1. Communication Risk
Though impossible to quantify, the risk of choosing the wrong name for a company or product is substantial. A "communication-efficient" name is understood by the target audience quickly. A "communication-effective" name resonates with the target audience, influences its purchase of a product and may even enhance brand loyalty. In comparison to a less efficient and effective name, a superior name builds awareness, comprehension, value and equity more quickly, therefore saving time and money.
2. Legal Risk
The use of a brand name by one company must not infringe on the use of the same or confusingly similar name previously used by another company for a related product. This is true whether the preceding use has been registered as a trademark or not. Because obtaining a Federal trademark takes nearly a year, most companies begin using a new name before its trademark is actually registered. Adopting a name which is not unique can be very costly if failure to obtain registration requires changing that name after it has been adopted and used.
3. Cultural Risk
As many companies now do business in multiple countries, the risk of a narrowly conceived English name communicating something inappropriate - or being impossible to pronounce! - in other languages and dialects has greatly risen. For every well-known debacle such as the Chevy "Nova" (roughly translated in Romance languages as "no go"), there are dozens of unreported stories affecting smaller companies or products and their names each year, causing untold embarrassment, customer ill-will, negative equity and, of course, wasted time and money.
In contrast, well-conceived names give companies and their products numerous competitive advantages.
1. Telling Stories
The most effective names communicate quickly. They intuitively convey a company's or product's essence – what it does, why it matters or what doing business with or using it would be like. Without having to explain their names or overcome communication obstacles, marketers are provided the opportunity to maximize the use of promotional resources telling their "brand story." Linking a name and its story helps to build more memorable brands that become the talk of their industries and categories.
2. Saving Money
The best names enable companies to save money. This is because a meaningful name that is quickly comprehended requires less promotion to be understood. A memorable name needs fewer advertising "impressions" for target audiences to become aware of the product it identifies, is easily recalled by customers and is top-of-mind when making purchase decisions. And, a great name quickly and smartly created saves employee man-hours, legal fees, research expenses and more.
3. Building Value
More than just saving money, the very best names can help build signficant brand value. To demonstrate, let's pretend that research has proven that, before its introduction, Name A received a "likeability" score of 8 (on a 10-point scale) among target customers. A recall test one week later determined that 30 percent of those customers remembered the name and, on the basis of that name, 80 percent of the 30 percent correctly understood the function or benefit of the product it identified.
The inherent, pre-promotional value of Name A could be stated as 8 x (.30 x .80) = 1.92
That is, while Name A is well-liked, its inherent value is significantly reduced by the fact that it is not memorable. In contrast, Name B also received a likeability score of 8, but was later remembered by 85 percent of respondents. Let's assume that Name B was more memorable than Name A because it was more interesting to them, even if less descriptive. As a result, only 70 percent of customers correctly understood the function or benefit of the product it identified based on its name.
So the inherent value of Name B is 8 x (.85 x .70) = 4.76
Thus, Name B is almost 250 percent more inherently valuable than Name A – despite both names being equally well-liked and Name B being somewhat less comprehensible (perhaps due to its less descriptive, more suggestive or fanciful style). Stated differently, customers can't buy products and names that they don't remember! While Name A can increase its memorability, this would require time and money. (Note: This name value analysis is a simplified version of a more sophisticated model used by my company, Idiom, when researching name candidates.)