The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.By Ellen Sluder and Neil Wieloch, CoreBrand NEW YORK ( TheStreet) -- As the market reacts to the latest announcement of job cuts and cost cutting at American Airlines, ( AMR) speculation of a takeover is heating up. US Airways ( LCC), who had failed in previous attempts to acquire or merge with United ( UAL) and Delta ( DAL), has been named by many as an obvious suitor, as well as the private equity firm TPG Capital, in partnership with British Airways. Even AMR's CEO Tom Horton himself has been talking future industry consolidation -- with a newly reinvigorated American Airlines at the M&A helm. Follow TheStreet on Twitter and become a fan on Facebook. If a merger is where American Airlines lands, especially with a rival carrier such as US Airways or British Airways, there is an important aspect to think about beyond anti-trust or airport asset redundancies: brand identity. Historically, the decision on how to merge two large companies' brand identities and logos seems to have been made haphazardly. Due diligence in an M&A scenario helps to vet each company's operational and financial strengths and vulnerabilities for optimal value and growth for the new enterprise. Yet for the most public of assets of the new entity -- its brand identity -- diligent valuation and strategy is usually overlooked. As a result, new logos seem to result as if the negotiation was a Ping-Pong game between attorneys -- we'll take our symbol, with your colors, our type font and your name. Instead of signaling the new company is a force to be reckoned with -- a combined entity greater than its parts -- the identity ends up a hodgepodge. Take, for example, the merger of United and Continental in 2010: The new United logo is simply the old Continental logo with a different word in front of the disco ball-like globe symbol. Only the actual letters themselves are from United -- the font, color, symbol and lockup are purely Continental. For someone glancing at the logo quickly, Continental would register in his or her mind.
What we want to know is: How did these executives decide these were the elements that had the most brand value for the combined entity? How did they figure keeping the conservative serif font helped ensure maximized revenue? Did they build a model that helped predict the monochrome blue would translate into greater market share? Developing, launching and maintaining a new brand identity can be costly. There are expenses associated with the initial design and the production of all new materials from stationery to signage. The implementation of these new materials -- especially across 370 global destinations, as in the United/Continental case -- can be a Herculean task. The airline re-painting costs alone are enormous. United/Continental's combined fleet is over 1,000. With an average of price tag of $150,000 to re-paint a commercial plane, you get a cost of $150 million. And that is just one small piece of a launch. Companies wouldn't take on this challenge or expense unless there were important business drivers behind it, but rarely do they take the time to consider how to do it most effectively. For so many other business decisions, executives create models and financial forecasts to understand the best strategy for optimizing ROI. But this is seldom the case with brand identity.
The example in this diagram represents how an optimal logo scenario is measured. In this scenario, the company needs an identity update. Although their current logo is meaningful in the marketplace, historical trending indicates it will no longer properly represent the firm and therefore decrease in value over time.
Testing the individual worth of specific elements of the legacy logo along with new logo concepts helps to maximize the value of the new logo upon launch. It is clear that if a company is able to predict that the combination of certain elements will allow them to launch into the market at point C, rather than point A, they will recoup their redesign costs more quickly. Preserving and evolving specific parts of the logo helps retain familiarity with audiences and facilitates the transfer of goodwill from the old logo to the new one. By methodically dividing brand identities into their most meaningful components and scientifically measuring their relative value among key stakeholders, companies reduce the risks associated with simply relying on "gut feeling" or post-hoc concept testing when choosing a new logo direction. If the business environment in which your company operates is changing and a logo change is an imperative part of your strategy, don't rely on anecdote alone to decide how to redesign your identity. Proper research and testing ensures your new logo will maintain the assets deemed most important to your audience, and that your bottom line will get the lift it needs more quickly and cost effectively.