Killing off brands is never popular or pleasant, but we should do it more often. Some executives may be reluctant to admit—perhaps for sentimental or political reasons—that their brand is draining more value from the company than it creates. They sustain a brand even if that means aggressive discounting, cheap licensing or other tactics that erode long-term value.
It’s not always clear when a brand should be killed. Profitability isn’t a useful metric. Most corporations generate 80 percent to 90 percent of their profits from fewer than 20 percent of their brands and many promising start-ups fail to generate a profit for several years.
A better litmus test for keeping or killing a brand may be purpose. In his book, Start with Why, Simon Sinek says that a sense of purpose should provide direction when deciding a company’s future: “Instead of asking, ‘What should we do to compete?’ the questions must be, ‘Why did we start doing what we’re doing in the first place, and what can we do to bring our cause to life, considering all the technologies and market opportunities available today?’”
Consider Blockbuster, whose first store opened in 1985. Blockbuster quickly became a popular provider of video games and movies for VCRs. But as Netflix and online-media channels developed, Blockbuster became obsolete. The brand died a slow death, with its video rental operations finally shut down in 2013.
Blockbuster’s managers should have euthanized that brand long before it sapped shareholder value. They could have started another business—and brand—by utilizing the company’s assets such as real estate, technology and staff. Or they could have sold off assets sooner when they would have been more valuable.
When dealing with a struggling brand, managers should ask themselves if it is staying true to what it was made to do. Is the brand’s purpose still relevant? Can it still deliver on its purpose in a way that increases competitive advantage? If the answer to these questions is no, can the company pivot to a new purpose that uses its existing assets?
We all love a good comeback story, and corporate turnarounds can turn CEOs into stars. But sometimes the right decision is the more painful one. If your brand is struggling, take a hard look at your purpose, not just your balance sheets. Fulfilling a meaningful purpose in a compelling way can be as life-giving to brands as it is to people. Denise Lee Yohn
Denise Lee Yohn is a brand-building expert and author of What Great Brands Do: The Seven Brand-Building Principles that Separate the Best from the Rest.