Bell's Coming Back
By Tom Van Riper
Tuesday, June 6, 2006
It's hip to be square.
That Huey Lewis catchphrase, which once defined the
yuppie-crazed 1980s, is being adopted by AT&T. The company
is betting that it'll get more mileage with mobile phone
consumers from its traditional sturdy image than from the
fresh, youth-centered Cingular brand.
And while some think they're crazy, the strategy makes
perfect sense. Give the company credit for thinking
globally and for keeping its eye on the big picture,
regardless of the hipness factor. And also for
understanding just how valuable the AT&T brand name still
is, stodginess and all.
Chief Executive Edward Whitacre said AT&T will ditch the
Cingular name on completion of its $67 billion merger with
BellSouth, expected early next year. Cingular began as a
joint venture between BellSouth and SBC, which took AT&T's
name when it bought out the old Ma Bell last year. With
AT&T now set to assume full ownership of Cingular, Whitacre
plans to roll the dice by folding the unit's 50 million
customers into the parent company brand name as AT&T
Some marketers, especially those at younger, cutting-edge
boutiques, can't understand the decision, especially given
the billions already spent on building up the Cingular name
since its 2000 inception. These days, Cingular is
synonymous with cellular, especially among the under-30
crowd. A recent poll of marketing pros in Advertising Age
ran 88% in Cingular's favor.
"Pretty goofy," says marketing consultant Jonathan Asher of
Dragon Rouge of the company's decision. "AT&T is tired,
dusty and old technology. Cingular is more youthful and
about today's technology."
But what's more appealing across all age groups is a name
everyone knows. That's especially true now that people 50
and over own nearly as many of the 160 million U.S.
cellphones as those in the younger set. In fact, a Pew
Research study showed that the number of 18-29 year olds
buying cellphones actually fell by 3% between 2002 and 2004,
while all other age groups grew. The fastest-growing
segment, surprisingly, is the 70-79 set, which increased
cellphone purchases 12% over the same period. Meanwhile, a
broadly recognizable name goes a long way, especially when
it comes to integrating voice, messaging and Internet
services on a global scale.
"If the strategy is to build bundled services, then yes,
they should get rid of the Cingular name," says Karl
Barnhart, managing director at CoreBrand, a marketing
communications company that measures brand value. One of
the few consultants to measure a direct link between a
company's brand image and its market valuation, CoreBrand
gives AT&T high marks for its longtime image of reliability
and its broad global appeal.
To be sure, calculating a brand's real contribution to the
market cap of a company is an inexact science. But
CoreBrand's analysis, which isolates factors that are common
to stock price and brand image, such as advertising,
investor relations, size and general reputation, estimates
that AT&T's brand image contributes 14.9% of its $100
billion market capitalization, good enough to nose out
Verizon for the top spot in the telecom services industry.
By contrast, scandal-plagued Qwest Communications comes in
at 4.3%. AT&T's brand contribution even outpaces many other
notable industry leaders, including Cisco Systems (telecom
equipment), Intel (semiconductors) and Bank of America,
according to CoreBrand's latest measures.
Of course, the company's decision to drop the Cingular name
from its vernacular still carries risks. Analysts estimate
Cingular's current value at $6 billion. Transferring that
type of brand equity needs to be done gradually, experts
say, especially since some Cingular customers have already
been forced to switch brands once before (former AT&T
Wireless customers were switched after Cingular bought out
the company following its spinoff from the original AT&T.
They're now headed back to AT&T Wireless after the latest
Is there a risk of alienating customers who never initiated
a brand switch but are forced to make a change anyway?
"Yes, it does matter, because people want choice," says
brand expert Robert Pasikoff of Brand Keys, who also noted
that a current law that gives customers the right to keep
their phone numbers when switching carriers makes it easier
for them to bolt to Verizon or Sprint. Still, he thinks
today's educated consumer understands corporate buyouts are
a fact of life. AT&T Wireless should avoid any massive
defections if it seamlessly maintains the same level of
service that Cingular customers have grown to expect.
Barnhart of CoreBrand recommends a gradual transition that
includes both names for awhile--asserting that what worked
for Sprint-Nextel can work for AT&T-Cingular. An AT&T
spokesman said the company will not formally keep a dual
name, but will invoke Cingular in its advertising for much
of 2007 to remind consumers of the brand's history.
But one thing is for sure. Short of a major scandal, brand
equity built over decades carries more weight than a brand
that debuted during the dot-com boom. Hip can be great, but
it also has a shelf life. A few years ago, it was hip to
devour Krispy Kreme doughnuts and Red Bull energy drinks.
"It comes down to the mom test," Pasikoff says. "Once Red
Bull was in mom's refrigerator, it wasn't hip anymore."
That's what AT&T is counting on as it rolls the dice.