Brand elimination sits well with consumers, if handled with care
 

July 28, 2009

Companies frequently eliminate brands. Kodak recently discontinued Kodachrome. Procter & Gamble sold off Folgers, Jif, Noxzema, Crisco and Comet. Shell Oil shuttered Texaco. GE may shed its major appliance division. GM is closing Saturn.

The firm-side strategic benefits of brand elimination have been exhaustively documented. But what about consumer reaction? A new study co-authored by Shailendra Pratap Jain, an associate professor of marketing at the University of Washington Foster School of Business, sheds the first empirical light on consumer response to brand elimination.

Three perspectives on brand elimination
An opening foundational study established that consumers view the elimination of a weak brand—defined as lacking both in image and profitability—as good for a company. “Consumers reason that getting rid of a losing brand will free up resources, and potentially help the firm become stronger,” Jain said.

A second study, concerning the communication of a brand elimination decision, found that firms are better off publicly explaining their rationale for eliminating a strong brand. However, the reasons for discarding a weak brand are better left unsaid. “When a strong brand is being eliminated, we found that it’s better to tell the consumers why,” Jain said. “When a weak brand is eliminated, it’s better to let the consumers speculate. Offering an explanation may actually hurt a company’s reputation.”

A final study, considering the response of loyal versus non-loyal consumers, suggested that shedding a weak brand is seen as positive by both. But eliminate a strong brand, and you’ll have some trouble with loyal customers. “In other words,” Jain explained, “As a consumer, I’m loyal to this brand, and it’s a strong brand in my mind—so what’s going on with this company?”

Know your own brand’s strength
According to Jain, understanding the repercussions of brand elimination is vital because it’s such a common practice. According to studies, only 20 percent of products launched survive five years on the market. Companies even sometimes divest themselves of strong brands due to a lack of strategic fit or advancing technology.

“One of the lessons of this study is: you must have a very clear handle on your brand’s strength,” Jain said. “It’s not the firm’s perception of the brand that matters; it’s the consumer’s perception that matters. So if you’re GM eliminating a brand like Saturn that people perceive as weak, it’s probably going to be viewed as a positive move. But if you’re GE eliminating a brand that most of the world thinks is strong and you don’t explain why, you might have a PR problem with loyal customers who will not take this news well.”

Jain’s paper, “Consumer Responses to Brand Elimination: An Attributional Perspective,” with Huifang Mao of the University of Central Florida, and Xueming Luo of the University of Texas at Arlington, is published in the July 2009 Journal of Consumer Psychology.

In June, Jain received the 2009 PACCAR Award for Excellence in Teaching, the highest teaching honor at the UW Foster School of Business.