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Photo: iStock
Photo: iStock

Opinion | Take charge of your brand's endurance

A new report on the value of Indian brands suggests that a good run of gains is about to be thwarted by the corona crisis. To stem losses, firms should invest in their bonds with people

In essence, a brand is a symbol of a set of values that its owner upholds for the consumer to invest his or her trust in. It is, of course, an asset. It generates returns and therefore has financial value. Among various ways to calculate it, the “royalty relief" method employed by the UK-based Brand Finance has gained global traction over the past decade or so. Taking into account such metrics as the current value of future earnings, the consultancy arrives at the money a company would pay as royalty to license its use if it did not own it. In its report for 2020 on India’s top 100 brands released this week, Tata was rated the country’s most valuable brand, worth an estimated $20 billion, up 2.3% from last year. This is only a fraction of what Amazon, the world’s No. 1 at $220 billion, was found to be worth by Brand Finance in January, but is impressive for an Indian brand. Our No. 2 is LIC, the value of which rose 10.7% to touch $8.1 billion. Third-placed Reliance saw its brand valuation jump 25.2% to $7.9 billion, thanks largely to its dramatic shift in focus from the old economy to the new. Infosys, SBI, HDFC Bank, Mahindra Rise, Indian Oil, HCL and Airtel made up the rest of the report’s top 10, in that order. Of these, the state-run Indian Oil registered the biggest leap in value, going up 41% to almost $5 billion. If this chart conveys an air of cheer that seems unwarranted amid the gloom of coronavirus, it is because these figures are based on pre-pandemic calculations.

Brands built over decades tend to hold steadier than financial figures such as revenues and profits, and when they suffer an economic crisis, it is usually with a long lag. Yet, it is a sign of how severe the corona crunch is likely to be that India’s top 100 brands may see their aggregate value drop by up to 15% over this year, by the report’s estimate, wiping out around $25 billion. The world’s 500 most valuable brands are expected to lose up to $1 trillion. The projections are based on conditions created by the ongoing recession since the viral outbreak, and they reflect the reduced ability of these big names to attract business for quite some time to come—well beyond a year. Yet, since the size, shape and time-frame of a recovery are not easy to predict for any economy, let alone India’s, valuations in 2021 may differ significantly from current forecasts. Some sectors will surely outperform others, though, and trends in favour of e-commerce could get reinforced. Web-orientation seems to confer an advantage. As a salt-to-software conglomerate, Tata’s brand value for 2020 is pegged at about a fifth of its global sales, for example, while Amazon’s is nearly four-fifths of its 2019 net revenue. With its Jio play, Reliance would be the domestic brand to watch.

The values that a brand professes need to stay consistent, as marketing mavens have always said. But doing this often requires a brand to exercise its agency all the more actively. In this crisis, how well a brand pivots itself to a post-corona market could determine both its customer appeal and worth as an asset. These are times so full of anxiety that they will be remembered for a long time. A brand that goes out of its way to strengthen its bond with people by being there for them in their hour of need, and by helping relieve distress across the country, could count on brand-value gains that may serve its interests for decades to come. A brand is not just a mark of assurance, after all. It is also a long-gestation investment.

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