Sunday, August 1, 2010

Ten Reasons Why Brand Owners Should Care About Their Trademarks and Federal Trademark Registration

1. Improper Trademark Selection Can Kill A Brand

Not all selected trademarks are created equal. Valuable trademarks distinguish competitors’ products, while trademarks that don’t distinguish competitors’ products are not valuable.  Nokia and Motorola are good examples of trademarks that distinguish the source of their associated products. There is no issue of whether consumers would be confused as to the source of Nokia and Motorola products. However, what about the trademarks Whoville Eye Specialists and Eye Specialists of Whoville? Might consumers become confused as to the source of the services offered under those trademarks? What if Whoville Eye Specialists develops a reputation for blinding patients during routine eye laser surgery? Do you think that reputation would affect Eye Specialists of Whoville’s brand? Of course it would. The likely result would be loss of patients, loss of potential patients and loss of revenues.

2. Trademarks Are Used To Avoid Products With Bad Reputations And Seek Out Those With Good Reputations

Consumers use trademarks to avoid companies with bad reputations and seek out those with good reputations. Under my Whoville example, consumers are likely to mistakenly believe that Eye Specialists of Whoville and Whoville Eye Specialists are either one of the same or somehow associated or affiliated. Either way, both companies’ brands become irrevocably damaged. And that’s unfortunate for Eye Specialists of Whoville who now must either change its name or spend tens of thousands of dollars in a public relations marketing campaign. Do think it might be difficult for Eye Specialists of Whoville to develop brand loyalty with consumers in light of Whoville Eye Specialists’ reputation?

3. Trademarks are Used to Identify Quality

Once consumers become familiar - and satisfied - with a particular product’s quality and price, consumers will continue to seek out that product time and time again. If a product’s quality is inconsistent, however, consumers will inevitably abandon that product in favor of another. Companies that deliver their products or services at inconsistent levels of quality risk severe damage to their brands. Those that offer their products at a consistent level of quality - and at a fair price – can build strong brands and brand loyalty.

4. Brand Loyalty

Companies that offer their products at consistent levels of quality and at fair prices can create brand loyalty. The result of creating brand loyalty is repeat business, which is what all companies’ desire. Why do some companies get repeat business while others do not? McDonalds® has been very successful at creating brand loyalty, thus repeat business. But how has McDonalds accomplished that? By offering its products at consistent levels of quality and at fair prices. Consumers know what to expect when they purchase Big Mac® sandwiches in Seattle and Boston. The Big Mac should cost and taste the same in both locations. However, if the cost, and more importantly the taste, of Big Mac sandwiches were different from city to city and location to location, consumers would not be as loyal to the McDonalds brand as they are today. And that holds true for any product.

5. Brand Successes and Goodwill

Brand loyalty and brand success go hand-in-hand. Strong brand loyalty eventually generates a high level of goodwill for companies and their brands. Goodwill is described as including a company’s reputation in the marketplace. It is inevitably trademarks that will protect the goodwill, reputations and brand images generated by businesses. Do you think companies want trademarks that have little “value” to be "protectors" of their goodwill and reputations? Of course not. So why do many companies ignore the importance of trademark selection? Ignorance, time or money? All three? Whatever the reason, to ignore the importance of selecting “valuable” trademarks can be the difference between product and brand success and failure.

6. Trademarks and Their Goodwill Can Increase Sales Margins

As product goodwill increases, its associated trademark becomes more valuable. As consumers begin to rely upon a product’s associated trademark as indications of source and high quality, resulting consumer loyalty may allow for higher pricing, thus higher profit margins.

7. Trademarks are Used as Decision-Making Tools

Trademarks reduce time, cost and effort in the decision-making process by allowing consumers to quickly select products based upon past experiences. Trademarks can convey emotional attributes to consumers that help with the decision-making process. A company’s trademark may convey a certain level of quality or image as well as other messages – such as a lifestyle, aspirations and desires. Trademark owners should consider what attributes consumers desire from their products when selecting new product names. Then select a name that starts the positioning process and drives the brand.

8. Avoiding Potential Global Implications: Does the Mark Have Language Barrier Issues?

There have been many stories – some of which may be nothing more than folklore but are nonetheless fun to talk about - of companies launching new brand names to later learn – much to their chagrin - that they convey negative connotations in other languages and cultures. Take, for example, the well-known story of the Chevy Nova. As the story goes, the term NOVA in Spanish means, “won’t go.” Probably not the best name for a vehicle would you say? As the story continues, maybe it was the name itself that explains why the Nova didn’t do so hot in the Spanish speaking markets.

Companies must also know whether new brand names would have distasteful connotations in other languages and cultures. Another example is the story of PepsiCo launching the slogan “Come Alive with the Pepsi Generation” in China. The story goes that the meaning of the slogan was terribly lost in Chinese translation. Chinese speaking folks translated the slogan to: “Pepsi Brings Your Ancestors Back from the Grave.”

Houston, we have a problem.

9. Trademarks Can Be A Company’s Most Valuable Assets

Trademarks may potentially be a company’s most valuable assets. Trademarks have the potential to increase in value over time. Trademarks can be used as collateral to secure business loans, which can be used for business expansion. Trademarks can also be licensed to third parties to designate new product offerings, which can increase revenues. At last count, the Coca-Cola trademark was estimated to have a value of 70 billion dollars – which is more than all of the company’s tangible assets.

10. Federal Trademark Applications and Registrations Preserve Valuable Rights

While registration is not required to create trademark rights in the United States (and in certain other countries), securing federal trademark protection is a best practice and carries with it certain valuable rights, presumptions, and remedies for trademark infringement. Even if a mark has not yet been put to use, a federal trademark application may still be filed on an “intent to use” basis, thereby potentially reserving rights in that mark for your company. That holds true even if a competitor were to begin use of the same or confusingly similar mark after the filing of your application but before your company’s use of the mark.

Planning ahead and properly clearing marks and filing “intent-to-use” federal trademark applications at least four months in advance of product launches is a recommended strategy for securing rights in marks before their actual use. That strategy may also avoid the all too common last minute scrambling to find available names. You know, that last-minute Friday afternoon exercise of “the product launches on Monday and we really really really need you to approve this name, Roger!” Yeah, that one.

There are other reasons why companies should care about their trademarks. Simply understanding and appreciating the basic values of trademarks and how they can drive a brand are the best reasons of all and a good place to start.

If you’re interested in reading other related posts, consider reading: Ten Essential Rules for Internet Brand Names and Why “TMing It” Advice by Seth Godin Misses the “Mark”

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