Essays

The issue of brand failures has caught the fancy of both corporate sector as well as academia. In this whole debate of the diminishing value of branding, it is the FMCG industry that has hogged the maximum 'share of noise'. Hence, we shall be focusing on this sector in this essay.

Sneaking a glimpse of the performance of some FMCG companies, Anchor toothpaste grew at the rate of21.4% and Haldiram grew at a whopping 26% in 2002. So, there have been impressive performances by some of the brands in these troubled times. To say that the whole exercise of branding has been rendered futile in the Indian market is not correct. We can, at the maximum, say that the ongoing brand war has churned the market shares, but it still remains a war of branding (the key word is branding). At the same time, a purist would hardly reckon these 'new kids on the block' as brands and would relegate them to the category of clones or generics. But let us not rush into things. Let us start by asking the question - what went wrong with the established brands?

The whole debate about the utility/futility of branding was sparked off when many established brands lost their market shares to new brands that were priced aggressively. Marketers asked whether the power of brands to generate higher premium and brand loyalty had diminished. To provide answers to these questions, we made a framework called Consumer Migration Framework.

In the framework, while a value-seeking consumer buys products targeted at his segment, the frugal and the aspirational consumers tend to buy products targeted at segments below and above their income groups respectively. However, a value-seeking buyer can also migrate up or down if he finds that there is no brand that provides the value proposition that he is demanding.

Looking at the product offerings of the Indian FMCG industry before the silent revolution happened, it was not that the products did not exist for different income groups. However, the middle- tier products were not quite successfully branded. This led to the brand-product-brand paradox where larger brands existed at the extremes and lesser brands (products) occupied the middle position. A plausible reason why this happened was the conspicuous absence to a very large extent of bigger FMCG players in the middle section, probably due to the fear of the cannibalisation of their high-end, more profitable brands.

As a result of this paradox, the customers belonging to the middle- income groups (value seeking customers as well) migrated to both ends, as the projected value of these products did not quite match their expectations. Subsequently, the bigger brands at the extremes started treating these value-seekers belonging to the middle tier as their target customers without considering the fact that they were buying out of compulsion rather than choice. This also presented a tremendous opportunity for any company that could successfully create brands in the middle-tier. Not only would the value-seeking customers belonging to this tier come back, but it would also attract the frugal customers of the higher class and aspirational customer of the lower class. Some companies actually succeeded in doing that.

Coming back to the issues of brand loyalty and the ability of the brand to sell at premium, we must consider that only those customers migrated back who were never ever loyal to the brands that they were using and that they were buying the 'available' products out of compulsion rather than choice. So, there is no question of erosion in brand loyalty. The debate of brands losing the premium that they could command was sparked off when a number of reputed brands slashed their prices to counter the new brands. It becomes clear from this framework that slashing of prices was not because the consumer belonging to the actual targeted segment was not ready to pay the premium, but because these brands desperately tried to woo back the migrating value- seekers not belonging to the target segment by changing their value-proposition.

All this leads us to one conclusion - branding in the Indian market is not dead. In fact, in these times of heightened competition, branding is a 'must-have' core competency without which survival is difficult. The following sections capture the essence of how many brands have gained mind share even in turbulent times.

A common thread that binds the strategy adopted by successful brands is razor sharp focus. They clearly see their target market and they know their customers well. For example, Dandi Namak was able to create a success story in spite of existence of power' brands and players like Tata and HLL. The reason for their success is focus. They entered the market not to compete with Tata and HLL, but with a focus on taking branded salt to rural and semi- urban areas. With this narrow focus, they not only captured a large rural and semi-urban market but also got some share of the urban market due to a rub off effect.

Focused branding also relates to effective communication about the product. Many successful companies don't go for blitz but instead try to relate themselves with their target customers by exactly understanding their requirements through extensive research. A slowdown is the time when one has to really focus on one's consumer like never before.

Another interpretation of focus is concentration on a few brands that are either doing well or have the potential to do well in future. Companies simply cannot afford to waste away their advertising expenditure on also-ran brands in this highly competitive environment. Companies like HLL have been the frontrunner in this strategy.

Find gaps and fill it with new brands or variants of existing brands - this is the new mantra. Though there is a fear of cannibalisation, the fear of competitor preemption and therefore losing the first mover advantage is even greater.

While carrying out line extensions, care must be taken that the image of existing brands does not get diluted. This is where companies must strategise and weigh the pros and cons of launching a new brand versus extending the existing brands. It is also important that the companies must think of long-term and have a clear-cut strategy of what their action plan would be in case of failure of extensions or new launches.

Companies are also realizing the greater role of channel members in the world of cut throat competition, and we have already seen a rise in the margins of the channel members. Channel members not only enhance the efficiency of the entire supply chain, but are also the partners in branding. Retail advertising and cooperative advertising will be increasingly important in the whole exercise of branding.

Recent innovations in other segments like consumer durables have taken the battle from intra-industry to inter-industry. Quality 'lifestyle' products available at much lower prices than before with easy availability of finance are increasingly vying for the share of the consumer's pocket. The changed scenario not only demands a new game plan with a sharp and decisive strategy but also a lot of creativity and insight. The companies need to continuously renovate their brands so that they remain relevant to the customers.

Another issue that has added to the misery of the existing players is the booming market for fake products. A recent study conducted by AC Nielsen across 30 FMCG companies has estimated that FMCG companies lose Rs 2,600 crore revenue out of Rs 6.0,000 crore market. Besides losing money, these counterfeits also lead to dilution of brands in a way. We believe that the companies will intensify their campaign to mitigate this problem. As a beginning, diehard rivals Hindustan Lever and Procter & Gamble joined hands with FICCI's Mumbai-based Brand Protection Committee, to track down manufacturers and sellers of spurious goods, and eliminate these channels.

In today's environment, building strong brands is becoming more and more challenging. Increased pressures to compete on price, increased competition through product introductions and store brands, and the fragmentation of advertising and market segments are just a sample of the pressures being faced by companies in today's highly competitive environment. A strong brand, however, enables a seller to ride both the crests and troughs of business cycles. The reason is because a successful branding programme is based on the concept of singularity. It creates in the mind of customer a perception that there is no product quite like yours. We can, thus, conclude that branding is the single most important competitive advantage for a company to survive in the marketplace, and will never go out of fashion.