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Rotman Insights Hub | University of Toronto - Rotman School of Management

Why rebrands fail

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Roger L. Martin

In May 2016 Facebook’s category-leading photo-sharing application, Instagram, abandoned its original icon, a retro camera and replaced it with a flat modernist design that, as the head of design explained, “suggests a camera.”

One needed only the article title to understand the assessment of AdWeek, the marketing industry bible: “Instagram’s New Logo Is a Travesty. Can We Change It Back? Please?” In GQ’s article “Logo Change No One Wanted Just Came to Instagram,” the magazine summarized the change thus: “Instagram spent YEARS building up visual brand equity with its existing logo, training users where to tap, and now instead of iterating on that, it’s flushing it all down the toilet for the homescreen equivalent of a Starburst.”

Facebook was not the first (nor the last) company to experience such a reaction to a rebranding or a relaunch. PepsiCo experienced much the same with its aspartame-free Diet Pepsi — like the infamous New Coke debacle, a botched attempt at reinvention that translated into serious revenue losses and had to be reversed. The interesting question, therefore, is: why do well-performing companies like these routinely succumb to the lure of radical rebranding?

The answer, I believe, is rooted in some serious misperceptions about the nature of competitive advantage. Much of the latest thinking in strategy argues that the fast pace of change in modern business means no competitive advantage is sustainable. In this worldview, companies need to continually update and adapt their business models, strategies, and communications in order to respond in real time to the explosion of choice that ever more sophisticated consumers now face. To keep customers loyal — and to attract new ones — you need to remain relevant and superior.

That’s an edgy thought, to be sure, but a lot of evidence contradicts it. Consider Southwest Airlines, Vanguard, and IKEA, all featured in Michael Porter’s classic 1996 HBR article “What Is Strategy?” as exemplars of long-lived competitive advantage as of twenty-five years ago. The notion that sustainable advantage is impossible notwithstanding, a full quarter century later all these companies are still at the top of their respective industries, pursuing largely unchanged strategies and branding. The Tide or Head & Shoulders brand managers of the past 75 and 60 years, respectively, would certainly be surprised to hear that their greater-than-half-century advantages have not been or are not sustainable. And this brings me to an important truth about customers: the familiar solution usually trumps the perfect one.

Creatures of habit

The conventional wisdom about competitive advantage is that successful companies pick a position, target a set of consumers, and configure activities to serve them better. The goal is to make customers repeat their purchases by matching the value proposition to their needs. By fending off competitors through ever-evolving uniqueness and personalization, the company can achieve sustainable competitive advantage.

An assumption implicit in that definition is that consumers are making deliberate, perhaps even rational, decisions — their reasons for buying products and services may be emotional, but they always result from somewhat conscious logic.

But the idea that purchase decisions arise from conscious choice flies in the face of much research in behavioral psychology. The brain, it turns out, is not so much an analytical machine as a gap-filling machine: it takes noisy, incomplete information from the world and quickly fills in the missing pieces on the basis of past experience. Intuition — thoughts, opinions, and preferences that come to mind quickly and without reflection but are strong enough to act on — is the end product of this process. It’s not just what gets filled in that determines our intuitive judgments. They are heavily influenced by the speed and ease of the filling-in process itself, a phenomenon psychologists call processing fluency.

Processing fluency is itself the product of repeated experience, and it increases exponentially with the number of times we have the experience. Perceiving and identifying an object is improved by prior exposure to that object. As an object is presented repeatedly, the neurons that code features not essential for recognizing the object dampen their responses and the neural network becomes more selective and efficient at object identification. Repeated stimuli have lower perceptual- identification thresholds, require less attention to be noticed, and are faster and more accurately named or read. What’s more, consumers tend to prefer them to new stimuli.

In short, research into the workings of the human brain suggests that the mind loves automaticity more than just about anything else — certainly more than engaging in conscious consideration. Given a choice, it would like to do the same things again and again. If the mind develops a view over time that Tide gets clothes cleaner, and Tide is available and accessible on the store shelf or the web page, the easy, familiar thing to do is to buy Tide yet again.

A driving reason to choose the leading product in the market, therefore, is simply that it is the easiest thing to do. In the supermarket, the mass merchandiser or the drugstore, it will dominate the shelf. In addition, when you encounter the product in question, most likely you have bought it before from that very shelf. Doing so again is the easiest possible action to take. Not only that, but every time you buy another unit of the brand in question, you make it easier to do — for which the mind applauds you.

Buying the biggest, easiest brand creates over time a cycle in which share leadership is continually increased. Each time you select and use a given product or service, its advantage cumulates over the products or services you didn’t use.

The growth of cumulative advantage — absent changes that force conscious reappraisal — is inexorable. Thirty-five years ago, Tide enjoyed a small lead of 33 per cent to 28 per cent over Unilever’s Surf in the lucrative U.S. laundry detergent market. Consumers at the time slowly but surely formed habits that put Tide further ahead of Surf. Every year the habit differential increased, and the share gap widened. In 2008, Unilever exited the business and sold its brands to what was then a private-label detergent manufacturer. Now Tide enjoys a greater than 40 per cent market share, making it the runaway market share leader in the U.S. detergent market. Its largest branded competitor has a share of less than 10 per cent.

A complement to choice

I don’t claim that consumer choice is never conscious, or that the quality of a value proposition is irrelevant. To the contrary: people have to have a reason to buy a product in the first place. And sometimes a new technology or a new regulation enables a company to demand consideration of a product — by radically lowering the price, offering new features, or providing a wholly new solution to a customer need.

Robust where-to-play and how-to-win choices, therefore, are still essential to strategy. Without a value proposition superior to those of competitors that are attempting to appeal to the same customers, a company has nothing to build on.

How, then, might a company sustain, enhance, and extend its competitive advantage by building a protective layer of cumulative advantage? Here are four basic rules to follow.

Become popular early

Marketers have long understood the importance of winning early. Launched specifically to serve the fast-growing automatic washing machine market, Tide is one of P&G’s most revered, successful, and profitable brands. When it was introduced, in 1946, it immediately had the heaviest advertising weight in the category. P&G also made sure that no automatic washing machine was sold in America without a free box of Tide to get consumers’ habit started. Tide quickly won the early popularity contest and has never looked back.

Design for habit

As we’ve seen, the best outcome is that your offering becomes the object of an automatic response. So, design for that—don’t leave the outcome entirely to chance. To begin with, you must take care to keep consistent those elements of the product design that can be seen from a distance, such as through distinctive colours — think Tide’s bright orange — and shapes, so that buyers can find your product quickly. Find ways to make products fit in people’s environments to encourage use, and look for changes that will reinforce habits and encourage repurchase.

Innovate inside the brand

As already noted, companies engage in initiatives to “relaunch,” “repackage” or “replatform” at some peril — such efforts can require customers to break their habits. Changes in technology or other features should ideally be introduced in a manner that allows the new version of a product or service to take on cumulative advantage from the old.

When its scientists figured out how to incorporate bleach into detergent, the product was called Tide plus Bleach. The breakthrough cold-cleaning technology appeared in Tide Coldwater, and the revolutionary three-in-one pod form was launched as Tide Pods. The branding could not have been simpler or clearer: this is your beloved Tide, with bleach added, for cold water, in pod form. These comfort- and familiarity-laden changes reinforced rather than diminished the brand’s cumulative advantage.

Keep communication simple

Marketers typically assume that they have the rapt attention of the viewers of their messages. They don’t. Remember: the mind is lazy. It doesn’t want to ramp up attention to absorb messages with high levels of complexity, even if those win awards at advertising festivals. Keep the message simple and always reinforce the most familiar aspects of your offering.

Many strategists seem convinced that sustainable advantage can be delivered only by constantly making a company’s value proposition the conscious consumer’s rational or emotional first choice. They have forgotten, or never understood, the dominance of the subconscious mind in decision-making. Products and services that are easy to access and that reinforce comfortable buying habits will over time trump innovative but unfamiliar alternatives that may be harder to find and require forming new habits. So, beware of falling into the trap of constantly updating your value proposition and branding.

This excerpt has been condensed from Roger Martin’s new book A New Way to Think, available May 3, 2022.

Roger Martin served as the institute director of the Martin Prosperity Institute and the Michael Lee-Chin Family Institute for Corporate Citizenship at the Rotman School of Management and the premier’s chair in productivity & competitiveness. From 1998 to 2013, he served as dean of the Rotman School of Management.