The Hindu Business Line : Building brands of steel

Many considered it a strikingTV commercial. It portrayed a chubby toddler in a diaper held by a steel pin. `There is a bit of steel in everybody's life' was the tagline of this early '90s ad from public sector steel giant SAIL. It was the dawn of a new era of marketing steel, till then just a commodity. However, that powerful positioning was not carried forward by the company.

Then, a few years later, the nation watched another equally arresting TV commercial from private sector giant Tata Steel, which portrayed scenes of happy customers and employees with broad smiles. `We also make steel,' was the triumphant line that signified the finale of the advertisement and the summit of the company's activities. The company rode high on the impact of that commercial and nothing more needed to be said about steel.

While product branding in the FMCG sector per se was not a new concept then, branding steel was, relatively. Steel has always been a commodity business. People generally did not buy steel by brand. Even the industry's biggies did not bother with branding their steel. The thinking then was that steel was a commodity meant mostly for industrial users so there was hardly any need for major marketing activity other than ensuring availability.

But now, there seems to be almost a paradigm shift. There are many companies making steel in their furnaces that customers will ask for by name — Tata, Kamdhenu, Rathi, i-Steel, Sujana, ARS, Tulsiyani and Kanishk, to name a few.

As B. Muthuraman, Managing Director, Tata Steel, told BrandLine, "Anything can be branded if it is worthwhile. I see no reason why steel should not be branded. When you see one soap selling at a price higher than other soaps for reasons which are not obvious and non-complex, I don't see why one steel should not sell at a higher price than another steel, especially if it deserves it."

In Tata Steel, in the late '90s, about 200 customers accounted for about 70 per cent of the sales of Tata Steel, and the rest was accounted for by a highly disorganised and fragmented base of around 6,000 customers, some of whom were traders, and most of whom were small order-size consumers. Then the Tatas felt that a direct marketing approach using the corporate brand platform would work for the big 200, but not for the 6,000, on a sustainable basis. After evaluating different strategies available at that time for dealing with the 6,000 customers, Tata Steel decided to establish an FMCG-style distribution network which would enable effective consumer-targeted marketing and branding of products being sold in retail, with the associated advantages of price premiums, consumer preference, loyalty and sustainable market shares in a competitive environment.

As a result, Tata Shaktee (galvanised corrugated roofing sheets) was born in March 2000. Then it moved swiftly to launch its other brands such as Tata Tiscon (December 2000) for TMT reinforcing bars for construction, Tata Steelium (February 2003), branded cold-rolled steel sold through distributors, Tata Wiron (July 2004), branded galvanised wire, followed by Tata Structura (branded steel hollow sections for structural applications). In fact, Tata Steel, even before it started branding its products, had generic brands such as Tata Bearings (1985), Tata Pipes (1983) and Tata Agrico (1927) (encompassing agricultural implements such as powrahs, kudalis, shovels, crowbars and hammers).

Consumer perception

Road users in Chennai were intrigued by large hoardings of Superman with iSteel emblazoned at the bottom, which, as it transpires, was a branding exercise for a steel brand, and who better than the man of steel himself to associate with? G. Gautam Reddy, CEO, Viki Industries Pvt Ltd, maker of iSteel, says, "Now, there is a huge shift in consumer perception, in quality consciousness. Though for a very long time, steel has been assumed to be a commodity, it is not so. There are a lot of variants in product quality. It is a very complex product to make. One can easily distinguish one type of steel from the other, one grade from the other, meant for different applications. And one can make a distinction between one producer's product and another. So steel has all the characteristics it takes to be branded."

Echoing his views, R.K. Birla, Managing Director, Sujana Metal Products Ltd, says, "As consumers become more and more quality-conscious and demanding, branding your product has almost become a necessity to sustain it in the market place."

Generally, companies in the industry serve two kinds of customers — the more knowledgeable customers in the B2B segment (automobile, white goods makers and so on) and the not-too knowledgeable ones in the B2C segment (mostly the construction sector). Customers in the B2B segment know the attributes of a good product. When they perceive a particular company's product as being good, a brand is created, without any need for a brand name being embossed on the product.

"When I sell to Tata Motors, Maruti, GE or Ford, I don't have to brand my product. They will buy it on the basis of specifications, surface quality, cleanliness, grains in the steel, physical properties and so on," says Tata Steel's Muthuraman. But, when marketing steel products to the B2C segment, it is not possible to explain all the technical details. Here, brand value becomes significant. The customer here may know as little about good steel as he knows about the ingredients of any good fast-moving consumer product. He buys it because of the brand name and the reliability it promises. Admitting this, Muthuraman says, "A villager who goes to buy steel in the marketplace does not know what Tata Steel is bringing to it. All he knows is that it is a Tata product." That villager needs to be told about the superiority of Tata Steel's product over others. This is the work of the brand.

"If we hadn't publicised what is behind that name, we wouldn't have got a premium. When we started branding, the premium was 7 to 8 per cent over our competitors' products. We could achieve this figure only after we made the architects understand the intrinsic value of the steel," explains Muthuraman.

According to Reddy of iSteel, the average consumer must be taught that steel is not made up of the brand name alone. "If I am not able to supply the quality I promise, I'm not in the market anymore." The quality of the systems and of the people in the company, the reliability of the technology and processes through which the steel is made, the service with which the steel is delivered, the history, and the integrity of the company concerned, all have a bearing on the product.

Distribution system

Prior to rolling out branded steel products, Tata Steel took various steps to become more customer-focused. In the late '90s, the company undertook internal campaigns to focus the attention of its workforce on customer orientation and service. Tata Steel also made changes in its distribution system. On the recommendation of consultants Booz Allen Hamilton, the company introduced the hub-and-spoke model to reduce expenditure on logistics. It also revamped its distribution system in the B2C segment. The initiatives paid off and the share of branded steel in total sales increased over the years.

Right now, the market for branded steel is evolving. There is more room to create brands, with specific benefits for specific market segments, for which people will be prepared to pay different prices. Failure to brand a product will result in the prospective customer being unable to distinguish between one company's product and that of others'. Consistently nurturing a brand will benefit the company in terms of gains either in a price premium, consumer preference, or market share. The greater the number of brands in the market, the better it is for the industry and the consumer.