The Hindu Business Line : ‘Slowdown is good time to get brands deliver better value’

Chennai, Nov. 18 Undeterred by the present slowdown, brand owners should use the time to better align their business to deliver the value of their brands to their customers while putting new structures and strategies in place for their brands in readiness for the good times.

Mr M. Unni Krishnan, Managing Director of Brand Finance, a brand valuation firm which is organising a forum in Mumbai on Wednesday for senior executives to debate how to leverage their intangible assets, says it is also a good time for Indian companies to take market positions abroad while global companies are going through a period of weakness.

“Brands should use the downtime to get their engines revved up,” he said.

Mr Unni Krishnan says most of the Indian brands at the top tier have all the resources and management bandwidth to ride out any slowdown.

“They don’t have fundamental weaknesses, but the time of getting revenues and profit margins while rising with the tide … those days are over; companies need to look at why customers are loyal to their businesses, and these value propositions and relationships are going to be terribly important.”

Indian companies across sectors are realising that the long domination they enjoyed is under severe pressure and old tactics of offers and promotions may not be the only way to manage a brand going forward. “The need is for a disciplined, enterprise-wide view to manage the brand,” he adds.

He says an analysis of 40 leading Indian brands over the past few years across 13 industry sectors by Brand Finance has thrown up some interesting facts: Indian brands have the intrinsic strengths to double in value if they are leveraged.

However, marketing and customer development expenses constitute the largest discretionary expense of the business. But marketing expenses were like a leaky tube – a lot of expenses which were not productive.

“These are actually investments in growing brand assets; we saw that as much as 5-8 per cent efficiency could be brought into the marketing investment which was going into the brand. Companies should scrutinise discretionary expenses which could actually be a strategic investment that goes into the brand,” he says.

Mr Unni Krishnan says that often most senior management time is focused on ‘capex’ and ‘opex’ plans.

“They need to be reviewed but they present only the value of tangible assets which constitute roughly 30-35 per cent of the value of the business in today’s environment. The rest of the assets are not on the P&L but hardly any senior board member hardly talks about ‘brandex’… the most dominant aspects of the business is off balance sheet. The largest discretionary expense, which is actually a strategic investment is incurred on an off-balance sheet item called the brand and other intangible assets such as customer base. These are hardly discussed,” he says, emphasising, though, that that realisation is dawning on corporate India.

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