Tweet of the Week for June 23 – 30 The Death of Comcel The Birth of Claro

Posted on Tuesday, July 03, 2012

#AMX changes venerable & valuable Comcel brand to #Claro The $$$ to change not the only cost – lost sales? #yg

Full Disclosure: During the period 1998 to 2001, I was COO when Comcel’s branding strategy consolidated and CEO during the ownership transition from Bell Canada to America Movil when the branding was confirmed by the new owners.

I no longer work for America Movil and have no strong desire to do so again. It’s not the kind of company I want to work for, for various personal reasons. But I consider it a well-run company with strategically smart executives. I have rarely disagreed with any strategic decisions they have made over the past decade.

This time I think they have made a mistake.

My ex-boss Peter Burroughs — who was CEO virtually from the beginning of the company through the America Movil purchase — has recently come out publicly against the move and I can understand his personal frustration. He was responsible for building the foundation of where the brand is (or perhaps was) today. He used his consumer goods experience to build a massive placement strategy, putting the name “Comcel” virtually everywhere in Colombia (even in places where we didn’t yet have coverage!).

I like the brand name “Claro” and I agree with most of the other brand consolidation decisions America Movil has made over the years. I recognize that stating my disagreement with their decision in the case of Comcel (and Porta Ecuador which is a similar case) is some how a waste of “ink” (or perhaps electrons). Peter may have been frustrated but coming out in public was frankly a waste of time. Did he think they would change their minds? Did he think it would help with his current role running a coal railway in the north of Colombia? But the reasons why I agree with some brand consolidation decisions and not with this one might help others facing similar challenges.

When America Movil consolidated disparate “Telecom America” properties in Brazil under the “Claro” brand that made perfect sense. Multiple brands within a single geographic market is a complete waste of money. The synergies were obvious. “Claro” was the best of the then existing brands (one of the few things Bell Canada International did right) and only needed a change of colors and logo for the relaunch / consolidation.

When America Movil changed CTI in Argentina and Smartcom in Chile, they relaunched companies with damaged brands, erasing a sorry past with a new brand for a (hopefully) better future. “Clearly” Claro was the right choice since it had already proven its worth in Brazil.

For similar reasons, where the company had bought integrated operators in the Caribbean and Central America, the change to Claro made it clear the break with the monopoly fixed line telecom past.

In Peru, with a brand new company it made perfect sense to use Claro. Why invent yet another brand?

But that left three markets with long-established, undamaged non-Claro brands: Mexico (Telcel), Colombia (Comcel) and Ecuador (Porta). In all three markets, the company’s market share is north of 60%.

Changing logos is expensive. Changing brands is even more so. I think it is justified in the following circumstances:

  1. To replace a damaged brand e.g. CTI Argentina, Smartcom Chile
  2. Consolidation e.g. Telecom Americas Brazil regional brands
  3. To take advantage of spillovers / synergies between product / services within a geography e.g. Telefonica’s elimination of “Telefonica” for fixed services in favor of “Movistar” in many markets
  4. To take advantage of spillovers between geographies

By “spillovers” I mean the synergistic benefit for one market from advertising destined for another market under the same brand say, fixed services when advertising mobile under the same brand. The best example in mobile is the benefit that Samsung gets for its mobile devices from the advertising it does for TVs.

America Movil no doubt argued to its board about spillover synergies from consolidation of Telmex and Comcel under a single brand. But that would argue for getting rid of the weaker (and somewhat damaged) Telmex brand in Colombia in favor of the much stronger Comcel. Recently Telefonica chose to use “Vivo” in Brazil for both fixed and mobile (dropping “Telefonica”) and decided not to use “Movistar” preferring to use an existing strong brand rather than introduce a new one.

The only argument for changing Comcel to Claro has to do with cross-geography synergies, not cross-product synergies.

  • There are synergies with having say, one creative agency and using common promotions, web-site design etc. across multiple countries. But these would seem to be in the single or low double digit millions whereas the brand damage could be much larger. Furthermore one of the advantages America Movil has had over Telefonica was that while technology decisions and strategic decisions were centralized marketing was decentralized. Decentralized marketing dilutes the benefits of centralized, synergized creative.
  • But spillover requires cross-border media consumption, such as might be expected in Western Europe or between Canada and the US. But the only cross-border media consumption is pay-TV, especially football (soccer). This would seem to be a small benefit applicable to only a subset of households.

On the other side of the ledger there is the cost of which the US$40M (to physically change branding and launch the new brand) is the smallest part as I suggest in the tweet.

To me the biggest cost is the potential loss of sales while the new brand gets established in the public’s collective mind. For a period of time, a (hopefully decreasing) percentage of consumers will not understand that the red-and-white “Claro” is the same as blue-and-white “Comcel”. The consequence is that they will probably go to one of their second or third top-of-mind choice, the blue-and-green Movistar or the dark blue-and-white TIGO.

The question — now that the decision has been taken — is how long before 100% of consumers understand the change. During this time America Movil will lose sales and the synergies — in my opinion — will be minimal.

Frankly, I question why this was necessary at all. What problem were they trying to solve? I just don’t understand.

I do know the happiest guys in Colombia will be marketing managers at Movistar and TIGO who will no doubt take advantage of this uncertainty to increase their share.

Members of the Colombian Communications Regulatory Commission (CRC) may or may not be happy. On the one hand, they should achieve their objective of reducing America Movil’s market share. On the other hand, they will have had nothing to do with it.

Bottom-Line: This is a decision America Movil will regret but for now they must minimize the damage with a blitz to get the equation Claro=Comcel firmly embedded in the public’s psyche. For Telefonica and TIGO, now is the time to invest heavily in advertising and promotions to drive confused consumers into your stores.

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