertz, ITT’s purchase of Avis), they provide the money needed to sustain growth and competition.
Otherwise, when the original founders retired or died, the tax bite would leave the company too weak to defend its turf.
The typical life cycle of a corporation starts with an entrepreneur with an idea. If successful, you can count on two things, death and taxes, to ensure that the operation will end up as part of a conglomerate.
Because companies grow by two different strategies (internal development or external acquisition), two different “name” strategies evolved. Corporate egos dictate the strategies.
When a company develops a product internally, it usually puts the corporate name on the product. For example, General Electric computers.
When the company develops a product by external acquisition, it usually keeps the existing name. RCA kept the Hertz name. ITT kept the Avis name.
But not always.
When Sperry-Rand developed a computer line internally, they called the product Univac. When Xerox went into computers by external acquisition, they changed the name from Scientific Data Systems to Xerox Data Systems.
Corporate egos aside, when should a company use the house name and when should they select a new name? (You can’t really disregard corporate egos. Try telling General Electric not to put the GE name on a new product and you’ll begin to appreciate the enormity of the corporate ego problem.)
One reason why the principles of name selection remain so elusive is the Charles Lindbergh syndrome.
If you get into the mind first, any name is going to work.
If you didn’t get there first, then you are flirting with disaster if you don’t select an appropriate name.
To illustrate the advantages of separate names rather than house names, compare the strategies of Procter & Gamble with those of Colgate-Palmolive.
You’ll find many house names in the Colgate-Palmolive line. To name a few: Colgate toothpaste, Colgate toothbrushes, Palmolive Rapid Shave, Palmolive dishwashing liquid, Palmolive soap.
You won’t find any house names in the Procter & Gamble lineup. Procter & Gamble carefully positions each product so that it occupies a unique niche in the mind. For example: Tide makes clothes “white.” Cheer makes them “whiter than white.” And Bold makes them “bright.”
With fewer brands Procter & Gamble does twice as much business and makes five times as much profit as Colgate-Palmolive.
While it’s fashionable on Madison Avenue these days to pooh-pooh Procter & Gamble advertising, it’s interesting to note that Procter & Gamble makes more money every year than all of America’s 6000 advertising agencies combined.
When a really new product comes along, it’s almost always a mistake to hang a well-known name on it.
The reason is obvious. A well-known name got well known because it stood for something. It occupies a position in the prospect’s mind. A really well-known name sits on the top rung of a sharply defined ladder.
The new product, if it’s going to be successful, is going to require a new ladder. New ladder, new name. It’s as simple as that.
Yet the pressures to go with the well-known name are enormous. “A well-known name has built-in acceptance. Our customers and prospects know us and our company, and they will be more likely to accept our new product if we have our name on it.” The logic of line extension is overwhelming and sometimes very difficult to refute.
Yet history has destroyed this illusion.
Xerox spent almost a billion dollars for a profitable computer company with a perfectly good name, Scientific Data Systems. Then what did Xerox do? Of course, they changed the name of the company from Scientific Data Systems to Xerox Data Systems.
Why? Obviously because Xerox was the better and more widely known name. And not only better known, but Xerox had a marketing mystique. A corporate Cinderella, Xerox could do no wrong.
When you look into the prospect’s mind, you can see what went wrong.
It’s the teeter-totter principle. One name can’t stand for two distinctly different products. When one goes up, the other goes down.
Xerox means copier, not computer. (If you asked your secretary to get you a Xerox copy, you’d be upset if you got a reel of mag tape.)
Even Xerox knew this. “This Xerox machine can’t make a copy,” said the headline of one of their computer ads.
You knew that any Xerox machine that couldn’t make a copy was headed for trouble. When Xerox folded its computer operations, it wrote off an additional $84.4 million.
What’s a Heinz? It used to mean pickles. Heinz owned the pickle position and got the largest share.
Then the company made Heinz mean ketchup. Very successfully too. Heinz is now the No. 1 brand of ketchup.
But what happened to the other side of the teeter-totter? Why, of course, Heinz lost its pickle leadership to Vlasic.
To be successful, Xerox would have had to make Xerox mean computers.
Does this make sense for a company like Xerox that owns the copier position? A company that gets most of its volume from copiers?
Xerox is more than a name. It’s a position. Like Kleenex, Hertz, and Cadillac, Xerox represents a position of enormous long-term value.
It’s bad enough when someone tries to take your position away. It’s tragic when you do it to yourself.
One reason why companies keep looking for a free ride is that they underestimate the value of anonymity.
In politics, in marketing, in life, anonymity is a resource, easily squandered by too much publicity.
“You can’t beat somebody with a nobody,” goes the old political saying. But today you can.
The rapid rise of a “nobody” like Gary Hart is proof that politics is a different game today. The old maxims are no longer valid.
Richard Nixon may be the best-known political name in the world. But almost any nobody could beat him.
Publicity is like eating. Nothing kills the appetite quite as much as a hearty meal. And nothing kills the publicity potential of a product or a person quite as much as a cover story in a national magazine.
The media are constantly looking for the new and different, the fresh young face.
In dealing with media, you must conserve your anonymity until you are ready to spend it. And then when you spend it, spend it big. Always keeping in mind that the objective is not publicity or communication for its own sake, but publicity to achieve a position in the prospect’s mind.
An unknown company with an unknown product has much more to gain from publicity than a well-known company with an established product.
“In the future everyone will be famous for 15 minutes,” Andy Warhol once predicted.
When your 15 minutes arrive, make the most of every second.