Once a name is promoted and becomes known to consumers, it
becomes more difficult and expensive to change. First a new name has
to be selected and purchased.
Then there are the “menu” costs of changing the printing on menus,
catalogs, letterheads, signs, logos and so on. A logo has to be
redesigned. These may cost 1% of sales.
There is the marketing cost of informing customers and running a
renaming marketing campaign. There may be some customer
confusion and some loss of brand equity (goodwill). This may cost 3%
to 9% of sales.
This 5% to 10% rule is also very approximate. The cost of changing a
name is the reason why many firms don’t change a limiting legacy
name.
The most common mistakes that force people to change their name
are:
1) Trademark problems.
2) Choosing a fad name.
3) Choosing a non-serious name for a small company.
4) Outgrowing a generic or descriptive name – such as expanding
beyond computers or cheap.
5) Choosing an inferior domain name.
If one becomes involved in an expensive trademark legal dispute, the
cost can rise. But punitive damages are rare except in cases of
intentional or willful infringement. Usually having to change the name
is the only legal penalty (and pay your lawyers).
Going from a good domain name to a great domain name may
be worth only 1% of sales. But choosing a terrible domain
name may cost you over 5% of sales. The downside risk is
more than the upside.
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