Was Ditching A Nascent Brand AT&T's Singular Mistake? - Ad Age

AT&T Rebranding Effort 'a Failure of Epic Proportions'?
Ditching Cingular Brand Looks Like a Mistake Claim Some Experts

By Alice Z. Cuneo

Published: October 22, 2007

Before a crowded ballroom at the Frank Lloyd Wright-influenced Arizona Biltmore in Phoenix this month, AT&T VP-Advertising Wendy Clark displayed an internal company chart to a who's who of top marketing executives at the Association of National Advertisers' annual conference. The grid showed brand awareness and affinity to the brand. A dot on the graph positioned AT&T clearly as a brand in decline, while the dot for the Cingular brand was unmistakably in the graph's "Power Brand" quadrant.

It was, in a sense, an admission that the company had elected to go with the weaker brand when it acquired BellSouth and became the sole owner of Cingular Wireless -- a brand that had been built with $4 billion in spending.

"The strategy of integrating Cingular is not working," said Karl Barnhart, managing director, Core Brand Communications, New York. "They have not been able to transfer any of the positive equity from Cingular to AT&T, despite a massive marketing campaign. That's a failure of epic proportions."

Ms. Clark completely disagrees. Since pouring some $1.7 billion into a rebranding campaign, she said, AT&T has reversed the situation, climbing to a point near Cingular's peak. She also cited company studies that show the marketing investment has paid off. AT&T's unaided brand awareness has tripled, she said, and it's become the "most-preferred communications brand" in just six months.

But not everyone's buying that. Brand experts studying the telecom category maintain that AT&T has failed to lift the value of one of the world's most well-known brands.

Mr. Barnhart's firm tracks 12,000 companies and studies consumers' awareness of brands and how much they like them. The studies are combined into a metric called "Brand Power" and are used to ascertain how much of a given company's stock share price can be attributed to brand. By Core Brand's measures, AT&T has shown slight increases in familiarity and favorability, but they were within the study's margin of error, meaning the results were basically flat.

"They spent a lot of money to tell folks about the new AT&T, but they didn't tell people what it means," said Timothy Robinson, managing director for Core Brand Strategy, and a colleague of Mr. Barnhart's. "They have a big proposition: 'Your world. Delivered.' But what does it mean for me?"

New forces in market
Robert Passikoff, president of brand consultant Brand Keys, said that AT&T may have been influenced by new forces in the marketplace to eliminate the Cingular brand. While wireless has been the major driver for telecom companies, it is evolving into just another component of a bundle (broadband, entertainment, and local and long-distance telephone service) those companies are looking to push to consumers. AT&T's competition is no longer just other telecoms; it's also cable companies and new technologies such as WiMAX that could have profound implications for the category.

"From a brand perspective, there was probably a logic to what they did," Mr. Passikoff said. But, he said, "in the switchover from Cingular to AT&T, the rationale was never fully communicated to consumers." Many telecom brands have "lost a good deal of meaning to the consumer," he said, becoming what he calls category placeholders, the equivalent of a generic "Acme Telecom." Those are companies where "everyone knows them, but no one knows them for anything in particular."

So why did AT&T elect to go with that name instead of Cingular? The decision, Ms. Clark said after being asked about it at the ANA conference, was based on two factors. First, while wireless is important to the new AT&T, the company is not just about the cell phone screen but about the TV and PC screens as well. Second, AT&T's business is global, and AT&T is the better-known brand around the world.

By most accounts, AT&T is doing well. The stock in September hit a five-year high with third-quarter earnings due out this week. AT&T and Verizon have been feasting on defecting Sprint customers. AT&T's churn rate is improved to 1.2%, third-best in the category behind Verizon at 0.85% and Alltel at 1.16%.

At the time of AT&T's acquisition of AT&T Wireless in 2004, a merger that made it larger than Verizon, analysts thought the telecom's dominance would be short-lived. Instead, AT&T has continued to rank first, with 63.7 million customers. Verizon ranks a close second with 62.1 million.

Through an exclusive multiyear deal with Apple, the iPhone has given the AT&T brand a young, hip image as well as a sales lift expected to garner dividends this holiday, when touch-screen phones are expected to be a hot item. The hottest one of all, the iPhone, will sell for $200 less than its introductory price.

AT&T is theoretically able to cut marketing expenditures. At the time of the BellSouth merger, the company promised Wall Street that 20% of its savings would come from marketing dollars.

Following the nine SBC mergers worth $280 billion that created a reformulated Ma Bell -- and one year after the acquisition of Bell South and full ownership of Cingular Wireless -- AT&T has entered into a new era, internally dubbed "AT&T 2.0." While the first corporate makeover focused on the company and individual products, AT&T 2.0 will center on the customer and integrated product offerings, Ms. Clark her audience at the ANA conference.

Orange crush
No makeover would be complete without a fresh color. AT&T added Cingular orange to its AT&T palate but not the playful Cingular "jack" that gave the brand a sense of "fun and exuberance," Ms. Clark said.

The new AT&T will have a more lively voice. A buy-one-get-one-free ad headline might read "How about seeing double?"

AT&T also has switched its ad agencies, bringing control of the brand to Omnicom Group's BBDO, with former lead agency and sibling GSD&M Idea City playing a bit part. It's also in the final stages of a review for its $3.4 billion media account. The three remaining contenders are Omnicom's OMD, which includes incumbent GSD&M; WPP Group's Mediaedge:cia; and Publicis Groupe's Digitas.

Ms. Clark added that it's far from over for AT&T. "There may be a 3.0" version in AT&T's future, she said, but not necessarily through a merger.

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