How you name your company impacts your likelihood of success
How you name your company predicts a lot about its success
There’s a common saying in marketing. “People make emotional decisions for rational reasons.” And it’s true. We tend to make decisions quickly based on relatively few inputs, and then rationalize those decisions with additional logic later.This foundational fact is crucial for startups to be aware of when naming their company or products. While your product or service may be life-changing, if people don’t respond well to a company’s name upon first hearing it, then the likelihood of them using that product or service decreases. The name of a company holds much more weight than you might expect. Many people think that the company name is irrelevant and that the value of the product is all that matters. Just think about the dozens of randomly generated “Name your Company” websites that exist online. In reality, the name of your company is a major component in the branding and marketing process, including how memorable and appealing customers find your product. Taking the time to properly name a company may be the deciding factor in whether or not a company becomes successful. Here are some considerations to take into account when deciding on a name.
It’s Not About You, It’s About the Customer
After working with dozens of high-growth startups, I’ve found that the way in which founders decide to name their company is an incredibly reliable heuristic to show how effective their market research is and how truly customer-centric their development cycles are.
If it’s all internally-driven, chances are you’ll hear things like, “This was my grandmother’s name,” or “I really wanted to start my own company and name it after my favorite X.” The problem is, the market doesn’t have the same connotations as you so. At best, these names will be ineffective at driving growth. At worst, they can detract from your overall market differentiation, leaving valuable revenue and market share on the table.
Some founders even gloat that “you’ll never guess” where the company name came from. That’s rarely a good thing.
The first step to naming a company is to distance yourself from the idea that this is “your company”. The company serves a purpose to a much greater audience. Although you may hold it close to your heart, you should think about the services offered from the perspective of a potential customer. You must understand your audience. Try to create some customer personas first, before exploring names. Is your target audience younger or older? What kinds of products do they use on a daily basis? Knowing this type of information can help inform you about their behaviors and may provide insight into potential names to consider.
In addition, it is important to understand the appeal of different names by testing out a couple options on sample groups. Once you have developed a set of names, gather a group of people and listen to their thoughts. Which names resonate with them? Why? You may learn something you did not previously consider. Perhaps one of your potential names sounded too similar to another company’s name. Or maybe the pronunciation was confusing. Consumer opinions and insights can often help you discover things you may have overlooked. This step is essential to developing a name that is compelling and captures the right audience.
Keep it Catchy and Simple
You want to ensure that the name you choose is both catchy and simple. It is important for people to be able to easily remember your company’s name. Some resort to using snappy names like “Google” or “Uber”. While these examples are household names, be aware that choosing names that are too unique may require more advertising and branding.
The simplicity of your company’s name is one of the most important factors to consider. You must ensure that the name is easy to spell and pronounce. One paper published on behalf of the Society for Personality and Social Psychology found that stocks with simple easy to pronounce names outperformed those with more complex names. Over the course of three decades (1974–2004), more than 700 stocks were examined. The 10 stocks with the simplest names earned 33% more over the course of a year compared to the 10 stocks with the most complex names. This example goes to show the importance of simplicity when it comes to naming a company.
You want people to be able to look up your company as quickly and efficiently as possible. Have you ever found yourself telling friends that you’ll take an Uber, when you really call a Lyft? In conversation, words with existing meanings or connotations can be confusing. And although we’re increasingly connected digitally, less than 10% of word of mouth happens online. You want a company name that’s easy to spell, say, and remember.
Purposefully misspelled names such as “Lyft” can cause confusion in both research and conversation. When hearing about this company for the first time, one would instinctively think that it is spelt “Lift” and likely would have difficulty looking it up online, especially if the company has not yet been well established. This adds friction to viral word of mouth loops. In addition, homonyms like “Lyft” can be confusing in conversation. Have you ever considered why people say “I ordered an Uber’’ when they actually ordered a Lyft? Part of the reason is to avoid misunderstandings. Choosing a name that is also a commonly used word might limit your conversion rate. Uber users whose friends substitute “Uber” for “Lyft” are more likely to stick with using Uber, since they are less exposed to the name “Lyft”. This idea may contribute to the fact that Uber’s market share surpasses Lyft’s by more than two times since September 2017 until April 2020.
In addition to choosing an easy name to spell and pronounce, make sure that your name is relatively short. Names that are too long can be difficult for people to remember and may cause people difficulty with spelling. If your name is long, make sure there is an abbreviated acronym that can be used instead. We see this to be the case with many consulting firms, some of which are named after the founding partners. For example, BGG (Boston Consulting Group), PWC (PricewaterhouseCoopers), and EY (Ernst & Young).
Develop a Connection Between the Name and the Product
Try to find some way to connect the name you give to the product itself. A great example of this is “23andMe”: a catchy and simple name that clearly highlights the services that the company offers. The company specializes in helping individuals understand their health, ancestry, and genetic predispositions. The name of this company is based on the fact that there are 23 chromosomes in a human cell, drawing an instant connection between the product itself and the purpose of the company. Connections like this make it easy for people to remember both the company and the product.
Another example of this is Twitter. When asked about the name in an interview, founder Jack Dorsey stated, “we wanted to capture that feeling: the physical sensation that you’re buzzing your friend’s pocket…So we looked in the dictionary for words around it, and we came across the word ‘twitter,’ and it was just perfect. The definition was ‘a short burst of inconsequential information,’ and ‘chirps from birds.’ And that’s exactly what the product was.” The name ‘Twitter’ encompasses all of the characteristics necessary to successfully naming a company. It not only is short and catchy but also has a meaningful connection to both the product and its users.
Don’t Be Too Narrow
While finding a connection between the company name and the product is important, remember not to be too narrow. You want to make sure that as the company expands and develops new products or services, the name chosen will still apply. Let’s look at Netflix as an example. Back in the late 90s, Netflix’s primary business model was DVD rentals. Over a period of time, Netflix’s business expanded to include an online streaming service as well as media production. Imagine if, back in the 90s, instead of “Netflix” they named themselves “DVDRentals”. While the name “DVDRentals” does directly tie into the rental service initially offered, it does not encompass the other major components of Netflix’s current business. So, as the company expanded, the name would no longer fit and may serve as a source of confusion for new customers, who naturally would assume that the company specializes in DVD rentals. In addition, the name “DVDRentals” might also come across as outdated to people in 2020, since DVDs are no longer the primary medium for video content compared to the 90s. Therefore, it is best to keep your company name relatively broad. If your name is too narrow, it could inhibit the growth of your company and may impact its success.
Closing Remarks
These methods are not to say that companies who don’t follow these practices will not become successful. Many well-known companies break the rules outlined in this article: Apple, Lyft, etc. But a poorly named company is less likely to gain the same traction and success as a company that follows the appropriate naming conventions.
How to Choose a Company Name was originally published in Strategica Partners on Medium, where people are continuing the conversation by highlighting and responding to this story.