by C. Clifton Eason, Ph.D.

Recent reports suggest that RadioShack is nearing bankruptcy – an outcome many investors and financial analysts saw as inevitable considering nearly three years of losses and a dismal 2014 holiday season.  If these reports come to fruition, it is possible that RadioShack could emerge from bankruptcy and continue operating (in a fashion similar to General Motors).  Or it may be that the retailer’s assets are bought by one or more private equity firms.  In the latter case, a resurrected RadioShack could still resume operations.

In either case, one question managers will have to address is what to do with the brand – specifically, the RadioShack name.  Once a venerable name in technology/electronics retailing, the RadioShack name has become associated with unexciting merchandise, mediocre
prices, and outdated stores.  The company even poked fun of itself and its 80s image in a 2014 Super Bowl commercial.

So when executives consider what to do with any assets that come out of a reemergence or liquidation, one question they will ask is:  Is the name “RadioShack” an asset at all? 

This is not an issue without precedent.  When WorldCom emerged from bankruptcy in the early 2000s, it reintroduced itself to the world as MCI.  Clearly, executives wanted to distance the revived company from the scandals that made headlines under the WorldCom name.  GM, on the other hand, chose to keep the General Motors name.

The different conclusions on what to do with the names can be understood in the concept of brand equity.  While the General Motors name had a century of recognition, name-product congruence, and many loyal customers, the WorldCom name dated back less than 10 years and became associated almost exclusively with scandal and corruption.

But not all tainted brands change their name.  Tylenol suffered through its own crisis in 1982 when contaminated capsules led to several deaths in the Chicago area.  While some predicted that Johnson & Johnson would maintain the Tylenol formula but begin to market it under a different name, the company chose to retain the Tylenol name.  J&J executives recognized that, despite the tragic events surrounding the poisonings, the Tylenol name still carried a lot of positive brand equity.

Some companies do change their name due to obsolescence or name-product congruence issues.  For example, in 1990, American Telephone & Telegraph dropped its full name and simply became what most people already called it:  AT&T.

The bottom line for RadioShack is that, despite being a name that dates back to 1921, the brand holds little equity.  In fact, some might say it has negative equity.  Further, the name no longer represents what the company is.  Companies with strong brand equity can overcome name incongruence that develops over time (e.g., Southwest).  But RadioShack is not such a company.  Considering its misleading name and tainted image, when the time comes to decide what to do with the company’s assets, any decision to resuscitate the business should be made in conjunction with the potential need to kill off the name.

C. Clifton Eason, Ph.D, Assistant Professor of Marketing, Brock School of Business, Samford University