Yahoo and AOL to avoid classic psychological blunder


By Jake McKenzie is the CEO of Intermark Group.  

Recently, Verizon announced its newest acquisition, Yahoo, would be merged into its existing AOL unit. At first, Verizon seemed to indicate that the combined entity would go by neither famous name. Instead, Verizon teased a new name, “Oath,” for the combined entity. The initial reaction drew was a lot of raised eyebrows from savvy marketers before Verizon clarified that it would be keeping the Yahoo brand for consumers. It’s a good move, as name changes rarely go well.

 

The move to rename a company is not uncommon. Tribune Publishing recently changed its name to “tronc, inc.” Gannett changed the name of its digital media unit to TEGNA. Mattress King, a regional bedding retailer, morphed into “Sleep Outfitters.”

 

I’m certain that changing the name of the company is done with the best of intentions. The professed rationale always sounds strategic — “heading in a new direction for the future” or “to better describe what we do.” To an executive team, this likely sounds like a great rationale for a name change.

 

However, this move illustrates not only a poor understanding of how the brain and memory function, but also of the marketing implications. In brief, our brain really dislikes changing anything stored in long-term memory. Simply adding something new in long-term memory is already a cognitive chore. Changing an established memory, like a brand name, is dramatically more difficult. Once we think we know something, our brains will stop trying to question that knowledge and become resistant to changing it. The reason we do this is the cognitive resources it takes to affect long-term memory are huge.

 

Because we don’t like changing long-term memory, initiating a change requires tremendous marketing resources and budget. Reprogramming memories takes significant time and repetition, which virtually eliminates the absorption of additional information, such as branding or retail offers. Precious marketing dollars are devoted to changing a company’s name, and resources for growth and sales are sacrificed.

 

Compounding what is typically a poor move is the fact that the decision is often based on a poor understanding of what a company name means to consumers. Consumers don’t store the name literally (declarative memory). Instead, they store it semantically, with the brand meaning.  

 

For instance, when you think about Google, you don’t think, “What does that have to do with a number containing a million zeros?” Instead, most people simply think, “great search engine.” We store the brand identity, not the literal words. Thus, changing the name of a company to better describe what it does doesn’t really accomplish much in affecting consumer behavior.

 

It’s much easier to simply expand WHAT a name means (the brand) than to change the name. Coca-Cola didn’t have to change the name of the company to make people forget that the beverage used to contain actual cocaine, which it did until 1929. Instead, the company simply began evolving the meaning of the brand. Now no one remembers, or cares, what it originally meant.

 

As with all principles, there are notable exceptions. For instance, sometimes a brand is so toxic as to necessitate a name change. Philip Morris spun off its cigarette business and changed its name to “Altria” so as not to hurt its ownership in Kraft Foods.

 

Changing the name of a company is a major decision, and the pitfalls usually outweigh the risks, often dramatically. The good news is that a name change is typically not a fatal error for a company. Smart, psychology-driven marketing can help overcome these obstacles, yet the transition is still painful and expensive. But like all mistakes, it is best to avoid this one in the first place, as the fine leaders of Yahoo/AOL/Oath appear to have done.