Saturday, July 7, 2007

Brand dilution is as important as brand enhancement

Any company management's main agenda has to be to do more business. But I could see many management body does not have this mandate. They are more focus on the enhancement of the brand asset of the company and less on doing actual business. The best example is the Swiss Watch Companies (like Rado, Radison, Swatch and Tissot) and Luxary Car companies (like Audi and Mercedes).

Many people may not agree with me. But I actually call this companies to dilute their brand name and capitalize it. They will need money to keep their brand living in future. Any company which does business in a niche market will find very hard to continue long. After all, except Apple there are hardly any company in the world who has hit the market with product innovation multiple times and revolutionized all areas it entered. Apple never diluted its brand for business and remain firm in its focus on product than process. Others all have done business by building the brand for some years and then diluting it for more capital.

We can see the rise of companies who are very focused on doing good business and have broader market consideration. The likes of Toyota, GE, GM, Ford, Microsoft, Citibank etc. These companies constantly explore new market opportunities and tap them. They have a clear cut mandate, Business Growth. They do continuous development of new products and improvement of existing products accompanied by efficient marketing, and product and process innovations.

The most successful companies follow a road map:
Company Establishment ----> Brand Building ----> Brand Dilution for Increased Business ----> Investment on Research and Development ----> Product and Process Innovations ----> New Brand Building and Existing Brand Enhancement ----> Brand Dilution for Increased Business .....and it goes on.

I once thought strong brand means a lot. But it actually isn't. Brand Value is the resource and not the goal. And unused resources are equivalent to not having them. Company's goal is more business, and more business may mean high revenue or high profit not strong brand. Strong brand with low business volume is like collecting resources and not using them. Therefore we can hardly take them as smart business which many brand guru take it.

I could find a very good example in the watch industry for the case study. Swiss companies Tissot or Swatch versus the Indian Watch giant, Titan.

Both the Swiss companies Tissot and Swatch target high price and high profit segment, and they are pretty strong in that market segment. They are doing good business too with high product innovations specially in the design side. But as they are niche players, their business volume is limited.

In the contrary, Titan entered all market segments. It has Titan for the elite group specially of old group and/or traditional people; FastTrack for the youth and sports lovers; Sonata and Timex for the economic to middle segment. This way of doing business has not only given them good business but made them a distinguished market leader in the Indian Watch Market. They have rightly placed all their brands with proper advertising, while covering the entire market. They used the Titan brand and diluted it to build other brands. And in the process, FastTrack become one of the most prominent youth brand in the country and Titan industries expanded it to cover FastTrack sunglasses also. Result very huge business volume.

Today, Titan has become a one stop for watch buyers. They have all quality and all price band products, and these products are distinguishable (thanks to good brand management and proper advertising). Both the quality watch makers like Japanese and Swiss watch companies, and the cheap non-branded Chinese and other Indian companies are struggling to make a strong foot in India. Titan could win both these wars over time.

Titan is expanding its reach outside India as well but till now it does not have any remarkable success. But I believe, it will. Thanks to its business innovation culture. It has very deep pockets and regular cash flow too. This will enable it to make strategic buyout and/or to make significant marketing spend in the new market. I wont be surprised if Titan makes a very high profile buyout from the Swiss or the Japanese. It may take few years and we will see that happen.

I call all marketers to learn from Titan. They need to build the brand, capitalize the brand and reinvest to re-brand. Its a chain. Capital make company and company make further capital to grow or to form new company.

More the merrier, be it the company, the brand or the capital. Brand without business is a capital sink, and one has to realize it. Sooner the better.


mona said...

I got ur blog URL from Orkut Community.

nice finding and greatly agreed with you that once company has created its brand and capture its niche market, it has to expand its horizon..but what if company agenda are differet.they dont want to dilute thier image of being elite..
Like, we say..they have only capture the elite class and its something like, elite prefer those which a more costlier and those things that are not in reach of every people..
If those compnay start expanding and capturing the common man market, it will certainlt loose their elite class..
Like, you have taken the case of Titan...its not being the first preference of elite..They will definetly prefer Rado as theyr give them show being..

In economics, there was an exception with increse in price will lower the demand..
these elite class and products came in that section..
Do, let me know abt your view in this.


Le_Plan said...

Hi Mona,
Thanks for stopping by my blog and giving an excellent comment.

While there are many companies which just focus on their specific market and remain strong there. But I feel this move as totally defensive and there is no war even won by defence alone. They need to be aggressive sometime or the other.

I have huge respect for companies like Harley Davidson, BMW, Ferari, Rado etc. But they are too good for the employees and the users. The question is hoe good are they are shareholders? They are not.

Each of these type os companies companies (except Apple)has performed below market. The companies like GE, Toyota, Honda, Motorola, Microsoft, Google etc, who tries to anything and everything possible are doing far better business. They could make lots of returns to the stake-holders and could even take huge bonus for themselves.

I wont be surprised if all of the niche market specialists get sold out or thrown out of market by the generalists players, afterall from advertising to R&D all costs money. And the aggressive generalist players have it.

Regarding the question of remaining elite class, I feel there is equal number of FastTrack and Titan watches being taken by elites in comparison to the Swiss counterparts. Same for Japanese superbikes (from Honda and Yamaha) in comparison to Harley Davidson. The thing is there is more in Honda to be talked about and there is nothing in Harley to be better news, While the market is more towards Honda.

Hope this makes sense.


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