When Brand is a bad word
In the umpteen conversations we have had with businessmen, with many, one thing stands out. For them, building a brand is inconsequential to business success. Who then are these people, who refrain from entertaining us as we attempt to woo them with the dream of creating a formidable brand?
Picture an individual who has been involved in the trading profession for some time, has a wide network amongst the distribution community; perhaps been a distributor of C&FA for a brand marketer. Their network of relationships is strong enough for them to slide their own product through the distribution chain at an appropriate time.
This capability is coupled with their belief that rather than invest in expensive brand building that produces no tangible results; it’s a preferred route to bet that money in lubricating the supply chain, since wholesalers and retailers are motivated to push products that offer them competitive margins. There are numerous examples of where this model has worked, these businessmen have found trade favour and given the established brands a run for their money.
Such businessmen carefully select the product categories to operate in; they stay away from premium end products, choosing to concentrate at the mass end of the market. Hence, they would tend to target SEC C, D and E, in the metros but moreover in small towns and rural markets. They plough the advertising investment they would have made into trade margins and bringing down MRP, and with a substitutable product (i.e. where the retailer has influence over the customer) their sales are ready to soar. There are examples galore of local players who have cornered considerable share in the soaps, detergents and the dishwashing categories. A trader’s delight, a customer’s budget planner and the large MNC marketer’s nightmare!
This then is their business design; which mind you is a successful one. They may not have created a powerful set of brands but manage to build a profitable business. We have a case in point of a business contact, whose brand name you might not have heard of, like Kinley, Aquafina and Bisleri roll off your tongue; but his mineral water has a strong presence in Karnataka, his margins to trade superior and his product consumed in copious quantities by the not so discerning customer. His business is profitable, and his revenue continues to grow. Would he be able to replicate this in a category of mobile handsets, which is a higher involvement category … perhaps not!
Why is it then that this breed of averse to creating and owning a known brand, which they have the option of doing? One immediate thought that comes to mind is that huge media spends is likely to draw the attention of the taxmen, be it Income Tax or Central Excise to their businesses. It’s true that for many of them, the business commercials are not fully accounted and reflected; which also permits them to offer better margins and pricing compared to the fully transparent companies.
However, there is another reason. This breed of businessman is not emotionally attached to the enterprise. For them profit is the clearly defined motive, they do not seek the status that comes with being associated with a known brand. They do not want to be in the public eye at all, tend to be low profile and are happy to be well known and respected in their business community.
My colleagues from our Brand consulting practice often come on strong with this segment, because they see a great brand potential that these businessmen are sitting on. However, while we still battle and try to proposition these folks; we equally acknowledge that it is not imperative for everyone to chase the dream of building a brand. There is an alternative model, and this is it!
That of businessmen, who at optimized investment enter a product category, grow it to a certain revenue in a market where they are well connected; and then rather than trying to extend geographically or enter with premium products, extract profit from the market share they have.
Do they run the risk of similar minded competition and shifting trade loyalty? Yes, of course.
Their recourse? Once their flagship business is bringing in steady revenue and profit, they ride on that … milk it and invest in a new line of business that can be leveraged through the same sales channel and strategy. It’s a model that has worked … exists today … and is here to stay … for a few decades at least!