Challenges for the Newly Merged Pharma Companies

The consolidation in the pharmaceutical industry continues. It is interesting that last year at this time I was teaching a Pharmaceutical Marketing MBA class and said that consolidation was predictable. Most of the students, all mid-level at pharma companies in various disciplines outside of marketing, pushed back that this would not happen. I think it was more of a wish on their part rather than good market observation.

Anyway, the consolidation has been going on and will continue. We likely are moving to what the Boston Consulting Group called the "Market of Three". That is, as an industry matures, consolidation occurs until there are three major broad players, with a group of niche players.

There are huge opportunities awaiting these newly formed companies to enhanced their perceived value with stakeholders. When a company says they will be the "new ..., they are in fact framing expectations for stakeholders that something will be different. That is, there will be new attributes, associations and experiences that were there previously. From a brand and reputation perspective, this is a double-edged sword. On the one-hand, these companies can get out of the starting gate with new positioning, brand and reputation initiatives designed to prove that they are in-fact new. Or, they can simply hope that new means that they will be accretive at some point in their financial performance, which I would argue is insufficient to prove their newness.

I would hope that these companies are looking at how they created value before, individually, and how they will be creating value going forward; that they reidentify for themselves and for others their strategic group with which they compete; that they engage in organizational change efforts to bring the new cultures into alignment (60-70% of mergers fail due to culture clashes); and that they look for ways to enhance their reputation with there key stakeholders.

It will be interesting to see how many of these companies do anything more than simply try to tell people that they are new.

Position Your Brand for Where the Puck will Be, Not Where It Is

I am looking forward to a trip in a few weeks to Toronto, one of my favorite (favourite, if you're Canadian or British) cities. I lived in Toronto for about 10 1/2 years. Great city! Vibrant, multi-cultural, young, wealthy, clean.... Somehow, though, this great city north of the border did a lousy job marketing itself.

When the Canadian dollar was cheap compared to the U.S. dollar (as low as $.59 at one time), Toronto had the brilliant idea to market itself as a cheap place for Americans to visit. "Come see us. We're cheap, have great theatre and restaurants, and you can buy all you want at basically half the price". Things worked well. Americans flocked to Toronto and shopped and went to theatre and had a great time.

Then, the Canadian dollar (called the Loonie in Canada) began to strengthen compared to the U.S. dollar. Up it climbed until it was nearly at par. As of today it is about $.93, or about equal to the U.S. dollar. What happened? You guessed it, Americans stopped visiting. Toronto was no longer cheap.

So, here sits a great city--the equal or better than any city we have in the U.S., and Americans don't visit because they do not know about all of the attributes that could have been part of the positioning of the city. So, off they go to Chicago, San Francisco and New York--cities as or more expensive than Toronto, but cities that have billed themselves all along as places you need to see.

Too bad the marketing geniuses in Toronto didn't follow their Canadian son Wayne Gretzky. When the "Great One" was asked what made him so great, he answered: "I skate to where the puck will be, not to where it is".

I use the Gretzky quote with every company I work with. It is a great marketing strategy. The Toronto dilemma is repeated in way too many companies that develop a positioning with brand attributes and associations that are wonderful for a time, only to find themselves in the wrong place when the market forces change.

It is important to think forward and to make market force analysis a part of the brand process. Will the attributes and associations hold up and be differentiating and desirable if things change? Don't just position against the market as it is; position against the market as it might be.

Companies Need to Get Customers Involved in Brand Redesign

IKEA recently made changes for the first time to its catalog. It changed the typeface it typically uses. Not a major revolutionary change to be sure. However, the reaction from customers was not what IKEA expected. It was negative and loud.

This comes not that long after Gatorade and Tropicana felt the wrath of its customers over packaging changes designed to update the brands. Gatorade, which I wrote about in a previous blog, redesigned itself and relaunched its brand as "G". Tropicana, which I talked about before, had to back down and reissue its old packaging when customers expressed anger over its new package design.

What is happening? I think what we are seeing is evidence that customers, not the company, own the brand. At one time, companies felt in total control over their brands. They changed things when the wanted and the public was expected to be soooooooo excited about the new brand name, logo and design. The problem was that with few alternative choices and few ways for customers to express themselves publicly, companies were often fooled into thinking that everything was fine. The Internet changed this. It moved power into the hands of the consumer who is free to express their opinions about brands and changes. With more alternatives to every brand on the market, changes that are not liked can easily lead to defections. The switching costs for almost every product--with few exceptions, like banking--are coming down rapidly.

Many companies are embracing this consumer ownership of their brands. Others are reacting with horror. At Hasbro, the company faced off against some of its most devoted customers who created an on-line version of Scrabble called Scrabbulous. Instead of finding a way to work with these brand-lovers, Hasbro sued them, turning many of them into brand-haters who are blasting Hasbro on-line.

Companies need to recognize that the brand is owned by the customer. That's where we always wanted it to reside--in the emotional connection with the individual purchaser. It is time that companies start to treat customers are partners rather than as passive purchasers. If changes to the brand are to be made, companies should get their best customers involved in the redesign. Then, they can use these customers to sell others who are less passionate. Times have changed and companies need to adapt.

Delaware's Proposed Sports Betting Damages the NFL's Reputation?

The State of Delaware got a shock when a court ruled that its proposed sports betting was illegal. Delaware can only off parlay betting (more than one team) and only on pro football. The NFL and other leagues argued that sports betting would damage their reputations? I wish I had been an expert witness for the State on that one!

What exactly is the reputation of the pro leagues that they are trying to protect? Is it Major League Baseball's blind acceptance of steroids? That league even did testing in 2003 but sealed the findings and did nothing about anyone who was found to be using illegal enhancers.

Perhaps it would be the National Hockey League that continues to walk a thin line between wanting a good game and a good fight. When discussions emerged a few years ago about banning fighting, the league found itself having to back down to the players' union.

Or, maybe it would be the good reputation of the National Football League that has had so many legal issues with its players that it is hard to keep track.

So, sports betting in little Delaware would damage the reputation of sports? Are you kidding me? Michael Vick and Ricky Williams can return to the game without damaging the leagues reputation, but betting will ruin it? Hockey players can beat each other up while the crowd goes wild, but betting will make the sport look bad? Manny Ramierez can come back as if nothing has happened, with ESPN cutting into games to show his every at-bat, but betting will taint the MLB?

Why can't the sports leagues simply say that they are afraid that games will be fixed, a la the "Black Sox" scandal in 1919? I can accept that argument. We know that there are many athletes who love to gamble. They're human. Pete Rose, Michael Jordan and Charles Barkley are just a few of those with big gambling habits--the latter two have never been linked to betting on their own sports while active.

It seems that professional sports are very good at turning a blind eye to things they do not want to see or acknowledge. Sports betting occurs all the time with bookies and at office pools. But, in a time when states are trying to find new sources of revenue, the "cause celeb" of the major sports leagues is to stop Delaware from legalizing the back room activities that go on all the time.

The hypocrisy is just too much!

Does Signing Michael Vick Hurt the Eagles Brand?

I was asked the other day whether the signing of Michael Vick hurt the Philadelphia Eagles' brand and reputation. The question was put forward with the obvious suggestion that the signing did destroy the brand of the team.

For those who are not familiar with US sports, the Eagles are a professional football (American football, not soccer) team. Michael Vick was a professional player with the Atlanta Falcons who spent two years in prison for running a dog fighting ring and personally being involved in electrocuting, drowning, and otherwise torturing dogs. He did his time; he's out and the Eagles signed him. Many teams refused to sign him. Needless to say, this has created quite a controversy amongst fans. One sporting goods store, Dick's, has said that they will not carry Vick's jersey with the caviat, that they will if customers demand it.

Those familiar with the National Football League know that there have been a large number of players who have had legal problems. At one time, people joked that the NFL stood for National Fellons League.

The Eagles argue that Vick has served his time and that he deserves another chance. Most people know that this is not the real reason he was signed. The Eagles were not trying to make a social statement. He was signed because the team thought he was a good football player and could help the team. Otherwise, he would have been defined as ex-con not worthy of rehabilitation.

Now, what about destroying the brand? We've seen in baseball with Manny Ramierez, Barry Bonds, and others that the home team cheers and the opponents jeer those who have been accused of or admitted taking baned performance enhancing substances. The home fans want a winner. Yes, even the sophisticated city of San Francisco loved Barry Bonds who claimed he never took performance enhancing drugs but could not explain how he gain 3 hat sizes and 2 shoe sizes as an adult. He hit homeruns and won games. He put fans in the stands and built the TV ratings. Major league baseball even ignored the entire steroid scandal, relishing the fan enthusiasm for the homerun derby that broke all historical records.

So, what is the brand of a major league football team? One might want to say a community, family sports franchise, but in reality, the attributes are of a rough, oversized group of athletes expected to win for the city they play in. Owners have long understood that the public wants a winner and that they also love controversy. The Dallas Cowboys became the self-proclaimed "America's Team" with a lot of bravado and controversy surrounding less than savory players. The TV viewing audience for Michael Vick's first game will be huge.

So, for all of those who want the brand to be one thing, the owners and coaches know that what the vast majority of sports fans want is a winner. Cognitive dissonance will play its normal role in helping people to explain away those things that do not fit in their buying rationale. The brand promise of a sports team is to put a winner on the field. If they can do it with a group of "boy scouts", then fine, but the fans have not shown an inclination toward that type of team, despite all of the critics who scream about athletes being role models for young kids. The role models we have in sports are generally bad--get over it. Too many are coddled, spoiled brats who are children in adult bodies. There are many exceptions, but they do not garner the headlines.

Let's all remember that brands are not about making everyone happy or establishing a "higher order". They are only those things if it makes sense from either: 1) the desire of management; 2) differentiation; or 3) customer demand. In the case of football, none of these things is at work. The Eagles are fulfilling their brand promise to the vast majority of their fans. I imagine, though, that more of the downside will stick to the Eagles because it reinforces another brand image of Philadelphia as a city with ruthless fans and a tough, working class underbelly. If this were San Francisco, people would be much more willing to explain it away as a city that recognizes that people can learn from their mistakes.

I despise what Michael Vick did. I wish that all felons were banned from sports so that they were not role models for kids, but my desires are not what make the Eagles brand. I'm not an Eagles fan and wouldn't become one because they signed someone wonderful or didn't. They do not appeal to me as a franchise--as a brand.

While many people wish that the Eagles management would run the team differently and believe that the team turned its back on its brand and brand promise, I would suggest that the team is actually no different signing Vick than it was before. It is the same brand and has the same brand promise. The team may loose some fans, but these will likely be a small group of people who are not devoted fans--those who contribute the most to the profitability of the team.

Connecting Brand and Reputation

I am starting to come to the realization after all of these years that brand is the essential part of reputation. Brand is about framing expectations; reputation is about the delivery of experience commensurate with those expectations. Brand is the control that reputation management lacks. We may not be able to control our reputation, but we can control the identity, attributes and associations we have, and we can work toward greater consistency of delivering experience to customers and other stakeholders.

So many brand projects stop with positioning, taglines and logos. They do not go the next step toward developing the processes to connect employees to the brand attributes so that they are both willing and able to "live the brand". Many employees are willing, but unable to understand what they are expected to do. This situation was found in a study by Mjken Schultz and Mary Jo Hatch. They examined the corporate branding efforts of companies globally and found that the missing piece for many was organizational change. In fact, they found that most employees at the firms that studied had not idea what was expected of them in delivering the brand promise, and as a result were not committed to it.

Consider that the companies employees are the most important stakeholders the company has since they are interpreting for customers and others every day the value--or lack of it--of the company.

So brand management is critical, but it will only be fully worthwhile when companies understand that their brands create expectations of performance and that they must take the steps necessary to make certain they can close the gap between expectations and experience.

From Radio Shack to "Shack"--Are You Kidding??

I just heard that Radio Shack plans to change its name to "The Shack" to distance itself from the old mindset connected with radios. Changing an outdated name or brand is not a bad idea. But, "The Shack"?? Is this a hamburger joint? Is it supposed to give it "street cred"? Is there a different Brand Promise in the name change?

Name changes are warranted when a company wants to recreate and reposition itself. However, the change only works well when the company also recreates and repositions its capabilities and the experience for its stakeholders. A company that clearly needs to have its name change is AIG. There has been such damage to this once proud brand that I do not see the ability of it to reposition itself with good key attributes. It always will have the association with economic disaster and poor management decisions. It may have been a joke, but I heard that they were considering changing the name to AIU. I hope this was just a joke, because if it were true, AIG's management team should be sued for complete ineptitude. If they want to change to AIU, they should save their money and instead put it into changing the internal culture of the company that created the mess in the first place. Then, they should start a major campaign apologizing for past mistakes, telling us what changes have been made, and trying to restablish themselves. Not sure if it would work, but an improved AIG would be better than a half-baked AIU. Still, a new name with a different culture would be the best course of action.

The Shack is following in the hallowed footsteps of Gatorade, which changed its name to "G". It is backfiring on PepsiCo, the owner of Gatorade, with a loss of market share. Pepsi had to back off its rebrand of Tropicana, going back to its old packaging after customers rebelled.

Why are companies listening to so-called "hip-hop" branding agencies who think that a new brand with "street cred" is the way to win the market? Perhaps they should be looking at where that youth market is relating to brands. It is on-line, not through traditional media and packaging.