India’s rapid growth alters brand landscape
BrandZ™ Five-Year Analysis
New insights for building valuable brands in India
India’s rapid growth
alters brand landscape
Building and sustaining value
becomes more challenging
India has changed dramatically over the past five years since the inaugural BrandZ™ India study in 2014, which corresponded to the change in political leadership with the election of Narendra Modi a prime minister, and the acceleration of efforts to strengthen the Indian economy, increase opportunity, and distribute wealth more equitably.
The programs to advance these goals produced both progress and disruption. They included efforts to digitize India, diversify the rural economy, incentivize foreign investment, and broaden the formal economy to curtail corruption and increase the tax base to gain the revenue necessary to pay for the government’s reforms.
Understandably, the transition of a diverse country of 1.3 billion people of manifold cultures and languages has not been easy. But in many ways India is different five years later. In 2014, a total of 213 million Indians used the internet. That number has more than doubled. Internet use is increasing more rapidly in rural areas and changing peoples’ lives throughout the country. These changes have altered the brand landscape, increasing the access people have to brands and their ability to pay for them.
Five years ago, Amazon, new to India, announced plans to invest $2 billion in its Indian operation, enough to challenge India’s e-commerce leader, Flipkart. Five years ago, Walmart was knocking at the back door, aligned with a wholesaler but prevented from rapid expansion by protective regulations limiting the entrance of multi-brand retailers. It opened its India e-commerce business in 2014. Five years later, Walmart announced plans to buy a majority stake in Flipkart.
Five years ago, FMCG growth was strong and dominated by multinational brands. Today, signified by the Patanjali phenomenon, local Indian brands are growing in quality and trustworthiness, and multinational brands are reacting with new products and communications that respond more closely to changing Indian preferences.
These developments are indicative of the many changes and trends—rising wealth, the influence of young people, erosion of trust, growth of nationalism, empowerment of women—that are impacting Indian brands. This BrandZ™ analysis explains how these trends have influenced brand value growth, and it recommends the actions required in today’s India to build and sustain brand value.
- Brand Equity
India Top 75 score high in equity
but future growth not assured
Brands that survived and thrived during the past five years—those that remained in the BrandZ™ India ranking or joined it—share in common a key factor—strong brand equity. These brands score high in the two BrandZ™ metrics that comprise brand equity: Brand Power and Brand Premium.
Brand Power measures a brand’s ability to predispose existing and new customers to buy more, and it correlates with market share. Brand Premium measures a brand’s ability to predispose existing and new customers to pay more, and it correlates with higher profit margins.
In Brand Power, brands that stayed in the ranking since 2014 scored 239; brands new to the ranking in 2018 scored 199; and brands that dropped from the ranking scored 129. The new brands scored somewhat lower than the brands that stayed because newcomers to a country ranking typically enter in the lower ranks.
In Brand Premium, brands that stayed in the ranking scored 121; brands new to the ranking in 2018 scored 114; and brands that dropped from the ranking scored 107. The lower scores in Premium compared with Power indicate the difficulty of commanding a premium, a challenge that is not specific to India.
An average score is 100, which means that even the dropout brands did well. But India has moved on. And the strengths that were sufficient for brand success in 2014 are no longer adequate today, raising the question: what brands will thrive in the future? The BrandZ™ Brand Potential metric provides answers.
Brands that stayed in the ranking since 2014 scored 111 in Potential; brands new to the ranking in 2018 scored 106; and brands that dropped from the ranking scored 100. These predictive scores show the greater strength of brands that stayed in or are new to the ranking; they indicate that strong equity today will help assure growth tomorrow. The somewhat lower scores, relative to Power and Premium, acknowledge the future’s inherent uncertainty.
Brand equity is key to financial success. Brands that are strong in Brand Power and Brand Premium today are also likely to score high in Brand Potential, signaling good prospects for future growth. Conversely, the weakest brands are likely to be superseded by brands with propositions that are more relevant to today’s consumers.
But scoring high does not guarantee success. Brand equity needs to be constantly refreshed by strengthening its three drivers: being Meaningful (Creating an affinity with consumers and meeting their needs); being Different (Being distinctive or trend setting); and being Salient (Coming to mind quickly at the time of purchase consideration). Brands that have stayed in the ranking since 2014 and those that joined in 2018, score high in all three drivers, while dropout brands score barely over average.
Both the stayed-in and new brands score highest in Saliency, which is important. But equally important is the need to be Meaningfully Different. Salience is less effective as a purchase driver when it is not rooted in Meaningful Difference. The challenge for brands is to be Meaningfully Different first, and then make those qualities Salient.
in equity grow
faster in value
And strong brand equity helps
sustain future value growth
Brands with strong equity—high scores in Brand Power and Brand Premium—also grow faster in value. A comparison of the 2014 BrandZ™ India ranking with the 2018 ranking reveals that brands with low Brand Power scores rose 76 percent in value, while brands with high Brand Power scores increased 131 percent in value.
The five-year analysis divides the 2014 and 2018 rankings in half according to Brand Power scores. Then it compares the brands with the lowest Brand Power scores (bottom half) in the 2014 ranking with the brands with the lowest (bottom half) Brand Power scores in the 2018 ranking. The same comparison is done for the highest (top half) Brand Power scores in the 2014 and 2018 rankings.
Using the same methodology for Brand Premium, the brands that scored lowest increased only 56 percent in value, while the brands that scored highest increased 168 percent. The results for Brand Potential are similar: value increased 59 percent for brands that scored lowest in Brand Potential, and 160 percent in value for brands that score highest in Brand Potential.
The increase in brand value for brands with the highest Brand Power scores was almost double the increase in value for brands with the lowest Brand Power scores. In Brand Premium the brand value growth was three times greater for the highest-scoring brands compared with the lowest-scoring brands. The results indicate that brands with the strongest brand equity can justify a premium, which is an opportunity to drive growth. In addition, brands with high scores in Brand Potential are likely to increase value much faster.
- Meaningful | Different | Salient
Uniqueness of India
Ingredients of brand equity
sometimes behave differently
As the BrandZ™ five-year analysis shows: In rapidly-changing India, strong brand equity—high scores in Brand Power and Premium—are required to remain in the BrandZ™ India ranking. And strong brand equity correlates with faster brand value growth. These findings raise a vital question: What actions do brands need to take to strengthen brand equity?
The answer is straightforward, but the execution can be complicated. Brands need to cultivate the drivers of equity: Meaningfulness, Difference, and Salience. This formulation has been tested globally and works similarly across country markets. The formulation works in India, too, but the country’s distinctiveness produces some variations.
Meaningful A comparison of brands with the lowest Meaningful scores in 2014 and brands with the lowest Meaningful scores in 2018 revealed a 47 percent rise in value over that five-year period. In contrast, a comparison of brands with the highest Meaningful scores revealed a 149 percent increase in value between the 2014 and 2018. In other words, the most Meaningful brands grew value almost three times faster than the least Meaningful. This correlation between Meaningful and value growth is consistent across country markets.
Difference A comparison of brands with the lowest Different scores in 2014 and brands with the lowest Different scores in 2018 revealed a 225 percent rise in value over that five-year period. In contrast, a comparison of brands with the highest Different scores revealed a 53 percent increase in value between the 2014 and 2018. In other words, the most Different brands grew value much more slowly than the least Different. This finding reverses the usual positive correlation between Difference and value growth, which is consistent across country markets other than India.
Salience A comparison of brands with the lowest Salience scores in 2014 and brands with the lowest Salience scores in 2018 revealed a 103 percent rise in value over that five-year period. In contrast, a comparison of brands with the highest Salience scores revealed a 107 percent increase in value between the 2014 and 2018. In other words, the most Salient and the least Salient brands grew in value at about the same slow speed. This finding, that Saliency alone does not accelerate growth, is consistent across country markets, but it is exaggerated in India.
The importance of having Meaningful brands that meet the consumer’s needs and cultivate love is always important. But it is especially critical in India, a society where tradition remains strong and even young people attempt to fit traditions into modern life rather than abandon them. This need for brands to be Meaningful in part explains the sharp rise of Patanjali and its ayervedic range of products.
In most countries, especially mature markets, Difference often signifies innovation and distinguishes brands from an overall sameness within their category. In India, experiencing a rush of foreign entries and local start-ups, Difference also can connote being relatively unknown and perhaps less trustworthy.
For marketers entering or expanding in India, it is important not to assume that brand building experience gained elsewhere can be applied without modification. The same ingredients of brand equity creation—Meaningful, Difference, and Salience—remain vital, but they need to accommodate the nuances of Indian society. Regarding Difference, for example:
- Difference can be counterproductive in India if it is perceived to cut against the fabric of traditional Indian life and the comfort that comes from consistency. Brands in India need a good reason to be Different. They need to be especially useful or introduce relevant, life-improving innovation.
- Difference also can be critical in India. Many of the brands that are lowest in Difference are in categories like banking and insurance. These high-value brands until now have dominated the BrandZ™ India ranking. But India—and the ranking—is changing, and brands that have succeeded without being Different are now vulnerable to newer brands that are Different with good reason.
The unicorn technology brand Paytm challenges venerable bank brands with its payment and money transfer functions. Established brands across categories need to work on building Difference, which is possible. And some have already succeeded. Not every financial brand is low on Difference. HDFC Bank, for example, is among the brands that score highest in Difference.
The slim gap between the value growth of brands with high or low Salience suggests that too many brands in India, as in other country markets, are not using Salience most effectively. Too many brands may be expecting scale to translate into Salience. BrandZ™ analysis indicates that brand value increases much more rapidly when brands first establish Meaningful Difference and then communicate their Meaningful Difference to build Salience, suggesting these takeaways:
- Multinationals that have built brands in India over decades would benefit from building more Meaningful Difference into the brands, especially as local Indian brands rise in quality and are often perceived to be more relevant.
- Marketers building new brands in India need to start with Meaningful Difference. And the Difference needs to be real and useful. Brands then need to make the Meaningful Difference more Salient.
It is not easy to build Meaning Difference. If fact, it is becoming more complicated, but also more essential. Until recently, the consumer market in India was mostly concentrated in urban pockets of relative wealth. But digitization and infrastructure improvement are spreading opportunity more evenly, adding new communities of consumers with unique cultures, preferences, and languages. This transformation requires brands to be Meaningfully Different in manifold ways.
- Brand Health
depend on five
key vital signs
Purpose and communication
especially important in India