Marketing: Tempest In A Tea Cup

INTERVIEW: Tom Blackett, Deputy Chairman, Interbrand Group
"Now Is The Time For Brands In India"

An Indophile, he claims to have probably been conceived in India (well, actually he means it!). An avid rugby and cricket fan, the 54-year-old Deputy Chairman of the world's biggest brand consultancy, Interbrand Group, Tom Blackett's one burning ambition has been to watch a test match at Kolkata's Eden Gardens. He may get lucky very soon. The cricket season is just about beginning in the sub-continent. More importantly, Interbrand has just struck a strategic tie-up with the Bangalore-based Equitor Consulting, and Blackett hasn't been to India since. In an exclusive, free-wheeling telephonic interview from his London headquarters, Blackett spoke to BT's Shailesh Dobhal on a host of issues surrounding Interbrand's gospel on brands and brand valuation. Excerpts:

Q. How do you view Interbrand's business potential in India?

A. We're very excited about the Indian market. We have been watching the Indian economy open and get stronger. Now is the time for brands in India. And what gives Interbrand, with its brand valuation expertise, a leg-up is how Indian businessmen behave: they are very hard-nosed and are skeptical of branding and marketing spends. But the moment you start speaking about actually putting a tangible value to brands, that moves them... they understand figures. And we can demonstrate to them, empirically, how to measure investments in brands and its concomitant value to business. Big consumer product companies and emerging industries like telecommunications and pharmaceuticals could be our first clients here. Why, we are here to make just about any industry help think in a different way, the Interbrand's way of brands being central to any business.

Has brand valuation moved out of its image of merely being an ''exercise in shareholder communication''?

THE LIFE OF A BRAND

Interbrand began life in 1974 in london as a specialist in the area of brand and corporate name development. Later, it added design capabilities and a legal practice (in the area of international trade marks) to become one of the first multi-disciplinary branding consultancies.

It was providence that offered Interbrand its forte of brand valuation. In 1994, Interbrand was asked by a UK-based food company, Ranks Hovis MacDougall (RHM) to help fend off a hostile takeover bid by Goodman Fielder Wactie (GFW), an Australian foods group. Interbrand's brand valuation exercise for RHM, and the resultant increase in RHM's business value, helped repel the GFW bid.

In the course of its close relationship with RHM, Interbrand developed-in collaboration with the London Business School-its proprietary brand valuation methodology through cash-flow analysis, brand strength scoring, and discounted cash-flow valuation. The UK Accounting Standards Board went on to accept Interbrand's methodology as the basis for balance sheet valuations of brands.

So far, Interbrand has valued more than 1,200 of the world's leading brands, including Ford, Nestlé, Danone, Nabisco, Grand Metropolitan, IBM, Gucci, Chanel, BP, British Airways, and MCI, with an aggregate value in excess of $50 billion.

Interbrand's strategic tie-up with the Bangalore-based Equitor Consulting will give the UK major a foothold in India. Equitor, on the other hand, will have complete access to Interbrand's global resources and expertise. The two companies will explore the possibility of a joint venture at the end of a year.

Well, even if most companies just did that, we would have enlightened business communities! I'll welcome it if more CEOs, internationally, treat their brands as assets, and at least mention their value on annual reports if not put it on the balance sheet. It is only then that the participants of any business will understand how brand valuation actually helps and impacts in investment allocation, brand performance, inputs to balanced scorecard, and mergers and acquisition negotiations.

Do you see CEOs taking active interest in and spending time on nurturing brands?

Yes. I was at a seminar sometime ago, where the British Petroleum (BP) Chairman, Lord John Brown, was speaking. And he spoke of nothing but how the BP brand is central to all its businesses, and how the brand is the public expression of the organisation, dictating the organisation's actions, investments, even technologies. For BP is no longer about plundering the earth for petroleum, but partnering, fairness and environment. Recently, Dominic Cadbury, Chairman of Cadbury, which puts the value of Cadbury's brands in its annual report, told me how most of his time is spent in explaining to shareholders his company's biggest expenditure head, marketing, and its impact on Cadbury's brand value. Samsung's Vice President (Global Marketing), San Jin Park, is another person I know who is passionate about the Samsung brand. Deepak Chopra is another person who looks into the future of his eponymous brand. But very often, very many CEOs pay just lip-service to brand building.

Have brand owners started seeing brands as principal contributors to economic value added (EVA)?

Well, from the brand marketers' point of view, it is more true in case of fast moving consumer goods (FMCGs), where anyway there is little value added in terms of anything else but brands. But it is changing even in industries such as telecommunications, where traditionally brand EVA was very low. With mobile telephony, where consumer choice becomes critical for business success, companies have changed over and realised that investing in brands was adding more EVA to the business than previously thought.

What implication does waiving of patents (in case of drugs for public health emergency) have on brands and the brand valuation process?

In that case brands become all the more important. Look at the way the pharmaceutical industry has operated: industry mentality is to invest heavily in research and development and then push for product monopoly through patents. Milk the patent and then move on to newer products. They do not have a long-term brand building perspective the way FMCG companies have. But what happens in a case such as Bayer almost losing its Cipro patent in USA on account of the anthrax scare? The brand then becomes a psychological monopoly, and pharma companies are realising this as more and more consumers are becoming part of the healthcare dialogue and ethicals moving to over-the-counter.

This may sound a trifle basic, but how would you define a brand?

Some people may say that it is a name. To me, it is a set of impressions that sit on the consumers' mind and is the basis of a relationship. And those impressions decide what kind of relationship the consumer will have with the brand and where.

So is Pepsi, according to you, only an aerated beverages brand? Or Coke, for that matter? Do you see that as a strength or a weakness?

I am a firm believer in a company sticking to its knitting. To me brand Coke is a brown, sweet stuff that pours out from a red can. Blue can in case of Pepsi. You can give me de-caffeinated, diet et al., but I will still expect brown sweet stuff to pour out of the can. That's the point: you have to respect the consumer's intelligence and not complicate things.

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