Rebranding failures: BT Cellnet to O2

Undoing the brand

In September 2001, UK mobile phone operator BT Cellnet announced it was getting rid of its brand name in favour of a new international identity.

The decision followed a continuing drop in its market share of call revenues. Furthermore, BT Cellnet’s arch-rival Orange (often admired for its brand name) increased its revenues and knocked BT Cellnet into third place, behind both Orange and Vodafone. Cellnet’s first parent company, British Telecom, had sold off its mobile operation and the new owners felt no reason to stick with the struggling identity.

When the announcement to scrap the brand name was made, analysts agreed it might be the right move. ‘Cellnet had a head start being part of BT but it has somewhat sat on its laurels,’ said Louisa Greenacre, telecoms analyst at ING Barings. ‘Orange has been more aggressive, while Cellnet has not got its branding strategy right, particularly as the brand Genie, BT’s mobile phone Internet portal, is slightly distracting.’ She added that BT Cellnet’s strategy, similar to many mobile operators, had been to grow a customer base as quickly as possible, but brand loyalty would be the key to increasing average revenues from that user base.

The new brand name was O2, the chemical symbol for Oxygen. ‘We have chosen a name that is modern and universal,’ said Peter Erskine, chief executive of the mobile business. The new name spelt the end for the variety of brands carried by the BT Wireless Group. These included Cellnet in the UK, VIAG Interkom in Germany, Telfort in the Netherlands and Digifone in the Republic of Ireland. The Genie mobile Internet portal was also to be relabelled.

So why O2? ‘Oxygen is the key thing to life and you don’t have to teach people to spell it,’ explained Peter Erskine. ‘There were hundreds of names to start with and O2 leapt off the pages fairly early. It’s a universal term. We wanted something that was easy, clean and fresh.’

The branding exercise was viewed as all-important, both inside and outside the company. ‘Brands are now being measured in a way they haven’t been measured before,’ one analyst told the Telegraph. ‘They’re not seen as a nice accessory, they’re seen as a valued part of the business.’ BT Cellnet was a confusing brand, complicated by BT’s other UK mobile brand identity, Genie. When British Telecom sold off its mobile operation, the new owners felt the name-change would help to forge a clearer, more relevant identity. But did it?

The early signs are that it didn’t. Indeed, despite a massive marketing campaign including sponsorship of the TV show Big Brother, many are unfamiliar with the name. According to a poll conducted by Continental Research for their Summer 2002 Mobile Report, almost eight in ten BT Cellnet subscribers did not realize the service had been renamed O2. ‘The decision of the new owner to abandon the brand has left customers – many of whom are older executives who were the first to buy mobiles – unimpressed,’ reported the Guardian. ‘This does suggest there has been some difficulty communicating the change of name to current users of the O2 network,’ agreed Colin Shaddick, the director of Continental Research.

Lessons from BT Cellnet

• Don’t overlap brand identities. When BT set up different mobile businesses with different names, such as Cellnet and Genie, it created consumer confusion.
• Realize that brand names can’t be ‘undone’ overnight. Despite investing millions into the name change, O2 remains unfamiliar to many mobile users.

Rebranding failures: Payless Drug Store to Rite Aid

In 1998, Payless Drug Store, a regional chain of chemists operating across western USA, changed its name to Rite Aid Corporation. The name change required several million dollars spent on advertising just to gain a level of local awareness equivalent to the previous brand name. The reason for the change was the acquisition of the Payless Drug Store by the Rite Aid Corporation, which owned its own brand of chemists throughout the United States. They therefore thought the re-brand was a logical step. But what happened?

Soon after the Rite Aid acquisition and brand conversion most of the former Payless stores started to lose 10 per cent of sales every month. Eventually Rite Aid sold 38 of the stores in California, cut down its workforce, and realigned its West Coast distribution centre.

Rebranding failures: Windscale to Sellafield

Same identity, different name

At the risk of understating the case, nuclear energy has always had something of an image problem. When incidents happen at nuclear plants this ‘problem’ becomes a nightmare.

For instance, when massive amounts of radioactive material were releasedfrom the UK’s Windscale atomic works in 1957, following a serious fire, the consequences were disastrous. The local community in Cumbria were understandably terrified about the health implications of uncontained radiation.

Rather than close the plant down, the government believed the best way to put distance between the disaster and the nuclear plant as a whole was to change the name, from Windscale to Sellafield. However, everybody knew that the nuclear facility was essentially the same, and so all the negative associations were simply transferred to the new name. The name-change certainly didn’t stop the rise in health problems in the area as this 1999 article from a local Cumbria newspaper testifies:

While animals are still being irradiated in laboratories all over the country to ‘study’ the effects, Dr Martin Gardner and colleagues of the Medical Research Council in Southampton have learned that the children of fathers who worked at the Sellafield nuclear-reprocessing plant were six times more likely to be afflicted by leukaemia than neighbours whose fathers had not worked at the plant. Sellafield, formerly called Windscale, has experienced so many episodes of radioactive leakage that the government changed the name to disassociate the plant from its history. There is an unusually high incidence of childhood leukaemia in the area. Dr Gardner’s study seems to indicate that it is caused by damaged sperm, which leaves the father intact but visits the government’s sins upon unborn children.

The new epithet therefore failed to generate any increase in goodwill towards the plant. Julian Gorham, creative head of the Brand Naming Company, claims that name changes are pointless without meaningful organizational changes. ‘Windscale, Sellafield, it’s the same thing isn’t it? Nothing has changed.’

Lessons from Windscale/Sellafield

• Change needs to be fundamental. A name change won’t fool anybody if the procedures remain unchanged.
• You can’t hide your history. Everybody in Cumbria knew about the 1957 incident, regardless of the new name, as its consequences were still felt for many years.
• Over the following pages are even more of the most notable rebranding misses.

Rebranding failures: British Airways

When British Airways went through an expensive rebranding exercise in 1996, it couldn’t have picked a worse time. The media contrasted the costly makeover with the ‘cost-saving’ redundancies announced shortly afterwards.

There was also criticism about the nature of the new identity. The airline had abandoned the Union Jack colours on the tail-fin, and replaced them with a series of different images representing a more international identity.

Many saw this move as unpatriotic, and Richard Branson, boss of the company’s arch-rival Virgin Atlantic, was quick to rub salt in the wounds by painting Union Jacks on its aircraft and using British Airways’ former ‘Fly the Flag’ slogan. It wasn’t long before British Airways scrapped the new and expensive tail-fin designs. Ironically, US customers and partners had stated to complain that they wanted Britain’s flagship airline to look more British.

Rebranding failures: MicroPro

Remember MicroPro? In the 1980s, and even at the beginning of the 1990s, MicroPro made leading word processing software product, WordStar. The program was even heralded as ‘one of the greatest single software efforts in the history of computing’ by the widely respected technology expert, John C Dvorak.

Because of the popularity of the WordStar product, MicroPro rebranded themselves WordStar International. This move proved to be a major mistake.

‘The new brand identity proved immediately self-limiting,’ explains advertising copywriter John Kuraoka, in a white paper on branding. ‘As WordStar International, the company was poorly positioned to keep up with changes in the computer industry – such as the rise of integrated software bundles that were the predecessors to today’s Microsoft Office. Note that Microsoft never became ‘Windows International’.’ The WordStar name had quickly become an albatross around the company’s neck. Between 1988 and 1993 the company struggled to find new ways to continue selling variations of the WordStar product. The rise of competitors such as Word Perfect and, later, Microsoft Word, led to WordStar’s corresponding and rapid decline.

Rebranding failures: ONdigital to ITV Digital

How the ‘beautiful dream’ went sour

In 1998, a new UK digital TV channel was introduced which aimed to take on Rupert Murdoch’s BSkyB and convert millions of middle-England viewers to pay-television with a new platform accessible via set-top boxes – digital terrestrial television. In 2002, however, it went out of business.

‘We thought we could take on Sky, through its Achilles heel: it was the least trusted by the audience,’ says Marc Sands, the first director of brand marketing for ONdigital. ‘We would differentiate ourselves by our behaviour, clarity, and transparency of prices. That was the beautiful dream. Plug and play.’

However, it soon became clear that it would be difficult to deliver the special software and set-top boxes, and cope with patchy coverage across the country. ‘By summer 1999, I saw that the problems were terminal,’ says Sands. ‘For those for whom it didn’t work, when the pictures froze, the promise was shattered. We never got past first base.’

Then the company’s chief rival, BSkyB, raised the pressure by paying retailers money to recommend its system. BSkyB’s decision to give away free set-top boxes meant ONdigital had little choice but to follow suit, a move that cost an extra £100 million a year. ‘I think the decision by ONdigital to go head-to-head with BSkyB was probably a mistake,’ said Chris Smith, former secretary of state for Culture, Media and Sport (who oversaw the government’s digital plans until June 2001), in an interview with the Guardian. ‘They should have aimed for a different part of the market.’ In 2001, ONdigital was rebranded ITV Digital, linking it to an established and trusted brand name (ITV remains the most popular terrestrial channel in the UK). However, the same problem remained. Viewers needed to buy completely new equipment, which didn’t require a dish. In other words, it was a completely new platform.

The technical problems were also an issue. The software used in the settop boxes didn’t have enough memory and crashed frequently. As former customer Bridget Furst explains:

I signed up for ONdigital in November 1999 as we live in a conservation area and were told we couldn’t have a dish. But all the technical breakdowns drove us dotty. The picture would freeze without warning, three or four times a week. You had to phone for advice, give your security password, queue for technical assistance, and then you needed 15 fingers to put things right. I was told that their software couldn’t cope with the BBC channels on the platform.

Graham Simcocks, the company’s director until 2001, realizes that the technological issues hindered development. ‘The business failed to take seriously enough the whole range of technological issues: why the picture kept disappearing, the need to boost its power. That was the biggest reason for customers being put off. Then there were homes that were supposed to be within a reception area but still had problems,’ he says.

Another factor was the lack of incentive to buy ITV Digital. Although ITV’s major networks Carlton and Granada were behind the company, they didn’t provide exclusive access to their major programmes. ‘I think Carlton and Granada didn’t support it enough,’ says former ITV Digital sales director Matthew Seaman. ‘They should have given it more exclusive programmes.

First runs of Coronation Street. Why not? Pay-television isn’t something that just happens. It needed a huge, bold move, equivalent to Sky’s Premier League. But the shareholders never felt they could risk the ITV crown jewels.’

Few could understand exactly the point of the network. At first, it had clearly tried to differentiate itself from BSkyB. Stephen Grabiner, ITV Digital’s first chief executive, once referred to Murdoch’s multi-channel vision for digital television as of interest only to ‘sad people who live in lofts.’

However, ITV Digital later mimicked BSkyB’s football-centric strategy, bypaying £315 million for the rights to televise matches from the Nationwide Football League. They also ended up buying movies from the satellite firm.

‘The inherent contradictions from the top down confused viewers,’ reckoned The Observer newspaper. The Observer also pointed the finger at Charles Allen and Michael Green, the chairmen of the platform’s two shareholders, Granada and Carlton, and the other management figures:

Many in the City expect that, even if Allen and Green manage to hang on to their positions, allowing them to make a more leisurely exit later in the year, some of their lieutenants will soon have to fall on their swords. Question marks hang over the head of Granada chief executive Steve Morrison, who, at the height of negotiations with the Football League, opted to take a holiday in New Zealand. And it is hard to see how Stuart Prebble, a former journalist who, despite having no experience in the pay TV arena, rose to become chief executive of ITV and ITV Digital, can stay in the ITV fold.
But alongside managerial failings, some things were beyond the company’s control. For instance, despite assurances from the Independent Television Commission (ITC) that the power of ITV Digital’s broadcasting signal would be increased, nothing happened. Coverage was reduced to include only about half of the UK. Also, the ITC’s decision to force Sky out of the original consortium – over ‘fears of a Murdoch dominated media’ according to The Observer – meant that none of the companies behind the platform had solid expertise within the pay-TV arena.

‘The ITC kept Sky out. If Sky had been allowed to stay in, ITV Digital would have got to three million subscribers by now,’ said Dermont Nolan of media consultancy TBS in April 2002. That some month ITV Digital met its demise and called in the administrators from Deloitte and Touche.

Although there were over 100 expressions of interest in the platform’s assets most of the interest was to do with the brand’s mascot, the ITV Digital monkey which became something of a celebrity in a series of adverts featuring comedian Johnny Vegas. Unfortunately, the monkey’s popularity didn’t rub off on the platform it was promoting.

Lessons from ONdigital/ITV Digital

• Be available. Technological problems meant that the platform wasn’t available in many parts of the UK.
• Be reliable. These same problems led to a reputation for unreliability.
• Have a strong incentive. ITV Digital didn’t simply require people to switch channels. They needed to go out and get completely new technology to place on top of their TVs. To do that, they needed a very strong incentive – the ability to watch something they loved, which they couldn’t find elsewhere.
• Deliver on your promises. ‘ITV Digital’s promises ran ahead of its ability to deliver, it was a totally new system,’ says Marc Sands, the platform’s first director of brand marketing.
• Don’t tarnish related brands. ‘The greatest mistake was to rebrand it ITV Digital, dragging ITV, one of the strongest consumer brands, into disrepute,’ says Sands.
• Be realistic. ‘I know what it costs to set up digital transmitters,’ says Gerald H David, chairman of Aerial Facilities, experts in digital radio engineering.
• ‘ITV Digital’s demise is all part of a pretty unrealistic plan. The ITC put the cart before the horse when it licensed it.’
• Understand the competition. ‘Carlton and Granada didn’t anticipate such a competitive environment,’ says John Egan, director of operations and strategy for the platform until 1999.

Rebranding failures: Tommy Hilfiger

The power of the logo

Tommy Hilfiger is one of the world’s best-loved designer clothing brands. During the 1990s Tommy Hilfiger moved from being a small, niche brand targeting upper class US consumers to becoming a global powerhouse with broad youth appeal. But then, in 2000, the brand was suddenly in trouble. From a high of US $40 per share in May 1999, Tommy Hilfiger’s share price fell to US $22.62 on New Year’s Day 2000, and was cut in half again by the end of that year.

Sales were slowing and, most tellingly, flagship stores in London and Beverly Hills closed down. Various runway shows at fashion events worldwide were also cancelled.

So what was going wrong? According to Tommy Hilfiger himself, the explanation is to be found in his decision to be adventurous with the brand.

He said in a 2001 interview with New York magazine:

At one point, I told my people, ‘We have to be the first with trends’, so we ran out and tried to do the coolest, most advanced clothes. We didn’t just do denim embroidery. We jewelled it. We studded it. We really pushed the envelope because we thought our customer would respond.

But the customer did not respond in a big way, and our business last year – men’s, women’s, junior’s – suffered as a result.

Part of this ‘pushing the envelope’ strategy involved reworking the brand’s famous imagery. Tommy Hilfiger, more than any other brand in the fashion industry, is a brand based on a logo. Indeed, some of the company’s most successful products have been T-shirts with the red-white-and-blue logo emblazoned across them. Everything about the logo, from the primary colours to the capital letters shouting TOMMY HILFIGER, suggested a bold, brash and 100 per cent US identity. When you wore a Tommy Hilfiger T-shirt everybody knew exactly what you were wearing, so long as they could read.

Of course, these logo-centric US brand values had been present in other fashion labels – most obviously Calvin Klein and Ralph Lauren – but Tommy Hilfiger had taken it a step further. And by 1999, Hilfiger himself was starting to feel it may have been a step too far. ‘When business plateaued in 1999,’ he explained, ‘we thought the customer didn’t want the Tommy logo anymore. So we took it off a lot of stuff. We made it tiny. We became very insecure about being a red-white-and-blue logo brand. We thought we had to be much chic-er, more in line with the Euro houses like Gucci and Prada.’ In other words, Tommy Hilfiger abandoned the values that had built the brand. Of course, the brand had in many senses become credible in high fashion circles but this credibility arrived, in part at least, by the brand’s urban appeal. In No Logo (written before Tommy Hilfiger’s dip in fortunes).

Naomi Klein explored the twin identity of the Tommy brand: ‘Tommy Hilfiger, even more than Nike or Adidas, has turned the harnessing of ghetto cool into a mass-marketing science. Hilfiger forged a formula that has since been imitated by Polo, Nautica, Munsingwear and several other clothing companies looking for a short cut to making it at the suburban mall with innercity attitude.’

However, this twin identity (suburbia meets the inner-city) happened initially by accident. In the beginning, Tommy Hilfiger produced clothes for the ‘preppy’ market, falling somewhere between the Gap and Ralph Lauren.

Pretty soon though, the hip-hop community embraced the label, and the Hilfiger logo could be seen popping up on every other rap video. It was only later that Hilfiger deliberately designed clothes for this market. In effect, this meant accentuating what was already there – making the prominent logo even more prominent, and the baggy T-shirts even baggier.

This strategy proved successful because the company was only exaggerating a formula that was already there. In 1999 though, the formula was abandoned completely, and, because of this, it strayed from the original preppy style that had made the brand so strong originally. For instance, Hilfiger launched a ‘Red Label’ sub-brand aimed at the very top of the market. This logoless range included such garments as US $7,000 patchwork, python-skin trousers. Clearly these items were out of the reach of the average Tommy Hilfiger customer. Another bad move was the decision to place stores in locations such as London’s Bond Street and Beverly Hills’ Rodeo Drive. ‘The London flagship store wasn’t open for a year when we realised we had made a mistake,’ he said in the New York magazine interview. ‘And the average age on Rodeo Drive is probably 50 years old. My customers are much younger than that. We thought all the cool people in LA come to Rodeo. But they don’t.’

Since 2001 though, Tommy Hilfiger has been learning from his mistakes and going back to basics. ‘As a result of learning from our errors, we went back to our roots: classics with a twist. We’re about colour, we’re about preppy, we’re about classic, we’re about America!’ And as a result of this turnaround, customers and investors alike are again comfortable with the Tommy Hilfiger brand. ‘It will never again be the hot, sexy, overly talked about, flashy, zippy, fast-growing company it was, but it will be a damn nice company with lots of cash,’ observed one Wall Street analyst at the time of the turnaround. ‘What you’ve got now is a company that went from an Aplus to an F-minus. And now it’s going back to a B. And it’s a hell of a business as a B.’

Lessons from Tommy Hilfiger

• Don’t deviate from your formula. Known as the brand which produces ‘classic with a twist’, Hilfiger concentrated too much on the ‘twist’ and not enough on the ‘classic’.
• Don’t compete with irrelevant rivals. Tommy Hilfiger attempting to compete with successful European high fashion brands such as Gucci and Prada on their own terms was a mistake which even Hilfiger himself has acknowledged.
• Don’t over-extend the brand. During its bad patch, Tommy Hilfiger moved into a lot of new product categories for which it wasn’t suited.
• Don’t be scared of your logo. The logo is what made Tommy Hilfiger the brand it is today. In fact, the Tommy Hilfiger brand is pure logo. When the logo disappeared or was toned down, the brand ran into trouble.

Rebranding failures: Consignia

A post office by any other name

When the UK state-owned Post Office Group decided to change its brand identity, a new name was the first on the shopping list. The reason for the brand makeover was partly to do with the fact that the 300-year-old Post Office Group was no longer simply a mail-only organization. It had logistics and customer call centre operations, and was planning a number of acquisitions abroad. There was also growing public confusion about what the purpose of the organization’s three arms – post offices, Parcel Force, Royal Mail – actually was.

‘We were researching hard into what this organization called the Post Office was facing,’ explained Keith Wells to BBC Online. Wells was from Dragon Brands, the brand consultancy that helped to repackage the organization.

‘What we needed was something that could help pull all the bits together.’

The consultancy considered the name of each division but none was appropriate. The name ‘Post Office’ was dismissed as ‘too generic’. ‘Parcel Force’ was, again, inappropriate. So what about ‘Royal Mail?’ ‘That has problems when operating in countries which have their own royal family, or have chopped the heads off their royals,’ said Wells. So Dragon Brands set about creating a new umbrella term for the whole organization. It wanted to come up with something non-specific, something which would work equally well throughout Europe, not just in the UK, and most of all something which didn’t tie the Post Office Group down to mail.

There is a wise logic behind such thinking. After all, many companies have come unstuck as time moves on and their name is no longer relevant. For instance, Carphone Warehouse may have once imagined a world full of consumers waiting to upgrade their carphones, but the reality is that now most people wouldn’t recognize a carphone if it hit them over the head. And other brands have managed to create very successful identities with brand names that have no direct relevance to their products, or anyone else’s products for that matter. This is especially true on the Internet. While selfdescriptive brands such as Letsbuyit.com and Pets.com flopped, vague and mysterious brand names such as Amazon, Google and Yahoo! have worked exceptionally well. Indeed, many of the largest brands in the world follow this model. To take the most obvious example, no-one who spends their money via Richard Branson’s company expects to take home a real virgin, any more than people buying books at Amazon expect to be transported to a tropical rainforest. These names are about evocation. They are about the identity of the brand, not the product.

Before the Post Office, many other British institutions had also tried to bring themselves into the new millennium. British Steel had become ‘Corus’ following its merger with Koninklijke Hoogovens. ‘Centrica’ was a former arm of British Gas. ‘Thus’ was the new name given to the telecoms division of Scottish Power. The list goes on and on.

So what was the name given to the Post Office? On 9 January 2002, the group’s chief executive, John Roberts, stood outside his organization’s headquarters and declared that the name was Consignia. This name, he added, was ‘modern, meaningful and entirely appropriate’ to the rapidly evolving organization.

Dragon Brand’s Keith Wells was equally happy with Consignia. ‘It’s got consign in it. It’s got a link with insignia, so there is this kind of royalty-ish thing in the back of one’s mind,’ he explained to the BBC. ‘And there’s this lovely dictionary definition of consign which is “to entrust to the care of.”

That goes right back to sustaining trust, which was very, very important.’ In addition, the name change had been approved by the controversial government minister Stephen Byers, who was at that time the trade secretary.

The reaction from the media and the general public was considerably less sympathetic. Some thought it sounded like a new brand of aftershave or deodorant. Others thought it was the name of an electricity company. The BBC’s Web site referred to ‘the most notorious ever Post Office robbery – that of the name itself.’ The Web site also asked the British public to e-mail their opinions of the name. Their responses were almost unanimously critical of the re-brand.

‘Consignia doesn’t sound like the national institution that the Royal Mail does. Instead, it reminds me of that brand of anti-perspirant, called Insignia,’ wrote one.

‘It’s a poor excuse to say that Royal Mail could be confusing when it takes a paragraph to explain what Consignia means,’ wrote another. One respondent e-mailed in with his tongue firmly in cheek saying that ‘given the current crisis within the Post Office, Consignia Plc seems like an excellent name. It is an anagram of Panic Closing.’

Soon it became clear that the name change was not having a positive effect. Although the Post Office had shifted to become a plc, the public still felt it belonged to them. If they didn’t like the new name, they therefore felt it was their right to be angry.

As the Post Office’s corporate performance started to falter, the name was blamed even more. ‘The name got muddied with the comments that business is doing appallingly – this idea that nothing had been the same since the name change. It’s a soft target,’ said Wells.

Soft target or not, May 2002 saw a U-turn as the new Consignia chairman Allan Leighton confirmed the name was to go – ‘probably in less than two years.’ He also admitted that he hated the name. ‘There’s not really a commercial reason to do it, but there’s a credibility reason to do it,’ he told BBC TV’s Breakfast with Frost programme. He said the name change was ‘unfortunate’ as it had coincided with a period of underperformance by the company (it lost over one million pounds a day during one month in 2001).

However, the news was lost on some people, as the Consignia brand had failed to become a household name. ‘I didn’t know that the Post Office wasn’t called the Post Office,’ one member of the public told a radio news interviewer at the time of the announcement. ‘Everyone I know calls it the Post Office.’

Lessons from Consignia

• Don’t change for the sake of change. The public perception was that the whole rebranding exercise was pointless. This impression was confirmed by a lack of advertising. ‘We thought what would be the point of advertising if all you would be saying is this name change is happening which is not going to affect you?’ justifies Dragon Brands’ Keith Wells.
• Realize that business realities have an impact. The new brand suffered due to the fact it coincided with a poor period of corporate performance.