A couple of scholarly studies have drawn attention to the importance of a tiny scrap of nomenclature: a publicly traded company's ticker symbol. The studies prove once again, if proof were needed, that your commitment to your brand is reflected in every element of your corporate identity.
In the more recent study, a couple of Princeton researchers looked at the relationship between the "fluency" of a stock's name or ticker symbol and its performance after an initial public offering (IPO). Their findings: the more fluent (easily pronounced) the name or symbol, the better the stock performed--especially right after the IPO, and regardless of the company's size.
Why would this be so? Simple memorability--a well-known criterion for naming (along with pronounceability, credibility, and legal availability). People are naturally drawn to easily remembered names and symbols--preferring, for example, Callaway Golf Co.'s ELY to Medicis Pharmaceutical Group's MRX. "People are also more inclined to believe aphorisms that rhyme (e.g., woes unite foes) than similar aphorisms that do not rhyme (e.g., woes unite enemies)," the paper said. Human brains are hardwired to remember rhyme, alliteration, assonance, and other mnemonic devices.
The second study, presented at the Financial Management Association's 2004 meeting by two University of Texas (San Antonio) finance professors, looked at what happens when companies change ticker symbols but not their names. Bad news here: both trading volume and stock price declined immediately and stayed down.
This study provides support for the decision of, say, Philip Morris to retain the ticker symbol MO (which has "clear meanings of financial strength, momentum, and performance excellence," according to the company's announcement) when it changed its corporate name to Altria. What the company didn't say, but which seems pretty obvious, is that familiarity helps, too: it suggests stability and continuity.
What does this research portend for your own IPO-bound company? First, don't leave naming--even ticker symbol naming--to chance. And second, it's never too early to start thinking about it. Check out how some Segway enthusiasts are using the new research to guide their thinking about a hypothetical Segway IPO.
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