Nirmalya Kumar doesn’t mince words. Known for his candour and acumen, he has served on several boards as director, including heading strategy at Tata Sons as member of the Group Executive Council. He has also authored eight books and is currently the Lee Kong Chian professor of marketing at Singapore Management University. In an interview with Outlook Business’ Shruti Venkatesh, Kumar talks about building ‘Brand India’, and the damage wreaked by corporate-governance scandals
How is ‘Brand India’ faring?
Overall, it is seen as youthful and energetic. In general, it is a positive story and people in business think of it as a must-win country. But there are problem areas, such as the recent slowdown in growth and communal differences that need to be addressed.
In 2020, have the ‘ingredients’ of what make a good brand changed?
It’s hard to say what a good brand is. What people are looking in a brand is generally a functional or a symbolic need that is fulfilled. We call it the logic and the magic of a brand. Every brand has to question why it exists. And in that existence there is a functional part – this is what I do for the customer – and there is a secondary part related to the personality of the brand. For instance, when you consider Adidas, yes, it is about the shoes, performance of the shoes, but it is also about what the brand says about me as a person.
Have Indian businesses understood the importance of brand-building?
The top companies in the world know that we live our brands through our products and our people. Increasingly, ‘people’ (those employed by the brand) are becoming an important part of the brand, especially in those brands where people interact with the consumer. For example, in brands such as P&G, its people don’t interact with the consumer, the product does. So brand has to be communicated through product and advertising. In the other case, in a company such as Starbucks, people serve you the coffee. So while the product is important, there is also a big ‘people’ component of the brand. If the person serving you the coffee doesn’t behave in a customer-oriented manner, then you don’t get the right product and the right experience. If you are in a service business, where people interact with the end user, then people perhaps become even more important than the end user.
Where do Indian companies lack and where do they score, over global peers?
In general, whether boards in India or boards overseas, there are few companies where marketing comes as an item on the table. Generally, the meetings are structured around finance, strategy and, to a lesser extent, on following the values that are espoused. Generally, branding issues rarely come to the table unless there is a crisis.
How do consumer trends change? Why do FMCG companies with their market research teams fail to foresee the change?
Market research tells you what the customers think today, based on the choices they have today. It is hard for consumers to imagine choices that don’t exist. But when new companies come, they cannot offer what existing companies are offering. They have to offer something new, and so they do. Secondly, today it is important for brands to practise social listening. It means paying attention to what people are sharing on Facebook, Twitter or Instagram, to understand the conversations that are taking place and to get some insights into consumer trends. This listening has become increasingly sophisticated, especially over the last five-years.
Is deep discounting a good way for start-ups to build a brand?
There are two kinds of start-ups: traditional company start-ups and platform company start-ups. In the beginning, to get users and make it a default platform, platform companies have to do a lot of discounting. Once they become ‘the’ platform, then they monetise. This is different from the traditional business model we follow, where we have to start making money on day one. But platforms can either be sticky or not sticky. Facebook is a sticky platform because, if you want to move, then all your friends have to move with you. On the other hand, Uber is not a sticky platform as customers end to have more than one [ride-hailing] app on their phone. In such cases, giving deep discounts initially is not going to lead to a pot of gold.
The market is becoming increasingly competitive and consumers have the attention span of a gold fish. Then, how can companies effectively build brands or create recall?
The most important thing is to be relevant to the customer. You have to be relevant to their current state of consumption and state of mind. Secondly, being relevant is not enough because there are seven other brands that are relevant too. So, you have to be different. The last part is being credible. That is, if I promise you something, can I deliver it? If I don’t, then I have disappointed the customer and destroyed the brand, no matter how much advertising I have done. Therefore, the three things to remember would be relevance, differentiation and credibility.
What about the flip-side of brand-building? We have seen that when a CEO or promoter, who is a bigger brand than the institution, gets embroiled in a personal scandal, it affects the company. Should businesses be wary of putting one person on a pedestal?
Most often, these companies build a person as a brand when their personalities are larger than life. But when a company grows to become an institution, it is not about a person anymore. For instance, Virgin initially was built around the persona of Richard Branson, but over time, it has become a brand that is about innovation with a rebellion. Some of the founders’ values have seeped into the brand, but it is not completely associated with that person.
With the Cyrus Mistry-Ratan Tata face off or the recent disagreements at Infosys, corporate governance at many companies has been called into question. What message does this send out to investors?
A brand exists at several levels. It does as a corporate brand, which affects its interaction with the broader community. It does as an employer brand, which affects its interaction with prospective and current employees. And, it does as a consumer brand. When a corporate governance scandal or any scandal hits a company, it affects the corporate reputation dramatically, the employer brand somewhat and the consumer brand, depending on how it’s managed, may suffer minimal damage. The NCLT Order [of December 2019, reinstating Mistry as executive chairman of Tata Sons] will have an impact on the brand image, but the extent of it depends on how it’s managed. If consumer brands are distinctly positioned, generally, consumers will not react to what is happening on the corporate governance side. I say that [the effect of a corporate governance scandal on the consumer brand] is limited. Broadly, such scandals have a negative impact on the credibility the companies (Infosys, ICICI and Tata Group) enjoy with governments across the world.
How best can businesses bounce back from such scandals?
You need to be quick in responding to it, and not ignore it. You then need to make corrective actions, and these actions need to be seen as credible by the community at large. But companies find it hard to admit that they made a mistake. The Board of Directors is generally populated with people with huge egos. In the ICICI case, when every data point was telling them that there was a problem, they kept reissuing statements that they will protect the CEO.
Is this an India problem?
In terms of laws, India has the best for corporate governance. In practice, India is probably among the lower half.
Finally, what would your advice be to the government to take back brand India to where it was?
Focus on economics, forget the rest. The job of the government is to make the rules of the road, so that businesses can compete and win. And businesses that win are the ones that offer the best value to the customer and best returns to shareholders, combined. So have rules to enable clean and healthy competition, which benefits customers and the investor community.