Consumers love marquee brands so much that they would give them up the last, in case such a situation should arise, says Dinesh Kapoor, MD, South Asia, of research-based consultancy Kantar Millward Brown. On the sidelines of launching the BrandZ top 50 most valuable Indian brands for 2016, Kapoor tells cat.a.lyst what separates marquee brands from others.
If you were to attribute five things in a brick-and-mortar space for a strong brand better than its peers, what would they be? What would differentiate the haves from the have-nots?
This is not completely new but we now have empirical evidence. First is that the brand should be meaningful to the consumer, next is, it should be different from peers, third is innovation, create awareness and excite the consumers, love for the brand.
When you do all of this, love is the outcome. What love does is, when there are tough times, brands with higher love sustain themselves far better. People give up the brands they love the last during tough times.
If you do these things we have empirical evidence to show that your brand valuation will be x per cent higher.
Most companies do not share brand-wise earnings in public. How do valuation exercises factor that in their calculations?
If a company has only one brand, then the company valuation is equal to the brand’s valuation.
Otherwise, if you get the price point and market share of a brand, then the financial value can be easily teased out from the balance sheet.
While every methodology calculates the financial methodology, we have a framework for the brand contribution that creates the positive image in the consumer’s mind in the brand being meaningful, different, and its salience.
If we look at the valuation of Kingfisher Airlines, it has taken a huge tumble. Where did the valuation experts go wrong?
The honest answer is that I do not know their methodology. In terms of whatever is available in the public domain it’s the financial data.
Even today the consumer affinity towards the brand Kingfisher still stays is what I would think. The valuation methodology is completely out in the open.
What happens to the brand strength of the lenders who put money on the Kingfisher brand?
I can answer that with the data we have. Between last year and this year if we look at the total valuation of the top 50 last year versus this year, the overall valuation has gone down by 2 per cent and it’s almost entirely contributed by state-owned banks.
State-owned banks, which were part of the top 50 last year, have declined by 33 per cent. It will have an impact and therefore I am a believer in data. The decline is not as pronounced in private sector banks.
Do economic indicators affect valuation of brands?
In the last two years, the valuation of the top 50 brands has gone up 30 per cent. Consumer confidence was high, economic factors were good, but not to the extent of 30 per cent.
So we are saying therefore it is due to the brand-building effort. You can have favourable conditions or you can have unfavourable conditions. But a strong brand has the ability to withstand all of that. We strongly believe that strong brands have to provide you financial returns. And this is the validation of the fact.
The ability of strong brands to withstand tough conditions is better, when recovery happens they recover faster. So I am a believer in investing in strong brands.
What is the animal named e-commerce platform doing to the brand valuation of marquee brands when they offer huge discounts in the online space?
Are big e-commerce sites destroying brand valuation for others?
You know the price of it. They are giving it at a discount. So my guess would be that the brand being sold is not devalued. What it creates is a perception about the intermediary.
Our view is that, from a branding perspective, all the e-commerce companies had a different goal, it was probably valuation and a surrogate for valuation for them was how many customerscould they acquire.
To acquire customers how do I differentiate across five players, so offer discounts. So that was probably the right way to achieve that goal.
This time you should be building brands to create a point of difference. We know that the valuation of e-commerce players is being questioned. The valuation of a lot of companies has come down, because you know that the model taken until now cannot be successful next year.
Marquee brands have a choice (of not being sold through this channel). My guess would be that the value of the brand being sold would not change. Hypermarkets sold brands at a cheaper price but did my perception about that brand change?
Getting a marquee brand at a cheaper price doesn’t change the perception about that brand.