I have always marveled at the power of brand names. When a company builds a brand name, they build loyalty, repeat business, and the ability to charge more for their products than competitors.
Coca-Cola is the strongest brand in the world. I'm not even sure what is in second place, but other brands like IBM, Levi's, Heinz 57, Exxon, Nordstrom, Apple, and HP are obvious ones that are recognized by consumes everywhere.
Brands are not built just by creating name awareness, although that is a necessity. A main reason why name recognition is so important can be explained by an old advertising maxim: "Share of market is preceded by share of mind." When you build name awareness you can then work on building other aspects of the brand. People want quality, reliability, consistency, and value for their money. Give them those and they will reward you.
When a branded product delivers the consistency that people want, they trust the brand and are ready to buy again when the time comes. But the brand name can lose its value too. Witness the quick demise of the Countrywide brand name. Let's look at a brief history.
Countrywide was already a well-known brand name when I got into the business 30 years ago. I'm not sure how big a company it was back then, but everyone knew it as the independent source for mortgage financing if you didn't want to go the your local Savings & Loan or bank. They had a good reputation too.
I remember that when I started my website www. loan-wolf.com back in 1996, Countrywide was one of the few other mortgage companies with a web presence. But things changed after 2000.
You will remember that 2002 and 2003 were big years for the mortgage business, with low rates across the board. Sales activity was high but there were a lot of refinances too because a lot of people had 7 percent and 8 percent mortgages. That was also when the subprime mortgage business moved from being a small niche to being a big business.
Countrywide expanded rapidly during this period. Unfortunately, along with this expansion came the same arrogance that affected the rest of the mortgage origination industry. They thought that they were smart enough not to make errors and big enough to absorb the problems if they did. Not so, as it turned out.
Ultimately the stockholders were virtually wiped out as the stock price fell from something like $45 per share to about $2 when BofA bought the company. Then the combined company entered into a consent decree with the Attorneys General of California and a few other states. They were accused of engaging in deceptive sales practices. They agreed to set up an $8 billion dollar fund to recompensate borrowers.
After the merger there was a question whether the almost 1,000 Countrywide offices would stay open under the Countrywide name or be re-branded as BofA offices.
The problems mentioned above appear to have only scratched the surface of the real underlying issues. Former CEO Angelo Mozillo took a lot of flack from liquidating some $400 million in Countrywide stock while the company was imploding. And then there is the ongoing FBI investigation which hasn't named target companies, but Countrywide is likely to be on the list.
With the implosion of the financial markets, the mortgage industry has suffered a public relations disaster. Rightly or wrongly, consumers blame the mortgage industry for many or our country's problems, and Countrywide appears to be at the center of consumer dissatisfaction. According to reports, the Countrywide brand is now a "negative" brand. It conjures up more negative feelings than positive among consumers.
At that point, there is no point in keeping the brand alive. So BofA is in the process of re-branding those offices as their own. In a final note, at the BofA shareholders meeting this week, stockholders removed Ken Lewis as Chairman of the Board, though he retains the CEO job. But for how long?