Changing your business name and branding is a risky proposition. Has Telecom, now known as Spark, made the right choice?
Alas, poor Telecom… it is no more.
The new Spark has risen from the ashes and time will tell whether the branding revamp has had a phoenix effect.
The challenges for Spark are considerable and include the potential confusion with the sporting funding body (sparc.org.nz), SPARK the University of Auckland Entrepreneurship Challenge, Spark International Festival of Media, Arts & Design (spark.net.nz) and many electrical companies…
Apart from the popularity of the new name, the fundamental problem for any brand is that it is owned by the customer: customers give it cachet because they understand what is embodied in the brand. Whittaker’s topped the Readers’ Digest most trusted brands in New Zealand survey for the third year running last month (before the blue plastic issue), followed by Dettol, Toyota, Sony and Panadol. Although the survey included beds, petrol companies and real estate agencies, telecommunications companies did not feature as a category. Telecom, given its coverage and loyal customer base, including commitment by those who remember Spot the dog, would have won by a country mile…
That loyalty might be hard to keep in this era.
New Zealanders are apparently far less brand conscious than the rest of the world, and when something changes with a preferred company, they might start looking around. This is the case with the power companies and is being encouraged by the ‘what’s my number’ campaign - inviting people to check the cost of their power supply and change suppliers if they can. The switching costs are being absorbed by the new company (which, of course, means by existing customers). Last year Nielsen reported that when considering designer goods, a mere 17% of New Zealanders were prepared to pay more for a brand to give them status. This contrasted with over a quarter (26%) of Australians and almost three-quarters (74%) of Chinese consumers.
The Nielsen report also indicated that although over half (55%) of global consumers said that commercials influenced their purchasing decisions, less than a third (32%) of Australians and New Zealanders agreed that they were influenced by advertising. For Australasians, the value proposition was reported to be the most important factor in decision-making.
This is particularly the case in the younger generations (born after the Spot the dog era). Steven Law, agribusiness student at the University of Waikato, says that students want cheap access to telecommunications; businesses want reliability and bang for their buck. He points out that there was considerable negative publicity for the unreliable Telecom XT network when it was first launched (despite the millions invested); there have also been issues with Two Degrees. Adequate rural reception, speed and coverage, is a more important investment than name and brand changes.
At his parent’s urban home, Steven’s telephone (not Telecom) sits on top of the microwave as it is one of two places he can get network coverage...
A Waikato science student, Rebecca Yeates, comments that “Changing their name does not affect me as an existing customer; it does not affect the service I receive and also does nothing to prevent me from changing to a different company if they can provide a better deal for my needs.”
In January this year, Boston Consulting Group (BCG) produced a think paper entitled ‘The Reciprocity Principle: how millennials are changing the face of marketing forever’. In brief, the BCG researchers advised companies shifting investment toward targeted media to engage millennials one-on-one and through small communities. Transformation of marketing strategies was urged across five elements: reach, relevance, reputation, relation and referral.
Students agree that change is required. In general, companies are marketing in the old ways that the students don’t use.
In Brand Premium, author Nigel Hollis (Chief global analyst at Millard Brown) states that if consumers are getting good value from a brand, they will talk about it and become advocates for the brand.
Students concur: they talk to (or text) friends about products. Replacing a device means going to the internet and comparing reliability, service and value for money. As indicated in the Nielsen survey, advertising doesn’t create a need. Using the advertising budget to address costs and response time would have a much greater impact on their view of any company.
Professor of Marketing Kevin Lane Keller, Tuck School of Business at Dartmouth College, has identified six major branding imperatives for the future. The first is to factor the consumer into the branding equation fully and accurately. “The consumers’ perceptions and beliefs have the power to make or break the brand”, he says. “Successful brands create mental structures and knowledge in consumers’ minds that cause them to favour the brand.”
Steven Law observes that telecommunications companies are in the same boat as banks - fighting over customers but having very little differentiation in actual service and prices. In addition, he points out that “even though Telecom is just a brand, there is still a lot of culture and history attached to it; changing it creates an opportunity for other telecommunications companies to poach clients, as has been experienced in the banking world”.
The second imperative is to go beyond product performance and national benefits. “At the heart of a great brand is a great product or service,” says Keller. That is the point made by the Nielsen survey - New Zealanders care more about this aspect than people in most other countries. It is also why Telecom has invested heavily in both products and customer service over the past few years.
The third imperative is to make the whole of the marketing programme greater than the sum of the parts. Social media are increasingly part of the approach.
The remaining imperatives are about understanding where and how you can take a brand (the inclusion of TV and film viewing, for instance), doing the right thing with the brand (corporate social responsibility), and taking a big picture view of branding.
It is, of course, true that Telecom has worked with customers to create the new brand of Spark. It is also true that the company has invested millions of dollars into networks, including the 4G network and the national WiFi network. In addition, the company is offering the new services, such as television and film viewing, which have created a fundamental change in the business. The new name is reflecting that change.
Whether telephone customers actually want to view television and films through their telecommunication provider is a moot point.
Professor Keller concluded that the Global Financial Crisis heightened the need for marketers to be able to understand and justify their marketing investments. He suggested that “doing so requires a set of models, tools and perspectives that fully illuminates how consumers are affected in the short-and long-run by any marketing activities or programmes for a brand.”
So does a name matter? And is the cost of many millions to change worth the money? After all, Juliet suggested that which we call a rose by any other name would smell as sweet.
But being positive, and in attempt to assist Spark to catch fire, go viral and whatever else… in Brand Premium, Nigel Hollis suggests that the biggest return on marketing investment will be from simply highlighting a good product experience and that feeling it evokes. “Unless your customers care too, your brand is not worth anything.”
Bring back Spot the dog; he has a track record of creating happy endings.
Jacqueline Rowarth is Professor of Agribusiness, The University of Waikato.