What’s brand value for the value-for-money driven 350 million middle-class Indians, the very lot which is often credited for being the chief driver of the passenger car industry that scripted a double-digit growth of 12.6% during the past seven years? What’s brand value for a nation, where only 16.4% of the automobile industry is accounted for by passenger vehicles, and where 75.4% of the total unit sales per year is accounted for by easy-on-the-pockets two-wheelers? Recall those times, when all that was known in the name of fuel-guzzling machines for the ‘common’ Indian were the humdrum scooters from the Bajaj stable, which needed a lean-on-one-side yogic exercise every time you felt the itch to give it a kickstart; how apt that there were just three sub-brands in that segment then and each needed the same treatment on non-performance! Notice the manner in which the number of vehicles on the streets have hit higher highs during the past so many months. And if you thought that we, as a market have found high-priced ‘brands’ digestible, we recommend to you a flashback to the nationwide cheers which an entry-product like the Tata Nano received! Really, is the Indian consumer even concerned about brands when it comes to choosing his new four-wheeler? In other words, have brands – in general – become so undifferentiated that one doesn’t matter more than the other? Neeraj Garg, a Director on the Board of Volkswagen India gives his response to us, “Branding creates awareness among consumers. Unless people know we are Volkswagen, they will not come to our showrooms. Once the consumer comes to our showroom, he experiences our products and our services and realises that we offer world class service and products. There is a direct correlation to a large extent... more the awareness, more the walk-ins and more the sales...”
Keeping our arguments and Garg’s justifications aside, let us first talk about the real situation in the Indian four-wheeler industry, for which the Society of Indian Automobile Manufacturers (SIAM) projects a happy tale of the industry becoming one of the largest in the world in the near future. But what it misses is the confusion in the minds of the consumers. Here’s proof – how many four wheeler brands exist in the market today? Honestly, an environmentalist who’s sworn by the gods to eliminate ozone-depleting engines will have a closer-to-correct seat of the pants response than an ordinary Indian, waiting to lay his hands on his new value-for-money car. And why so? Surely, this has nothing to do with any intellectual evaluation of the Indian middle class genome, but the truth is – they really don’t care! And as far as the number of brands on Indian soil go, the count at present stands at a healthy 90. Beat that for clutter!
Let’s begin with some real brand valuation figures here: The Millward Brown Optimor 2009 Most Valuable Global Brands rankings honours the Japanese Toyota as the number one global auto brand, with a brand value of $29.91 billion. The others that follow in the list are: BMW ($23.95 billion), Porsche ($17.47 billion), Mercedes ($15.50 billion), Honda ($14.57 billion), Nissan ($10.20 billion), Ford ($5.92 billion), Volkswagen ($5.84 billion) and Lexus ($4.55 billion). The Interbrand/BusinessWeek’s Annual Ranking of the Best Global Brands for 2009 shows that the top valued auto brands in the world are: Toyota ($31.33 billion), Mercedes-Benz ($23.86 billion), BMW ($21.67 billion), Honda ($17.80 billion), Ford ($7 billion), Volkswagen ($6.48 billion), Audi ($5.01 billion), Porsche ($4.23 billion), Ferrari ($3.52 billion) & Lexus ($3.15 billion). Two lists, one surprise – none of the names mentioned in the two much-revered lists given above (read as: the most valued auto brands in the world) feature amongst the top sellers of four-wheelers in the country. As per SIAM’s report, the top five sellers of four-wheelers in the country are – Maruti Suzuki India Ltd. (with a market share of 47%), Hyundai Motor India Ltd. (16%), Tata Motors Ltd. (15%), Mahindra & Mahindra Ltd. (7%) and General Motors India (4%), clearly indicating that for starters, global brand equity amidst a plethora of brands in the Indian four-wheeler market means nothing more than just a number! Of course, if we talk about the luxury car-market in India, everyone knows that the products in this segment sell due to their prestige and brand values, as even Debashish Mitra, Head - Marketing & Sales, Mercedes-Benz India shares with us, “In luxury cars, the consumer has made his mind towards a particular brand before going in for the final purchase. Thus the brand in such a case makes a lot of sense.” But as far as the mass car market is concerned (the most critical segment, as far as the Indian market is concerned), the secret here is to realise that in order to have a best-selling brand in the Indian auto market, all you need to do is focus on marketing your vehicle well, which most necessarily needs to be a cost leader (and therefore competitively priced) with an engine that doesn’t catch fire!
As far as forecasts are concerned, they certainly seem bright with SIAM further claiming that despite the cyclical changes in the industry and economy as a whole, production figures for the passenger vehicle segment have appreciated (CAGR) by a stunning 15.6% during the past five years, to touch 1.22 million units in 2008-09. So while on one hand, we have a great growth story being written down in terms of domestic production and consumption, on the other, we have the much honoured Indian auto brands going places, our exports having grown at a CAGR of 30% in the past seven years, crossing 331,500 units during 2009 alone. But there’s the rub: no Indian auto brand has been featured amongst those most valued by either Millward Brown or Interbrand/BusinessWeek. Does this mean that names like Maruti Suzuki India Ltd. or Tata Motors, that are relatively unrecognised when it comes to brand value amidst global names, have nothing to worry about when it comes to brand-related payoffs? Strangely, even though the Indian auto brands are having a roll in a market, which according to the International Yearbook of Industrial Statistics 2008 released by United Nations Industrial Development Organisation (UNIDO), is ranked 12th in the list of the world’s top 15 automakers, various global researches across sectors strongly prove how brand value does matter when it comes to shareholder wealth and other financial implications. Prof. Natalya Delcoure of the College of Business Administration of the Sam Houston State University proved through her paper titled, ‘Corporate branding and shareholders’ wealth’ how “Corporations that own superior brands exhibit higher profitability and create shareholders’ wealth independent of economic downturns.” Using statistical analysis, she proved how, “Strong brands appear to have lower market risk and deliver greater returns to shareholders compared to the relevant benchmark.” Another empirical work by Professors Thomas Madden, Frank Fehle & Susan Fournier of Harvard Business School titled, Brands Matter: An Empirical investigation, testifies how “strong-brand portfolios significantly outperformed the market.” Their calculations showed how while the portfolio of strong brands “yielded an average monthly return of 1.98%, during the same time period, the benchmark portfolio on average returned 1.34% per month while the one-month Treasury bill returned 0.42% per month.” Further on, a 2001 Ernst & Young study claimed how “corporate reputation accounted for upwards of 30% of a company’s stock price.” A study by JPMorgan (in association with Interbrand) concluded that “on average, brands account for more than one-third of shareholder value. Brands create significant value either as consumer or corporate brands or as a combination of both.” Various other studies by academicians from Harvard and the University of South California, published in the book titled ‘Brands and Branding’, indicate that “companies with strong brands outperform the market in respect of several indices. It has also been shown that a portfolio weighted by the brand values of the Best Global Brands performs significantly better than Morgan Stanley’s MSCI index and the American-focussed S&P 500 index.”
Brand valuation experts Millward Brown was quick to make its claim in a report titled, “Brand-driven shareholder value creation’ which proved empirically how “Brands with greater market presence and a superior ability to convert customers from brand awareness to strong relationships significantly outperform the market, producing annual average total shareholder returns of 10% to 20% in the period 1998 to 2006. In comparison, the market on average yielded a mere 4% return to shareholders annually.” A paper by McKinsey & Company titled, ‘The New Rules of Branding’ also proves how “companies with strong brands have shareholder returns of 1.9 points more than their industries’ average.” This was doubled up by another McKinsey product titled, ‘The Power of Brand Delivery’, that interestingly put forward its proposal of an emotional connect. “Strong brands create value for shareholders by building emotional bonds with customers,” is what it claims. But who better to talk about emotional bonding and emotional attachment than the Indian consumers. It is therefore surprising then that the global automakers’ claims of great intangible brand value score low on Indian frontiers when it comes to performance in the market. Value-for-money is what the Indian middle-class consumer generally looks out for in everyday consumption, from the time she makes her choice of detergent to choosing the ‘right’ kind of four-wheeler. The Maruti 800s, the Altos, the Zens, the i10s, the Swifts, the Santros, the Indicas – these are of the ilk that made great headway into the Indian market, having sold millions of units till date. But ask an ordinary consumer what characteristic he associates with these abovementioned brands between being ‘performance-based’ and ‘goodwill-based’, and the answer would be nothing but the obvious – these are value-for-money performers and not brands which command billion dollar goodwill in the market (compare them to the BMWs, the Audis, the Mercs and the Land Rovers and you’d understand our point here)!
But then, there are the believers and the disbelievers; and then there are the preachers, just like the auto companies’ marketers who are just gung ho about whatever rolls out of their assembly lines onto the Indian soil – for them their ‘brands’ successfully play the desired trick in the minds of the Indian consumers! One such agent is Ankush Arora, GM – Sales & Marketing, GM India, who says to us that the GM brand “as a whole gives a platform which is then leveraged in the performance of the vehicles. The consumer buys the final product both on the perception of the brand and the performance of the vehicle.” To this, Ravi Bhatia, VP - Commercial, FIAT India adds his take on his firm’s brands, “The FIAT brand is very popular in the country and we believe that FIAT’s long association with the country has helped the company to gain overwhelming initial response for the products.” When quizzed about the effect of the brand on consumer decision-making process, Sandeep Singh, Deputy MD – Marketing, Toyota Kirloskar Motor, quips, “Toyota as a brand stands for quality in the country which is mostly because of the high quality of the products. On the industry front, I believe branding makes a lot of sense as most Indians make their final purchase with a perception about the brand in the mind.” Our take: none of these three brands feature amongst the top five sellers of four-wheelers in India – they possess a combined market share of less than 8% in the country!
Conclusively, brand value in the Indian auto market is all about its direct linkage to performance of the machines, as Shahshank Srivastava, Chief GM - Marketing, Maruti Suzuki India concludes, “The consumer buys the brand, which is only a small part of the package & offering, with performance being the most critical part of it...” When the market leader says it, you better believe it, for there’s one last piece of report titled ‘What Price A Strong Brand?’ from Millward Brown which backs him up and justifies Maruti Suzuki’s leadership position in the country. Findings of the research prove how “companies that own the strong but lesser-known brands outperform the companies with high-presence, high-voltage brands.” No wonder, Maruti, despite its strong, yet relatively lesser recognised ‘global’ brands in terms of brand value (like Alto & 800) ripped apart competitors who had cluttered the Indian auto market. Brands matter, but only if you’re selling a golden chariot; for the ones you call Indian consumers are just way too happy with easy installments and competitively priced vehicles, slowdown or no slowdown!
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