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July 12, 2004 - Strategy Magazine
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Marketing after a merger
The goal of delivering a better product should dictate what brand is used - and how

by Bernadette Johnson
page 1

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.

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