The Hindu Business Line : Branding benefits

There are several benefits that come from branding and marketing a product as opposed to just distributing a commodity. Apart from tangible benefits such as a better price, players can also build a loyal customer base which, according to B. Muthuraman, MD, Tata Steel, appreciates the "collateral of service and the distribution strengths," considers benefits other than price when making buying decisions, and remains largely unaffected by price fluctuations.

"If the brand is positioned and developed, it will create a segment in the market that is loyal to the brand and to what it stands for," adds Muthuraman.

This, in turn, will offset the uncertainties brought about by that segment of customers who buy products on price considerations alone. The loyal customer is able to build a stable relationship with the brand, thus reducing the vagaries of price for the supplier while assuring himself of a good product.

Besides, says Muthuraman, "Branding products will synergise with the company's brand image. The economic benefits of branding lie both in the protection of the price lines of a company's products, as well as in the protection of the company's market capitalisation."

Rich dividends

Branding has already begun to yield rich dividends for these companies. Announcing the quarterly results of Tata Steel, Muthuraman said the company would focus more on the branded segment of the market.

Last year (2005-06), Tata Steel sold about 8.73 lakh tonnes of branded steel (which represented about 27 per cent of total sales), as against 7.92 lakh tonnes of branded steel in the year before. This year, the company plans to greatly increase the volume of branded steel close to 11 lakh tonnes.

iSteel, which is present only in the construction segment, manufactures TMT (thermo mechanically treated) and CRS (corrosion resistant steel) bars, which are technically called `long products.'

The company's products command two to three per cent premium in the market. Justifying the premium, Reddy says, "The quality of steel lies in the chemical composition, technology and process. Our bars offer you properties that are far higher than the ISI specifications." It also plans to get into customised product manufacturing in the future. The company spends a substantial portion of its revenue on advertising.

The Hyderabad-based Sujana Metals, with a production capacity of 9,000 tonnes a month, branded all its products — TMT bars and angles. According to R.K. Birla, MD, Sujana Metals, the company's products command around 5 to 10 per cent premium in the market over the steel that is available as commodity. The company recently opened a new facility built at an investment of Rs 150 crore near Chennai. It sells 80 per cent of its products directly to consumers and only the remaining 20 per cent is being sold through its distribution network.

Tata Steel went ahead in the concept of branding and marketing by opening an exclusive outlet — Steeljunction — in Kolkata in December 2005. It may also get into co-branding at a later stage, especially in the B2B business, according to sources. This would involve getting into an agreement with, for example, a furniture maker who will use the company's steel. The Tata Steel brand name thereby gets prominence when the furniture gets sold. But, "the market is not yet ready for co-branding," clarifies Muthuraman.

Another steel giant, Jindal Stainless, has gone a step further and introduced a designer brand — Artd'inox. Under this brand, the company manufactures lifestyle products such as kitchenware, tableware and office accessories. The products are available in the price range of Rs 135 for a bottle-opener to Rs 15,000 for a dinner set. It claims to introduce one new product every four weeks. It currently has 10 exclusive outlets called Artd'inox Boutique and is planning to open 15 more across the country.