Names, Brands, and Reputation

What’s in a name?


That’s what Juliet asks in the famous “balcony scene” in Romeo and Juliet. She had fallen in love with Romeo, but Romeo had the wrong family name. Tragically, they couldn’t escape their families’ heritage of violence and vendettas.

On the other side of the coin, companies put billions of dollars annually into creating names and brands that we can trust. Retailers like Amazon and Target, health care companies like Johnson & Johnson or Pfizer, and global firms like Rolex and Lego all live and die by their reputation.

34 years ago Johnson & Johnson faced a crisis after someone tampered with its Tylenol packages in order to commit a series of murders. Over seven people died in the Chicago area when they took pills that had been laced with cyanide. The company acted immediately and decisively, spending hundreds of millions of dollars to recall all of its over-the-counter pills, and compensated customers who threw away their bottles. They revamped their products to make them tamper-proof. This was costly. Tylenol sales represented 20% of J&J’s total revenues.

Photo: Roger Ressmeyer. Source: Time

A year later, Tylenol was once again the top-selling pain reliever, and J&J was one of the most trusted companies in America. Their response to the Tylenol murders is still discussed in business schools as a model of crisis management. Johnson & Johnson spent hundreds of millions, but preserving its global brand was worth hundreds of billions.

Brands matter. They convey quality and commitment. A brand is a promise that customers can expect long-term security—that a company is willing to put its reputation on the line every time someone uses their product or service. It’s a shame when firms forget this—or throw their good name away.

Douglas R. Tengdin, CFA

Chief Investment Officer

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