Varvara Grankova

Many companies are into rebranding these days. But is it worth spending money on changing your image if the result is not guaranteed?

For 25 years, any budget traveller wanting to explore the birthplace of Robert Burns could stay in a caravan at Turnberry Holiday Park on Scotland’s rugged west coast. But this year, the park’s latest owners found that sales were not growing as quickly as they had hoped when they bought the business in 2012. They surveyed more than 1,000 people and came to a depressing conclusion: almost a third of potential customers were unlikely to visit because they believed Turnberry was somehow connected to the nearby Turnberry Golf Club, which was bought by Donald Trump in 2014. “The negative influence of Donald” means the name may have to be changed, unpleasant as it may be, Andrew Howe, chief executive of the park’s owner, said last week. If it does, it would be a rare example of a company fully embracing the need to rebrand.

Many companies think about how to improve their business, but it is the image change that most often puts them in a dead end. After numerous attempts at rebranding, business owners usually understand that the only thing that rebranding definitely guarantees is spending money, sometimes exorbitant amounts.

When BP announced a new identity and unveiled its new sunflower logo nearly 20 years ago, the FT dispassionately reported that the oil company had “spent $7 million on research and development of the new logo and plans to increase advertising budgets over the next few quarters by about $25 million a quarter to support the new brand.”

Rostelecom has updated its brand

Technologies / Telecommunications

The amount Dunkin' Donuts paid for its rebranding may also be shocking. In September of this year, the company announced that it would henceforth be called simply Dunkin'. At the same time, Weight Watchers, wanting to be associated with the trendy healthy lifestyle movement, changed its name to WW - these two letters take twice as long to pronounce in English as the old name, and are also widely used as an abbreviation for World War.

But is there any evidence that the money spent on rebranding always pays off? The evidence is mixed. Researchers have spent decades studying how rebranding affects a company’s performance, and they’ve all come to the same conclusion: rebranding doesn’t matter. Research suggests that rebranding can have a positive effect on a company’s stock price at the time it’s announced. It’s hard to find any connection over the long term. Only insurance companies fare a little better – one US study found a link between changing a company’s name and higher premiums.

But a larger study this year in the U.S. looked at more than 200 name changes by companies in 101 industries. The results are sobering. The researchers found a link between rebranding announcements and an average 2.46% increase in stock prices. But in more than 40% of cases, the announcements were followed by “an abnormal drop in returns.”

In other words, rebranding may or may not help improve the bottom line. The age of the brand probably matters. Researchers warn that managers should be especially careful when it comes to ditching a long-standing name or logo. If rebranders take the risks into account, they might at least start choosing new names that don’t make them laugh. Unfortunately, many don’t even do that. You’d think few would name a company that sounds like a sexually transmitted disease, but that’s exactly what NBC’s Sci Fi did a few years ago. Syfy is Polish slang for syphilis.

There are companies that use terrible word formations as their names that are neither a word nor a phrase, such as Refinitiv, the new name for the recently spun-off financial data and risk unit of Thomson Reuters. Some come up with names so bad that they are forced to go back to their old name in disgrace. A few weeks ago, tronc Inc., the publisher of the Chicago Tribune, announced that it would ditch its much-mocked new name and go back to what it had been called before: Tribune Publishing.

This is far from the first example of such a sharp change in strategy. And it is unlikely to be the last. Meanwhile, companies that keep simple, well-thought-out and easy-to-read names always enjoy customer support.

Translated by Nadezhda Belichenko

Why you shouldn't get carried away with rebranding