Branding in KPO

From: Tilotia Akhilesh
Sent: Monday, October 24, 2005 1:16 PM
To: Iyer Ramganesh; Raja Kanishka; Pawar Swapnil
Subject: RE: The power of Brand - How relevant to India


cartel is the word that i was looking for....and the way i look at things (patents, brands, incumbent-protection rules in any market) are just means by which the businesses make money....

my idea in the ed sector (in context of this mail being "how relevant to India") was: can we think of making a KPO brand in India for educating the firang students (i do hope the discussion does not waver here!!). the DPS, Xavier's etc have created a name for themselves in the physical world...in context of KPO, can we create a Brand where we can make the tons of money? i can visualize the profit pool based on the huge PPP and other arbitrage opportunities...

cheers,
akhilesh

ps: the other big reason for putting a sector name was to see if we can think more on the implementation issues of these mails than just long theoretical debates!



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From: Iyer Ramganesh
Sent: Monday, October 24, 2005 12:55 PM
To: Tilotia Akhilesh; Raja Kanishka; Pawar Swapnil
Subject: RE: The power of Brand - How relevant to India


education? of course there are brands all over the place
dps in the north / west and psbb in south are examples

i agree with ur last sentence... in fact i read an article somewhere saying that almost all money in the market (in the absence of protective tariff) is being made through cartels (more abundant than monopolies)

ramg





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From: Tilotia Akhilesh
Sent: Monday, October 24, 2005 12:49 PM
To: Raja Kanishka; Iyer Ramganesh; Pawar Swapnil
Subject: RE: The power of Brand - How relevant to India


am no marketing expert but the way I look at brands is that it is the creation of a mini monopoly profit pool - just like patents. what i find interesting is Kan's logic of branding a low cost product (which i think is superfluous): a brand will typically command a much higher price than its cost.

what 1 is trying to do when 1 brands a product is to make the customer come to my product again and again...and this is more powerful than the patents that provide a more legal (forced) and time bound monopoly. brands - since they connect at the more emotional level (which given that man has remained heart-ruled than head-ruled for the last 5,000 years - and I dont see that changing till we plunge into a black hole) will always provide a much better fortification to the monopoly than the forced patents (people like ranbaxy's will keep hitting at your - pfizer's - patents)

look at the industry that ramG has pointed out, note that none have been able to establish an emotional connect with the consumers. to establish emotional connect what one needs to provide the customer the assurance of the same (hopefully world class!) quality consistently (which can happen in case of both products and service and hence BCG is a brand name)

what interests me is that the educaton sector, esp the primary and the seconday sector does not hae powerful "brands"? think we can create on here in this era of KPO?

cheers,
akhilesh

ps: WB rocks: he has introduced me to the concept of monopoly profit pools which i believe is fundamental to any business





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From: Raja Kanishka
Sent: Monday, October 24, 2005 12:30 PM
To: Iyer Ramganesh; Pawar Swapnil; Tilotia Akhilesh
Subject: RE: The power of Brand - How relevant to India


very little idea about 1&2. so wont comment....3 is useless brand or no brand....but as for 4, have had an up close & personal look at what cos. have been doing to establish themselves as a brandin India & worldwide and it is extremely fascinating!



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From: Iyer Ramganesh
Sent: Monday, October 24, 2005 12:19 PM
To: Pawar Swapnil; Raja Kanishka; Tilotia Akhilesh
Subject: RE: The power of Brand - How relevant to India


i agree with kanishka on this...
despite major time information flow nowadays with all technology, 1 has not seen a decline in power of brands in most industries
in fact, industries with no brands (or no major brands) have never made money and have seen significant churn of companies

e.g. 1. aluminium (no joker in the world has made money)
2. HRC steel (no money again), though CRC steel and value add steel has brands and hence Arcelor etc have made money there
3. airlines (where there are brands, but consumers dont care much)
4. cement - another graveyard for many (however cos. now desperately trying to brand their product)

ramg



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From: Pawar Swapnil
Sent: Monday, October 24, 2005 11:54 AM
To: Raja Kanishka; Iyer Ramganesh; Tilotia Akhilesh
Subject: RE: The power of Brand - How relevant to India


which brings me to the point of my steady state proposition..

In the long run, (with human beings still around and companies still existant), there weould be no brands..

brands are a transient distortion brought about due to information assymetry, longing for exclusivity and concerns for quality.. (each applicable in different measures to various brands)

coke is thought worth 10 bucks due to concern for quality.. whatever be details of pesticides etc, the myth or reality is that coke is centrally manufactured, is consistent in terms of taste and is drunk by millions.. kind of a quality assurance in a beverage..

eventually, people will start evolving into higher human beings with exclusivity brought about by more inherenht features than acquired ones..
quality will cease to be an issue with advances in standardization.. and information assymetry will also go down with technological and customer rights progress..

so then, everything will be a commodity.. !!!

PS: brands would not be older than 200 years.. and in a true sense have only arrived in last 100 years.. what say?



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From: Raja Kanishka
Sent: Monday, October 24, 2005 11:44 AM
To: Iyer Ramganesh; Tilotia Akhilesh; Pawar Swapnil
Subject: RE: The power of Brand - How relevant to India


I do agree with the network effect bit on MSFT but what I dont agree with certainly is your hypothesis of brands being associated with snob value. Without getting into jargon ( I dont know any), there is I think something called cultbrands (or some such name) whose central value proposition is exclusivity. So they work by taking you to a higher perceived pedestal and may have low utility per se. Harley Davidson, Rolls Royce, Apple (used to be one till about 2-3 years back but everyone has an iPod these days) are classic examples.

However, Coke is one of the longest surviving and valuable brands and that does not have snob value as a value proposition. A bottle of coke, when I last heard, would cost the company about 2.40-2.50 including the bottle. It sells for 8-10 bucks because there is a taste and a unique flavor that you associate with Coke. Now some of that taste difference may be actually there, most of it might be due the brand effect but the bottomline is you will not think twice before paying 10 bucks for a coke bottle but you will certainly raise your eyebrows if the lemonade vendor on the street starts selling a glass of lemonade for more than 4-5 bucks.

conclusion: Every brand has its USP, it may be snob value for some (Rolex), same taste (Coke ) for others, prompt & assured service for some others (Fedex) but I owuld certainly not think that snob value is the sole driver.
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From: Iyer Ramganesh
Sent: Monday, October 24, 2005 11:31 AM
To: Raja Kanishka; Tilotia Akhilesh; Pawar Swapnil
Subject: RE: The power of Brand - How relevant to India


This point is true - but I believe only to a certain extent.

MSFT is hardly an example of brand - I think its success is not due to people's awe of the Windows brand, but due to the network effect, where I cant change my OS even if I want to, since I want connectivity and applications to run on my machine....its similar to, but much stronger than, the efffect of phone number change playing on stickiness to a particular provider. I stick to Orange not due to its brand, but due to pain of number change.

Brand is much more relevant in things like Nike, Rado, Longines, etc
Here I have a hypothesis - the more the snob value in a product, the more successful a brand can become...
This is bcos the brand then gets dissociated from the functionality of the product per se - why will a sensible man buy a watch for a few lakhs?

Shoes have snob value - but less than watches... so moderate success of brands here

For a country like India, where miniscule % of people can afford to have snob value, I think the volume game is more relevant than the brand game

Ramg



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From: Raja Kanishka
Sent: Monday, October 24, 2005 11:22 AM
To: Iyer Ramganesh; Tilotia Akhilesh; Pawar Swapnil
Subject: RE: The power of Brand - How relevant to India


I dont think the central argument of the guy's plea is that the volume / low cost route is bad.....I totally agree with the Chinese argument of great productivity by playing the volume game. Similar is starting to be seen for India with their gameplan of lowcost IT offshoring / outsourcing and what now. So there is no doubt that the India/Chinese strategy brings in its rewards and on a sustainable basis (i guess ~20 years of Chinese whirlwind growth is long enough to be called sustainable)

The argument which hits me hard is that the efficiency and impact of a brand is so huge that all other strategies fall on their face. The MSFT example is really compelling. It speaks volumes (no pun intended) about the price points that an MSFT will be able to charge on a sustainable basis because of its extremely high brand equity. I think that as Indian talent and brainpower becomes recognised worldwide, it is time someone thought of building a global brand whose value proposition is unparalleled quality/service rather than 1/3rd the price at which it is available in the west. Imagine if you had a brand like Wal-Mart and you could combine it with a low cost gameplan : the two strategies put together can potentially lead to a blockbuster arrangement!

In A, we did some work on brand valuations where we came across this Interbrand (the global authority on brand valuations) study which stated that for the top 20 brands globally (like Intel, MSFT,Coke etc) , the value of the brand is close to 50-60% of their mkt cap! I dont know if the biggest Indian brands will be able to match even 1/10th of that !

~KR



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From: Iyer Ramganesh
Sent: Monday, October 24, 2005 11:04 AM
To: Tilotia Akhilesh; Pawar Swapnil; Raja Kanishka
Subject: RE: The power of Brand - How relevant to India


fair point...
though it doesnt explain how china is making its unbelievable growth through the volume route, not the brand one....


ramg



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From: Tilotia Akhilesh
Sent: Sunday, October 23, 2005 12:31 AM
To: Iyer Ramganesh; Pawar Swapnil; Raja Kanishka
Subject: FW: The power of Brand - How relevant to India


very interesting article.

cheers,
akhilesh

ps: in many cases, i keep spamming you guys with articles that interest me. in case you come across articles that interest you, please do keep spamming me!



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From: Mankad Shishir
Sent: Friday, May 27, 2005 8:15 PM
To: Mall Amitabh; Garg Ashish; Srivastava Ravi; Bansal Seema; Sinha Abhinav; Sharma Puneet; Jhunjhunwala Pranay; Verma Sharad; Tilotia Akhilesh; Gupta Gouri; Vohra Rohit
Subject: FW: The power of Brand - How relevant to India





I guess this is an old one but nevertheless very provoking and inspiring.....a little longish though.







There's a small question-and-answer game I play with business audiences
when I'm called to address them. I ask them to estimate what they'd pay
for two pieces of leather, about 12" by 6" in size. The answer's
typically about Rs 50 or so.

I then ask what they'd pay for two pieces of flat rubber, about 10" by
4". Again, the consensus is about Rs 20. Now I ask their quote for two
pieces of sturdy string, measuring about three feet long each. A rupee
or two, I'm told.

What would they pay for an hour of manual labour? Oh, about Rs 20, they
say. I then ask them to add up the cost of the goods and labour; some
attentive soul says it's Rs 92. Now I ask them, suppose you took that
leather and instructed the labourer to spend an hour shaping it over the
rubber, pass the strings through the top - and make a decent pair of
shoes that you could sell at a roadside vendor, what would you get for
it? About Rs 150 or so, I'm told. When asked for the profit margin, some
wag quipps that it's about 35%.

I then ask for the cost of four tiny pieces of leather, cut into shapes
of letters of the alphabet. Oh, another two rupees at the most, I'm
reassured. The revised total cost? Rs 94. And what if I arranged those
little pieces in the order 'N', 'I', 'K' and then 'E' on the shoes and
THEN sold them? What would I get? There's typically silence in the
house, and then pandemonium. What would the profit margin be, I ask?
Nobody bothers to calculate in the hubbub.

I do this to illustrate a simple point: that brands earn more. Not being
accustomed to jargon, I did pick up the concept that this line of
activities involved in creating a product - from the slightly reluctant
cow, to the tanner, the dyer, the rubber moulder, the lace-maker, the
cobblers and cobbling machines, to the stockists, the retailers and
finally the eager Michael Jordan fans - is called a value chain.

And the greatest value in this chain is at the end of it. That's where
the money is. I also note that virtually, without fail, all of Indian
industry has been concentrated at the wrong end of the value chain. In
every business, be it leather goods or garments or even computer
software, we have largely been the leather and cobbler suppliers to the
world. A simple calculation brought this home. An Indian IT service firm
was making loud whooping noises about crossing a billion dollars in
revenues. I read they had some 25,000 people who took them to that
number. I looked then at a former client of mine, Microsoft, who - with
twice the number of people - pulled off $32 billion in revenues. A
productivity-per-employee figure that is not twice or 4 times, but 16
times that of one of our more admired companies.

when will we begin to learn that building end-user brands - and not
low-cost processes - is what brings the moolah home? That's what will
increase our GDP, bring in the wealth, and actually make us a developed
nation.

Why is it that we teach thousands of B-school students the art of brand
creation - from understanding customer needs, competitive strengths, gap
identification and obscure market research techniques - and then deploy
them at multinationals selling soap with "new, increased carbolic acid"
rather than with someone creating global brands from right here in
India? Beats me.

I see today's entrepreneurs from Tirupur proudly claim to sell
top-quality t-shirts to Tommy Hilfiger for Rs 150 - and then use the
money they earn to go abroad and buy the same thing back at Rs 1,000 a
piece.
Somebody told me that to create a brand, you must be near consumers, and
we can't do that if consumers are in the US. Nonsense. Today, TV and the
internet are global.

My six-year-old in Bombay tells me what's cool among six-year olds in
Boston. If the Japanese can sell cars and perfumes globally, and the
Koreans handsets, we can certainly give the world our brands.

We can be more than just cobblers to the world ... Think about it