Marketing after a merger

The goal of delivering a better product should dictate what brand is used - and how

Most people agree a successful marriage takes work: Among other things it calls for communication and commitment.

It’s not unlike marrying companies or brands. Consolidation can lead to greater efficiencies, better products – stronger companies overall – but it requires a thorough integration strategy and marketing plan to convince shareholders, employees and especially customers that the move is a good one.

Studies have shown that a high percentage of mergers worldwide fail to create value; in some cases they even destroy it.

‘The challenge is that more fail than succeed,’ says Nancy Helstab, managing director at marketing consultancy BrandEdge of Toronto, citing a Canadian Business study, conducted by the Boston Consulting Group, that showed 60% of the large Canadian mergers over the past decade (among publicly traded companies) underperformed their sectors and actually destroyed acquirer shareholder value.

‘The ones that succeed,’ she continues, ‘are doing it not strictly for growth reasons but because they think there is some added value they can provide; combining forces to deliver something better. That’s what should motivate [a merger]…and dictate what brand will be used, and how.’

There’s no blueprint for success, no one common strategy. Rather, pundits point to several different formulas employed by the likes of Telus-Clearnet, TD Canada Trust, Rona-Revy, Chapters-Indigo, Sun Life-Clarica, and even the newly named Conservative Party.

Over the last year, Montreal-based Rona has actively sought to solidify its brand across Canada, says senior national marketing director Michael Brossard. In the West in particular, the home improvement chain completely rebranded its Revy (Revelstoke) stores, which it purchased in 2001, under the Rona banner.

‘It was important for us to own a brand name out West, but the Revy name was so well-established that we decided to keep both brands for a while, and [ease into the] integration.’

The transition was spurred on by a successful integration campaign (print and radio), that featured then Revy spokesperson Bob advising consumers that while the name was changing, the brand promise and heritage would not. In fact, Brossard adds, that campaign achieved top-of-mind-awareness of about 50%.

Similarly Rona’s most recent Ontario campaign, produced by Montreal agency BCP, stars the Building Box’s (now Rona Home and Garden) Hammerhead mascot shedding his suit in an effort to explain the change to consumers. While its Building Box and Revy stores have all been consolidated under the Rona banner in Ontario, the company still maintains sub brands Lansing and Cashway, both purchased between 2000 and 2001. These banners have a very strong brand equity among their key trades people and contractor targets, Brossard says. ‘We want to maintain that heritage.’

Consolidating its banners is a wise move for Rona, says retail consultant Ed Strapagiel of Toronto-based Kubas Consulting, adding that it is tough to sustain – and rationalize – several brands that hold the same promise: Each brand is serving a similar need in the marketplace, so there is not an awful lot of difference.

‘They’re likely going to increase the efficiency of their advertising, and of their presence in the marketplace, by being known as one thing,’ he speculates. ‘Trust in uniformity.’

Rona’s consolidation is also an example of a regional-to-national strategy, adds Helstab, whereby a company that wants a national presence will buy up local or regional brands, much in the way Telus moved East by acquiring Clearnet. In such cases, she adds, the parent brand will almost always keep its name/positioning, or at least incorporate it over time.

The latter should also hold true in cases where a company purchases another organization in an effort to further its industry growth and/or market leadership, she adds.

When Montreal-based pulp and paper firm Domtar purchased four paper mills from Atlanta-based Georgia Pacific in 2001, it effectively doubled its size – becoming the number-three player in the category. But it realized that its plethora of brands could overwhelm the consumer, says Scott Townsend, director of strategic marketing initiatives at Domtar.

‘We went from 54 brands to one brand, which is Domtar,’ he says. ‘Product names have become sub-brands, and they are phased out if they are too confusing.’

The approach has permitted Domtar to deliver a consistent marketing message. Everything from its lifestyle-oriented advertising by New York-based agency desgripped gobe group to its newly developed packaging, featuring silhouettes of people at work, links back to its positioning, ‘a different feel.’

But there are instances where the acquired company’s name and positioning can be leveraged.

In early 2002, when Sun Life purchased Clarica, senior folk from both companies got together to determine the fate of both brands. According to Peggy Jarvie, EVP customer knowledge and branding, many different options were considered: one brand vs. the other, a co-mingled brand, and a completely new brand. In the end, with the help of focus groups and a brand assessment, they elected to use Sun Life as the corporate brand, but maintain use of the well-known Clarica brand to continue to target its retail mid-market customers.

‘We put an enormous amount of effort into communicating to our customers and employees and advisors what the relationship was going to be,’ says Jarvie, pointing to the two waves of cross-country advertising Sun Life did at the time of the merger to allay any customer concerns.

Jarvie says they’ve been tracking consumer response to the Clarica brand since it launched in 1999 (pre-merger), as well as perceptions of other brands in the market. And though there have been some fluctuations over the last few years, her sense is that they haven’t been impacted by the merger.

Toronto-based Chapters too has maintained separate identities for its Indigo, Chapters and Coles brands mostly due to the brand equity behind each one, says Sorya Ingrid Gaulin, director of PR and regional marketing. In fact, she adds, the book retailer has made the selection across both of its superstore formats (Chapters and Indigo) very similar, however, the perception from the customer is that they are getting something different. Coles’ mandate, meanwhile, remains one of convenience (because of its mall locations) and community (customers tend to be voracious readers and visit the retailer frequently), she says.

‘We want to be respectful of those different perceptions. The key for us is not so much amalgamation – it is making our stores as relevant as possible to the customer. And that to us means drilling down to the selection and the customer experience,’ says Gaulin, adding the retailer now has a new inventory system to help it do exactly that. Eighteen months in the making, the system will eventually allow it to tailor the inventory in each store across the country based on spending patterns, among other things, and help it further its goal of being relevant, she says.

Since the merger though, the retail chain has focused its marketing (mostly print ads supporting national campaigns) around its large-format brands – often positioned together since most of its offers apply to both brands; and always listing the integrated Web site www.chapters.indigo.ca. However, she says, in the year to come it will turn its attention to the Coles brand.

This month, it launched a promotion called Bag-a-bargain that actually extends across all formats and will include all of the brands in its print ads, which it sometimes does if the offer is not brand-sensitive. Gaulin says: ‘It’s value- and savings-based, so it is relevant to all our customers.’

- with files from Lisa D’Innocenzo