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Business Commentary/Dilip Thakore

Time to build corporate and brand reputations

It is an overdue development. On June 22, the London-based business consultancy firm Interbrand Newell and Sorrell, which specialises in doling out brand building advice, released its first league table of global brands. The firm identified Coca-Cola, Gillette and the designer luggage and personal accessories company Louis Vuitton as the world's top profit earning brands.

IBM, Microsoft, General Electric, Ford, Nokia, Mercedes and Nescafe were among the top 15 brands with Coke heading the list. The firm's director Raymond Perrier came down heavily on corporate managements which do not value and do enough to develop their corporate and product brands.

"Currently companies give very little genuine information about brand value and yet for many it is their single most important asset. Chief executives need to recognise that they have the lead role in managing their corporate brand as the way to deliver long-term shareholder value. That's too important a task to delegate down the organisation," he said.

Corporate managers -- and shareholders -- in India would do well to heed this advice because barring the managers of a few multinational affiliates, management professionals within Indian industry tend to do precious little to develop corporate or product brands.

Perhaps because most of the big business houses of Indian industry had their origins in commodities trading firms of yesteryear, the captains of Indian industry attached little importance to the building of unassailable brands.

As a happy accident and mainly because advertising expenditure has been almost always accepted as a deductible expenditure, a few Indian brands have established a reputation in the national marketplace. Unlike Japanese and latterly Korean companies, Indian corporates have conspicuously failed to develop world class brands.

Ironically, Amul, indigenous industry's most well-known brand. has emerged from the rural hinterland rather than from within the boardrooms of pampered, overly protected and consequently spoilt Indian industry.

Amul was developed by professional managers led by the visionary Dr Verghese Kurien representing barely literate farmers. It is perhaps the only FMCG (fast moving consumer goods) brand which can hold a candle to the heavily promoted and carefully developed brands of multinational subsidiaries and affiliates such as Hindustan Lever and Procter & Gamble.

However, after the economic liberalisation and deregulation programme was initiated in 1991 -- inspired as much by the Amul example as by the heavy artillery brand promotion efforts of Coca-Cola and PepsiCo -- managers in Indian industry are beginning to appreciate the logic of brand value and brand development.

And though the benefits to the media of heavy brand promotion and development continue to flow mainly form MNC affiliates, several home-grown corporates such as Bajaj Auto, Wipro, Telco and HCL among others have begun the long journey to develop corporate and product brands which are likely to stand them in good stead in the difficult and highly competitive years ahead.

There is a common misperception among managers in Indian industry that building brands requires big bucks to finance saturation advertising on television and in the print media. But now there is sufficient evidence to prove that premature saturation advertising in mainstream media can adversely affect a company's growth and development.

A classic case study on the dangers of premature and expensive advertising is provided by the self-engineered destruction of Real Value Marketing, the company which launched its Ceasefire domestic and convenience fire extinguisher with a heavy television and print medium national advertising campaign some five years ago. Instead of gradually developing a market for home and convenience fire extinguishers within the propertied middle class with a carefully conceptualised direct mail and niche print medium ad campaign, the company went for a big bang television campaign which bankrupted it.

But it is not only gauche indigenous companies which have fallen flat on their corporate faces in the slushy Indian marketplace. Quite a few -- indeed most -- recently arrived multinationals with great brand building histories have come to grief in the difficult Indian market.

Perhaps, the most conspicuous among them is the US-based breakfast cereal giant Kellogg which even if it has not gone the Ceasefire way, has failed to impact the Indian consumer. Like Ceasefire, it attempted to blitz the consumer with high-profile mass media advertising when it ought to have attempted to educate and change the breakfast habits of middle class Indian consumers through a more cost-effective targeted direct mail campaign supported by a similar press campaign.

Indeed, as a recent market survey by KSA Technopack, a global consumer goods consultancy firm, proves, most MNCs have grossly overestimated the size of the Indian market for branded goods. Also overestimated was the capacity / inclination of the Indian consumer to purchase the over-priced products of MNC affiliates which set up shop in India after the 1991 liberalisation and deregulation initiative.

The moral of this sad story of failed efforts to build durable and competitive brands is that in developing economies, markets have to be created; they can't be assumed to exist. Long accustomed to living with low purchasing power and conscious of the need to save for the rainy day --it seems a succession of incompetent governments at the Centre and the states has ensured that many a rainy day befalls the populace -- the Indian consumer has become very price- and quality-conscious.

Therefore, corporate managements have to build a reputation for delivering quality products at affordable prices. Moreover, marketers of consumer durables need to acquire a reputation for delivering prompt after-sales service - the Achille's heel of Indian industry. Only after the basic groundwork is done and a corporate reputation is painstakingly built do mass media advertising campaigns make sense. The dynamics of the Indian market are that advertising should be the icing on a very substantial, carefully baked cake.

The current recession in industry offers a good opportunity for corporate managers to go back to the basics of building corporate and product brands, and creating and developing markets. In effect, this entails building a reputation in the marketplace for delivering high- quality products at fair and affordable prices, and acquiring a reputation for being ready, willing and able to provide prompt after-sales service.

That is how brands are built and markets are created. Creative and clever advertising works only when companies have a reputation to boast about. Managers in Indian industry need to grasp this reality. There is no time to lose.

Dilip Thakore

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