The Risks of Rebranding

Welcome to HBR on Strategy, case studies and conversations with the world's top business and management experts, hand selected to help you unlock new ways of doing business. Are you considering a refresh of your brand? Roger Martin says you might want to rethink that. Martin is the former dean of the Rotman School of Management at the University of Toronto, and one of the world's leading thinkers on strategy. He argues that customers stay loyal through habit, but brand updates can interrupt those habits and force something new and unfamiliar on them. Something as simple as changing the color of your packaging can affect a customer's buying habits. In this episode, Martin explains how habits build cumulative advantage for brands, why that's so important, but also fragile. Martin also offers real world examples of brand updates gone wrong and right, from tied laundry detergent to Instagram's logo and even the iPhone. This episode originally aired as part of the HBR Quick Study Video Series in October 2022. Here it is. It has become very popular in the world of branding and business in general to think of both the importance of customer loyalty and how you need to promote loyalty. You know, it's a good thing, you'd want people to be loyal to your product and keep on repurchasing your product. But it turns out that there is something more powerful by far than loyalty. You should think about loyalty as the tip of an iceberg, but the 95% that you don't see below the water is habit. It's the subconscious saying to you, you should do this thing again. The modern fantasy about, wow, business is changing so quickly. You've got to keep morphing and changing, updating your brand, getting a new visual identity, all of those things. They're just bad. Bad, bad, bad, bad. Don't do them. Why? It's because you interrupt habit. So rather than a consumer thinking about, oh, wow, I'm loyal to, let's say, tide. I'm loyal to tide detergent. I really should buy it. It's actually that person's subconscious saying, you know, the most comfortable thing to do, the thing we in your subconscious are most confident of is that thing that worked for us before. So please, please, please don't think about buying something else. Tides bit around for 76 years, and it has what we call cumulative advantage. Cumulative advantage is what you increasingly build as the customer becomes more and more comfortable with using your product or service. Each time they use it and get the benefits they wish, you get more cumulative advantage that causes the subconscious to say, I'm totally comfortable with this. And I would be uncomfortable if we did something else. That's the win of cumulative advantage. When you rebrand, the subconscious is saying, woe woe woe woe woe, where's that thing we were comfortable with. And in some sense, it puts you back to square one. You're now competing to establish a new habit. So tide was the dominant powder detergent that worked in this new thing called the washing machine as of 1946. On the basis of that, it had the greatest cumulative advantage 30 years later when chemists figured out how to formulate liquid detergents. PNG created a fantastic liquid detergent called IRA and brought that out. And they said, well, we need to do IRA, a new brand because this is a new product. Tides stands for powder detergent and IRA will stand for liquid detergent. It was a complete bust and never got anything but fractional share. And then some smart person at Procter & Gamble said, how's about we do this? How's about we put it in an orange bottle with a target on the front that says tide all across it? And it quickly became the number one liquid detergent. Number one and it has been ever since. Even with that huge advantage in detergents, right, you couldn't switch and get people to say I want this entirely new brand. You need to double down on the habit of buying tide. And every once in a while, the Procter people, even though they're super smart, make a little boo-boo when they came out with detergent that could wash entirely in cold water. They said, you know, that orange tide bottle, that's a warm color, right? We need a cool color. So we're going to put it in a blue bottle. What happened, do you think? Disaster. It was just a disastrous launch. What did they do? Put it in an orange bottle and it became the dominant cold water brand. All of that can only be explained by the subconscious because the conscious should be saying, oh, yes. That's cold water, blue, blue equals cold, et cetera. That story is a conscious story. The unconscious is saying, where is the familiar bottle? Where is it? You've taken it away. You put this weird thing in, I don't want to think about that. And that's the story of your subconscious saying, I want to keep this habit. An example of what not to do on this front was the Instagram change in logo. Right? It is just a self-inflicted wound where you've got a camera, right, that everybody understands its Instagram. And then you've got some designer saying, well, that's old-fashioned. Yes, it was. Yes, it was. It was an old-fashioned looking camera that everybody understood meant Instagram. And they created something kind of new that looked really new. Who cares, right, literally, it's boggling to me. I'm blown away at how often websites get enhanced. It drives me nuts. I've a favorite sports app, my favorite sports app, did a refresh. And everything was in a different place than it was before how you clicked on it. I finally said enough already and went back and picked a new one. They put themselves back to square one. Keep as much of the cumulative advantage you can keep. Does that mean don't ever mess with the product? No, no, no, right? If the product is advancing in your competitive set, you have to advance it as well. But you can advance it in ways to say, here's how I connect this product to the previous product. So how much has your iPhone advanced since that Clujie thing back in 2007, enormously in almost every way? Have the visual cues changed dramatically? Does it look a lot different than it did? Heck no. It's always had similar visual cues, look and feel, operation are cues to the subconscious that said, you know that last iPhone you had that you loved so much? This new one is very much like it only better. And the subconscious is like, that's great. That's awesome, I'm happy. Go get the 13. So for cumulative advantage, if I had a choice between using new and using improved, it's a no-brainer. Improved creates a link to the past, new, if anything, suggests a break with the past. What I'm saying is hard to do. There are people who are absolutely utterly convinced that refreshing something beloved is a good thing, that it's just a bad thing to let something get kind of old and tired. Unfortunately for them, now all the behavioral research, like all of it, says exactly the opposite. This lies beneath the rational conscious mind. Think about appealing to the subconscious and you appeal to the subconscious when you help the subconscious feel as comfortable as possible. That was Roger Martin on the HBR Quick Study video series. He's Professor Emeritus and former Dean of the Rotman School of Management at the University of Toronto. We'll be back next Wednesday with another hand-picked conversation about business strategy from the Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you're there, be sure to leave us a review. Wear a production of the Harvard Business Review. If you want more articles, case studies, books, and videos like this, find it all at hbr.org. This episode was produced by Scott Locke here, Anne Sanny, and me, Hannah Bates. Ian Fox is our editor. Video and animation by Dave DiUlio, Ellie Honein, and Alex Belser. Special thanks to Maureen Hoke, Audi Ignatius, Karen Player, Ramsey Kabaz, Nicole Smith, Ann Bertolomew, and you, our listener. See you next week. (soft music)