Thursday, October 16, 2008

Brands in trouble

http://www.blonnet.com/catalyst/2008/10/16/stories/2008101650040200.htm

Some of the most iconic brands have taken a thorough beating with the recent meltdown in the global markets..

Neither brands nor businesses are immortal. Successful brands are relevant to their consumers and different from their competition.

“Buildings age and become dilapidated. Machines wear out. Cars rust. People die. But what lives on are the brands.”
- Hector Liang, Chairman, United Biscuits

This is a statement that is often made at brand management conferences, reproduced in articles such as these and spouted at brand management classes by teachers like me. The brand is like a God, or so some of us say, and if you keep propitiating it,pay respects to it and invest in it, it will remain forever, long after us. I sincerely believed in the power of the brand and still do, but my unqualified and unquestioning belief in this statement has taken a severe beating as an aftermath of the meltdown in the US financial markets.
I am no expert on finance as my current portfolio demonstrates. (Portfolio! What a wonderfully packaged term for what are essentially pieces of paper that are fast attaining scrap status.) So I will not even tread the murky area of finance but stay with the more familiar if less risky area of brands and branding and see if there are learnings from the current imbroglio that has thrown the world into a tizzy, causing bankruptcies, destruction and even the death of an Indian’s entire family that was living in the US.

Brands under scrutiny

Let us take a look at some of the brands that have come under public scrutiny and been found sadly wanting. First and foremost is brand USA .The foremost nation brand for years, if Western media is to be believed. Let’s not forget that the US was the brand that eulogised the spirit of free enterprise and told the world that this was the only way to do business and run the world, if not the way to live life and use credit cards! To my mind the brand that has taken the most severe beating in recent days is this brand.

My mind goes back to the Seventies and my days at college. My friends from IIT Madras who entered IIT with the objective of going to America considered themselves failures if they did not make it to the land of apple pie.(In fact, some of my friends knew more about apple pie than kheer.) From where to where has this brand sunk? And the US brand sinks into a deeper quagmire as media abounds with stories of its bailouts protecting bonuses of overpaid finance executives from poor taxpayers’ money! Merrill Lynch might be “bullish on America’ but I wonder if the rest of the world shares that same sentiment!


Another brand that is facing a real crisis of confidence is Wall Street which, for years, has been the premium financial market of the world and is more than what Madison Avenue is to the advertising world.


I am not sure how many of you remember Harshad Mehta, the man behind those heady days of a bull run in India. One significant thing happened for Dalal Street and the Bombay Stock Exchange as our rates were flashed along with those of other major stock indices of the world, for the first time. We thought that we had arrived, so big were the other world brands.


Now let’s get to the companies that have been on intensive care. One of them, Lehman Brothers, has been pronounced dead. Last year Lehman brothers were valued at $4 billion by a consulting company and it is a high-profile company that has been making a profit every quarter! The company’s profit growth has been dramatic, as was its stock price performance, almost doubling from $44 at the start of 2005 to around $80 in 2007. And what is its value now?

Brands such as AIG, Lehman, Goldman Sachs, Merrill Lynch and Morgan Stanley have been on the list of the top 50 brands of the world and have been day zero recruiters at business schools. There seems to be a cloud on many of these brands now. This reminds me of a Tamil proverb that when translated, means, “Who knows which snake will come out of which pit?” Remember that the carnage is not over yet. All of this makes me believe that brands are certainly not immortal as we believed and need a lot more nurturing than we had imagined.

Answers to the future

Many of us are brilliant in hindsight and yours truly is no exception. We can all climb on the criticism bandwagon which anyone who follows cricket in India is familiar with or we can learn from this once in a generation happening. There is no doubt that a cataclysmic event of this nature is like a tsunami leaving financial death and destruction in its wake. But what can brands do?

I think the first realisation is that neither brands nor businesses are immortal. Brands that were on top of the heap a few years ago have been consigned to history in a heap. So the first point one would like to make is that the life cycle of brands is very, very different from the life cycle of people that we are familiar with.


We no longer live in the days of Shakespeare and the seven stages of man. Just as we have only the stages of childhood, youth and old age today, I think brands too have very compressed lives. How many of us are aware of this? And how does our strategy reflect this? As Jack Welch said, any fool can make money in the short run and any fool can make money in the long run, but it calls for real ability to make money in both the short run and the long run! So preoccupied were the finance whiz kids with the short run that they have ignored the long run and see where some of them are now!


It is not only the cosmetics

Successful brands are relevant to their consumers and different from their competition. While this is not rocket science it does seem that brands tend to forget or ignore this important aspect.

Many of the brands that are under siege today have their cosmetic part of the brand right. The look and feel, the colours, lofty mission statements are all in place. But how different have they been from each other as all have chased dubious financial instruments and short-term profitability? They seem to have focused on the product category of financial services rather than on their own brand differential which is probably why many of them are in trouble and being tarred with the same brush quite easily.


The team matters

Given the similarity of the range of product offerings of many of these competing brands, what really sets one company apart from the other? It could well be the teams that are guiding the destinies of these firms, the board of directors and their ability to add value to the firm and its operations. Not to be forgotten is their ability to keep tabs on deviations from accepted practices, though what is acceptable in the finance industry in the US seems to be shifting just a little bit today. Bank of America picked up Merrill because it had a better team and clearly a better brand than Lehman which had no such luck.

In the long run we all drink Coke

Amidst all the uncertainty, confusion and chaos it is perhaps relevant to think that some things don’t change, and thank heavens for that! I speak of Coke which has been the most valuable brand in the world for several years now. It continues to enjoy the franchise of young and old in every part of the world and has been passed down from generation to generation like a family heirloom. Leadership is all about clarity, consistency and cohesion and the ubiquitous bottle of cola has demonstrated these qualities in no small measure, which is why millions of bottles of the fluid continue to be consumed.

Build a fund of goodwill

Many of us are great in good times at handling things. We also tend to forget that things can change around dramatically. How often do people go to temples when everything is fine and how quickly they rediscover the road to the temple the moment something goes wrong! Why wait for a rainy day or for trouble to strike?

Companies would do well to prepare for troubled times by investing in social causes that are close to their heart and try to build a corpus of public goodwill, so that they have some recall with the public at large and are not seen as just another large corporation maximising its profits.


Times like these are not easy to handle. But they serve as reminders to companies to focus on their basics, getting closer to their customers, constantly monitoring their own performance and letting their performance and service build value.

Easier said than done?

(Ramanujam Sridhar is CEO, brand-comm, and the author of One Land, One Billion Minds.)

4 comments:

M. C. Kini said...

Very interesting perspective. Enjoyed it.

My two bits worth-

a) While we may nurture brands assiduously, the brand is not immune from the cataclysmic collapse of other so- called iconic brands. While there is no doubt that at the core is a financial mess, what imparts a significant enhancement of the "gloom and doom" hue is the iconic nature of the brands that collapse. That they were around for generations perhaps lent a sense of comfort. This huge loss of comfort and lack of sign posts for the future is damaging the comfort/trust and hence brand values of brands that may have had nothing to do with the status of affairs. For example, what have well known brands like Jet Airways, Cadbury chocolates have to do with the mess? Yet they get short shrift in the atmosphere of insecurity. The only positive perspective on this is that they will definitely bounce back whereas the collapsed brand will perhaps fade away forever.


b) Saw an interesting clip on CNN yesterday where they talked about customers in small town USA flocking to the neighbourhood small bank which is considered "Boring but Safe". An interview with the bank's MD - 3rd generation - highlighted how they had stuck to their "Boring but Safe" principles since 1893 without the flashy credit card/sexy financial instruments of their highly visible ( but now collapsing) counterparts

Which raises the question as to whether the real underlying property of a truly sustainable brand is the sense of security that it exudes and lends to consumers because it is around and an important/essential part of life. Hence the true importance of (perhaps boring) consistency in how the brand presents itself. And when ordinary mortals choose to change brand presentation, trying to make it more "contemporary", whether through features, costume or communication, they may unwittingly end up chipping away at the core solidity that lends the sense of security that lent the sustainable relationship that the brand enjoyed with consumers.

Ramanujam Sridhar said...

I agree entirely with you Chandru.The solidity is the “relevance” of the brand particularly in say financial services. Unfortunately we get carried away by the cosmetic stuff .

Take the case of Canara Bank, despite being a 109 year old bank, it chose to forget its heritage an solidity an is trying to be something that is not and is giving up on its basic strength.

Lakshmi Ishwar said...

fantastic piece, one of your best.....very topical and very relevant.



Keep it up!

N. S.Srinivasan said...

Your recent write-up about brading in BL is down to earth,read-worthyand educative

Congrats