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Brands alter strategies to boost equity, value in competitive market

Premiumization

Brands alter strategies to boost equity, value in competitive market

Premiumization becomes clearest path to growth

Economic and social changes in India over the past five years have measurably impacted the way brands increase and sustain brand equity. Going forward, building brand equity and value will increasingly depend on a justifying a premium, according to new BrandZ™ research. The finding is most critical for Indian brands competing with overseas brands entering the market

Two BrandZ™ metrics comprise brand equity: Brand Power and Brand Premium. Brand Power predisposes consumers to buy more, Brand Premium predisposes consumers to pay more. Power correlates with market share, premium correlates with higher profit margins. Over the past five years, the average Brand Power score of the brands in the BrandZ™ India ranking has declined, while the average Brand Premium score has increased.

In 2014, the India Top 50 averaged 239 in Brand Power. The average score declined in every successive year, and in 2018 the Top 75 averaged 219 in Brand Power. Since an average score is 100, these high-value brands still remain strong in Brand Power, but the declining trendline is cautionary.

At the same time, the average Brand Premium score of brands in the BrandZ™ India ranking has increased. In 2014, the India Top 50 averaged 111 in Brand Premium. The average score increased every successive year, dipping slightly in 2018, when the Top 75 averaged 117 in Brand Premium. These scores are above average, which is 100, but still much lower than the Brand Power scores, indicating how challenging it is for brands to justify a premium.

These contrasting trends—the decline in Brand Power and the rise in Brand Premium—reflect a substantial change in the Indian market, which is becoming more competitive, with the entrance of more foreign brands and the expansion of choice changing consumer behavior. Certain categories, such as telecoms and automobiles, are consolidating.

As market share growth becomes more difficult across many categories, more brands depend on premiumization to drive revenue and profit gains. Around two-thirds of the brands in the BrandZ™ 2018 India ranking score high in Premium (110 and above). Five years ago, only around a half of the brands in the 2014 ranking scored high in Premium.

Along with greater profit margins, Brand Premium adds another important benefit—a positive correlation with high brand value. In the BrandZ™ 2018 India ranking, the value of brands that scored high on Premium (110 and above) was 85 percent greater than the value of brands that scored low on Premium (below 96).

Brand Implications

There are an increasing number of examples of Indian brands that have successfully improved their ability to command a premium. Maruti Suzuki, India’s market-leading automobile brand, introduced and rapidly expanded a network of showrooms, called Nexa, which feature its premium products and services. The showrooms added upscale appeal to the brand and drove substantial sales increases.

The Maruti Suzuki Premium scores spiked immediately after the brand introduced the Nexa showrooms. Since the introduction Maruti Suzuki Premium scores remained high, but they have settled somewhat, suggesting that a Premium image needs constant refreshing because, in the consumer’s mind, today’s Premium is tomorrow’s normal expectation. Maruti Suzuki is introducing Nexa 2.0.

The bank brand Kotak Mahindra increased its Brand Premium score from below average, 99, in 2014, to 110 in 2018. Over these five years, brand value increased 288 percent. Similarly, Airtel has competed on price in the competitive telecom category, it has also attempted to separate the brand with a more premium offering that includes handset protection and, in some instances, free Amazon Prime membership.

The question becomes: What characteristics do brands that have increased their Brand Premium scores share in common? Particularly in India, with improved digital communications throughout the country, Brand Power is driven by Salience (coming quickly to mind when considering purchase).

However, being Meaningfully Different is the key ingredient contributing to Brand Premium, which means brands need to meet consumer needs in ways that are relevant and distinctive. One nuance applies in India. Because so many brands are new, Difference for the sake of being different does not work well. Difference works best when it is based on real and useful innovation.

Brands in the BrandZ™ India Top 75 that scored in the top third in Meaningful Difference and Innovation achieved an average Brand Premium score of 132; brands in the bottom third scored only average. In addition, brands that scored in the top third in Meaningful Difference and Innovation were valued 179 percent higher than brands that scored in the bottom third.