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Wednesday, 23 April 2014 00:00 - - {{hitsCtrl.values.hits}}
As Sri Lanka sweeps into being an upper middle income country, are we ready for the rise of the new middle class consumer, who maybe neither rich nor poor but who has the intelligence to make smart decisions and who understand the good from the not-so-good?
Marketers need to think different to the linear extrapolations that we have been trained to do. This was old world thinking. We need to see the opportunities through a fresh lens. This is a view consisting of an assortment of new aspirations causing changes in market segments, with diverse customers who have different priorities and capabilities than that which we have been used to in the past.
Such trends are reflected in Brand Finance’s Global 500, where the top brands are technology giants led by Apple, Samsung, Google and Microsoft. See table 1.
Tech brands in general have tightened their grip this year. Walmart is the only non-tech brand remaining in the top 10. Once the world’s most valuable brand, it now sits in ninth position having been overtaken by the online retailer Amazon. The upstaging of the world’s biggest retail brand by the biggest online retailer represents yet another coup for tech brands over ‘real-world’ businesses.
Therefore the message is clear; the only way companies can sit atop the table is if their products, services and strategies are managed for change as their life expectancies are shrinking rapidly.
The brand and organisation culture on the other hand must be managed for continuity, with a long term view in mind. It is this dual strategy that has enabled old world brands like Coca-Cola, BMW and HSBC still create enormous value and be on the global most valuable brands list. These are possibly the strongest brands on earth because they have titanium strength based on a foundation of a strong culture and values on which the business is rooted.
The purpose of Brand Finance’s annual brand analysis is to drive home the fact that brands can actually play a vital role in translating a company’s competencies into market success. Effective management of brands is therefore an important element of a good business strategy which in turn impacts business valuations.
Having a more disciplined approach to brand building is therefore mandatory for success. In this hyper connected world, where retaining consumer attention is so difficult, having a solid and structured brand story is vital to anchor and build such brands. This needs to be an integral part of the culture of the organisation and its core values and beliefs which could stem from so many factors that are close to the heart of the company; such as preservation, protection, conservation, promotion of issues, prevention, etc.
In order to have deeper engagement with consumers there has to be a purpose to the brand, a higher meaning beyond the functionalities of the product or service as well as a sense of fun, interactivity or gaming which can translate into building loyalty and long term support. In Sri Lanka, we should therefore be evaluating our own most valuable brands in this context. See table 2. How many are really on the path of building their strength through such strategic approaches? Many of them are on this list purely because of their historical legacies, buoyed by regulatory forces and the lack of international competition in the domestic market.
Winners and losers amongst Sri Lanka’s most valuable brands
In our annual review of brands (published in the 2014 Brands Annual), this year we find there has been a significant increase in the overall value. Looking at the top 10 brands collectively, the brand value has increased by 31% to Rs. 190 billion. With a table that is heavily weighted towards the financial sector, what this implies is that the wider Sri Lankan economy is still seeing the post war benefits.
As the economy and consumer spending catches up, with the years lost to the war, many brands have achieved strong financial growth and, coupled with a perceived lower risk attached to the country/economy, this has resulted in a large increase in brand value.
We continue to see the consolidation of the established brands at the top of the table, as they begin to race ahead despite their giant sizes.
The top 10 brands are all familiar faces, having been there or within striking distance of leadership for several years. These include Bank of Ceylon which continues to retain the top spot, whilst this year they have pulled away from People’s Bank with whom they have had a close tussle in the past. SLT has tumbled out of the top 10, whilst its mobile carrier Mobitel powers up the table and now sits at No. 17. This is a clear sign of the transformation that is underway in that company. Commercial Bank despite its large size continues its dramatic rise and is within touching distance of the second placed People’s Bank – truly a remarkable performance for a banking behemoth.
By closely reviewing the table over the years, we can also identify brands that are in deep trouble. There are several that are heading to the bottom of the table. The challenge for many such companies that are vulnerable and specifically those that are stagnating in the middle of our table, is to ‘future proof’ themselves by strengthening the brand.
This is easier said than done, because based on our extensive involvement in the brand consulting business, many companies fail to realise the difference between the brand as a trademark vs. the brand as an asset that can be leveraged. This is a small shift in mindset, but has massive impact on the future company performance.
"It’s time for marketers to change the way they operate and develop the power of brands by applying insight and imagination to create better ideas, reaching audiences with global aspirations, aligning the organisation internally, and becoming the driving force for innovation and growth. Doing so requires a mindset shift to infuse an inventive spirit into marketing"
The future challenges
The challenge however is once the pent-up demand of the economy has been filled, how does the growth momentum be maintained? These are what many companies are now beginning to grapple with, as they find it more difficult to grow as consumer spending becomes more saturated. So, predicting the future is key.
With over 10 years of historical data on some brands, Brand Finance has a track record of brand performances overtime. We can see once powerful brands rapidly declining on our table, whilst others are making steady progress up the charts. The data we have is essentially historical, the challenge for management however, is to see the future, or alternatively, to predict it.
This can indeed be done through effective modelling and valuations that factor in future projections with the underlying revenue drivers. Such brand valuations are often used as a beacon to chart the course of a brand, rather than looking back in the rear view mirror.
The challenge for marketing then is to move from a pure consumer or customer focus to a more holistic approach to driving the business, through sustainable practices impacting multiple stakeholders, creating innovation platforms through the use of appropriate technologies and developing the brand from ‘inside’ the company through close interactions with the human resource department. Doing so requires a different view of the ‘new market’ and that of the brand being built. Clearly defining it and establishing its role becomes central to the strategy, and buy-in across the organisation. It’s therefore time for marketers to change the way they operate and develop the power of brands by applying insight and imagination to create better ideas, reaching audiences with global aspirations, aligning the organisation internally, and becoming the driving force for innovation and growth.
Doing so requires a mindset shift to infuse an inventive spirit into marketing.
[The writer is Managing Director of Brand Finance Lanka (www.brandfinance.com).]
