Why Federated Is Right and Wanamaker Was Wrong
Financial analysts will argue that a holding company such as Federated Department Stores doesn’t need a corporate brand, that the only thing that counts are the financial results. I suggest that they wake up and face reality.
In proposing to change its name to Macy’s Inc., Federated is doing what it should have done long ago – treating its corporate brand like a business asset. As a corporate brand, “Federated Department Stores” is a laggard. Of the 36 retail corporate brands we at CoreBrand track in the Corporate Branding Index, Federated is at the bottom in terms of familiarity, brand power, and brand equity. “Macy’s” will likely be near the top, which means that the name change will prove to be a very smart move.
Brand equity for Federated (a calculation of how much value is contributed to the market cap based on the corporate brand) is only 2.28%. The category average is 11.36%, and the best in the retail category is 19.32%.
With this move, Federated seems to be following in the footsteps of Dayton Hudson Corp.’s highly successful name change to Target Corp. back in 2000. The company created energy and excitement with its new corporate brand, but most important, it created tremendous value by treating the corporate brand as an asset.
Compare the brand-equity scores during a three-year period. While the retail category grew modestly, Target’s corporate brand equity grew by 2.47%, or an improvement of $3.48 billion of market cap directly relating to the corporate brand! Target is a company that lives and breathes its brand, and is reaping the rewards of a consistent, highly focused strategy. In contrast, during the past three years, Federated has lost ground in the retail category.
John Wanamaker is famous for inventing the modern department store in the late 19th century and for a statement that has allowed many retailers (and many businesses in just about every other industry as well) to lose sight of the bigger prize in building brands: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” This statement alone has done a tremendous amount to derail common-sense brand-equity building at the corporate level–and frankly, Mr. Wanamaker was wrong!
Brand building works both at the product level (in this case generating revenue for the stores themselves) and at the corporate level. Each half contributes to the success of the other. Of course, there must be some consciousness and respect for what the corporate brand is capable of contributing to the value of the company.
Getting it right
In the case of a name change of a retail corporate brand, the major effort is getting your corporate name change right. Here are the keys to success in a major name change:
• Be decisive. Do it and don’t look back.
• Develop a clear strategy, and announce it to the world.
• Let your employees know why you are making this change. Tell them at least six times and in six different ways why you are doing it.
• Share your vision with Wall Street.
• Spend enough on the change to make it look as if you mean it.
• Be patient. It generally takes at least three years to reap the dividends for this move.
Does the financial performance count? Absolutely, but so does intelligent strategy.
James R. Gregory is founder/CEO of CoreBrand, a Stamford, CT-based branding consultancy, and the author of “The Best of Branding: Best Practices in Corporate Branding.”
Other articles by James R. Gregory:
The Red Umbrella: a Case of Stolen Identity
