Corporate restructuring can make perfect financial sense, yet create a perfect mess creating brand confusion in the marketplace.
Take Marathon Oil, which just announced it is spinning off its “downstream” refining and retail operations. Those low margin businesses drag down the finances of the whole company, so a spin off is a shrewd move. Still, calling one company Marathon Petroleum Corp. and the other one Marathon Oil Corp. creates endless confusion and genuine brand risk—people will always wonder which Marathon is which. (Motorola has done something similar).
From Brand Confusion to Brand Risk
Should Marathon decide to eventually sell the retail operation, brand confusion becomes a risk. What an acquiring company does under the Marathon retail brand will impact the parent company brand. The risk also runs the other way. If Marathon has an oil well disaster like BP did in 2010, it impacts the retail brand. Consumers aren’t going to differentiate Marathon Oil and Marathon Petroleum when they boycott. Marathon is one brand, no matter that it is now two companies.
Retail Rebranding is Expensive
Should Marathon eventually sell its spun-off retail operations, the buyer may not want to change the brand name on each of the 6500 individual gas stations. Joe Bona, retail brand expert and president of the retail practice at design and strategic branding company CBX, notes: “The cost of rebranding sites, terminals, transportation vehicles etc. would be quite substantial and the risk of alienating core constituents would also be a concern. Of course then there would be the marketing cost and time to build any new brand. Without having access to research, I would have to believe Marathon has positive equity in the markets they operate, so anyone planning a new brand would have to weigh the risks of any such move.”
A number of years ago, I worked on the rebranding of a major oil company merger involving some eight different retail brands. When deciding which brands to keep and which brands to discontinue, we discovered that distributors liked having a portfolio of brands so that they could own all four corners of an intersection, each with a different brand name. This may be another reason why keeping the Marathon brand could make sense to a future buyer.
Rebrand the Parent Company
A cheaper solution would be for the parent company to rebrand its exploration and production business. While they lose some legacy, they can make up for it with a clear, differentiated brand—and a future with less risk or brand confusion.