IBMR, Chakan Blog

"Success is not the key to happiness. Happiness is the key to success. If you love what you are doing, you will be successful." -- Albert Schweitzer

India is at a unique crossroads in its history. We have a fast-growing economy and a young, large, educated, and aspiring population.

Our gross domestic product (GDP) per capita stands at $1700, just where China was in 2005. In terms of disposable income, we have hit the ₹1 lakh-mark for the first time. Given that an individual’s fixed costs grow no faster than the rate of inflation, disposable incomes tend to see far higher growth rates than the overall economic growth, thereby creating non-linear growth in spending power and fueling domestic consumption.

Simultaneously, we have achieved rapid internet penetration. Today, we have an active internet base of over 350 million people and an effective internet penetration that has tripled in the last 5 years alone. The rapid rise of the internet has created a much more level-playing field for all income strata in terms of our awareness and aspirations. Today’s consumers, whether in metros or rural areas, across all social stratas, are converging on trends demanding the latest and coolest products.

As a result, today’s relatively low spending power, yet high levels of awareness create a unique access-aspiration gap. However, therein lies one of India’s largest opportunities – that of the home-grown consumer brands. These brands are born out of a consumer’s need for standardised, high quality and affordable consumption of goods and this is more applicable in India. There has never been a better time than now, for that need to be more applicable in India.

India’s consumer spending is dominated by basic items like fresh foods and groceries. As any economy matures, that mix is bound to change. Looking ahead, we are most excited about Indians wanting to eat better, look better and dress better! Specifically, the sectors of fashion, packaged foods and personal care seem most attractive for churning out home-grown consumer brands. Each is grossly underpenetrated in branded consumption today e.g., fashion is at 15 percent vs. China, which is at 60 percent and packaged foods at 22 percent vs. China at 52 percent. Numerically, this translates into over $150 billion in addressable market opportunity.

Now, what does it take to build a great consumer brand? The best consumer brands are built on a great product. Great products are themselves born out of a deep understanding of consumer psyche, one that often enables the best founders to see around corners and predict the needs of people before they even know it. Such products allow for the most robust, sustainable and monetisable businesses.

World over, the best brands have been built around hero products that drive revenue and profit. For example, the iPhone is the majority of Apple’s sales while commanding a 60 percent-plus gross margin. Louis Vuitton took something as mundane as a bag and turned it into a 65 percent plus GM business. Even affordable goods like Zara and Coca Cola both command 60 percent odd gross margin levels. All these are enabled by truly unique, high quality, aspirational products.

Although the product is core to a brand, there are both supply side and demand side pillars necessary to build and carry the brand. The three most important of these pillars are supply chain, distribution and marketing.

The beauty in brands being built today, is the unique ability to leverage technology. Technology across all three pillars can today enable much more capital efficiency as well as a non-linear growth curve. Traditionally considered capital intensive and slow businesses, some of the best brands today have returns of capital as high as 50-60 percent and growth rates of in excess of 100 percent year on year.

In the supply chain, companies are using the power of data to optimise just-in-time models to reduce working capital needs, thereby enabling much higher returns on capital and quicker feedback loops to enable better products.

Distribution in India has traditionally been among the most complex and friction-filled experiences. It is among the prime reasons that behemoths like Hindustan Unilever participate in businesses as vastly diverse as chocolates and shampoos. Online distribution, however, has given a distinct advantage for upstarts to build new products and introduce them to the consumer directly. While the answer to scale still remains a mix of both offline and online i.e. omni-channel distribution, online retail provides significant velocity to the growth of new brands. It also allows for swaths of consumer data to be captured that again allows for even better products.

Finally, the marketing. Storytelling or creating the narrative around a product is as important as it gets to building a new brand. It includes not just effectively communicating the core value proposition, but also being able to establish an emotional connect with the consumer. Again, technology and the internet, today, allows for the story telling to be personal, and targeted. Not only does it allow you to acquire customers cheaply and re-target, but also makes it easy to sell ten items to one individual as opposed to one each to ten different customers. This in turn, makes the long-term value, vis-a-vis the acquisition costs a lot more viable.

The need of the hour is for us to build businesses that create true value for the Indian consumer and can withstand the might of international behemoths dumping capital into India. Consumer brands allow for both. They not only create true value, but, if done right, can create highly differentiated businesses, with hard to replicate products, supply chains and consumer connects. All moats that are very hard to scale for new entrants.

As Warren Buffett puts it – a good business is like a large castle, with wide moats, led by a knight one can trust. Deep markets, defensible business models and the best entrepreneurs allow for all three in consumer brands.

The author leads Consumer and Media investments at Matrix Partners India, an early stage venture capital fund with $700 million under management in India.

Source http://www.forbesindia.com/blog/business-strategy/why-do-people-like-consumer-brands/

Published in Business

For parents, one of the biggest decisions in their lives is choosing their child’s name. But choosing a name is a complicated process. If parents keep a common name then their child would find himself lost in the crowd. To get their child noticed, if they try to come up with a unique name, then it should be easy to pronounce and should have some base for justification. If they choose an old-fashioned name, then there's a chance that the kid could be bullied in school and later in life.

A startup is no less than a child for the founder(s). And that's why, choosing a name for a brand is complicated. A brand name can be regarded as one of the most important assets that businesses need to survive, launch products, pull talent, attract customers and differentiate themselves from their competitors. It's important to come up with a name that is sticky enough to recall.

Every entrepreneur wants a magic wand that could create names that are memorable, pronounceable, unique, creative, interesting and relevant. Unfortunately, such a magic wand doesn't exist.

There is no one right or perfect way to come up with a good brand name, but based on learnings from a few successful brands, entrepreneurs can plan their approach. A few of the components that could be helpful in creating a brand name are as follows:

1. Family name:

One of the most natural ways to come up with a brand name is to use the name or surname of the founder. A few of the successful brands based on this strategy are Disney, Ford Motor Company, Estée Lauder Companies Inc., and others.

Though this approach sounds straight forward, there is a catch. The name should be uncommon and should connect well with customers. As shown in the movie ‘The Founder’, Ray Kroc felt that the name McDonald is glorious, limitless, beautiful and better sounding than the name Kroc, so he preferred to acquire McDonald’s instead of launching a new brand.

2. Associations:

Associations are helpful in relating something unfamiliar with something familiar. Familiar things may not directly relate with business, but evoke a feeling or mental image. Associations can be done with people, animals, flowers, rivers, mythological names, and so on.

For example, the brand name Amazon.com is based on the Amazon River, which is considered as the biggest river in the world. One of the most popular mythological brand names is Nike. In Greek mythology, Nike was a goddess who personified victory. Similarly, Puma is based on the name of a Puma cat, which embodies the characteristics of speed, strength, suppleness, endurance and agility.

3. Words with powerful meaning:

Uber means an outstanding or supreme example of a particular kind of person or thing. In Korean language, the word Samsung means three stars. As a caveat, the meaning of the word should be checked in different languages as sometimes a word could have positive meaning in one language, but negative in other language, leading to perception challenges during international expansion.

4. Blended words:

Blended brand name can be formed by combining parts from different words. For example, the brand name Microsoft is formed from blending of initial part of two words: Microcomputer and Software.

5. Fascinating stories:

People listen and remember stories; they are very powerful tools to connect with others. A popular story with universal appeal can amplify significance of a name. For example, the brand name Alibaba is based on the Arabic story “Alibaba and the Forty Thieves”.

6. Place of origin:

Place of origin acts as a strong component of brand identity. Initially, the place of origin can help a brand become popular, but when a brand becomes global, it can help its place of origin to become popular. One of the interesting examples of a brand name containing place of origin is Kentucky Fried Chicken (KFC), which was started as a roadside restaurant in Kentucky, US, and became one of largest global fast food chains.

7. Coined words:

Coining a new word can help a brand stand out. For example, the brand name Google is a play on the word “googol,” the mathematical term for a 1 followed by 100 zeroes. Another interesting example of a coined brand name is Xerox that became a synonym for photocopy.

8. Ingredients:

In this approach, an ingredient of a product or service is brought into the spotlight as the image of ingredient could have a positive influence on the consumer. For example, in the name Coca-Cola, the first half in the name refers to the extracts of coca leaf and the other half represents another ingredient - the kola nut.

9. Movie or book characters:

Movies and books can open up a new world of names. The characters in a movie entertain us and sometimes left a lasting impression through their role or their names sound very catchy. One of the popular brand names – Starbucks is inspired by the name of a character – Starbuck in a whaling novel and movie - Moby-Dick.

10. Descriptive words:

A descriptive name is self-explanatory. A few of the examples of self-explanatory names are Shaadi.com and Naukri.com. Along with creativity, coming up with these kind of names require luck and focus. Luck for availability of domain name and trademark, and focus as self-explanatory names can be applicable for specific niches.

11. Link of generic words:

Interestingly, meaningful and memorable names can be created by linking common words in the right order. For example, the brand name Facebook links two common words face and book. Similarly, the brand name MakeMyTrip links three common words: Make, My and Trip.

12. Business attributes:

In some cases, brand names are also based on the attributes i.e. characteristics of a business. For example, 7-Eleven, the world’s largest convenience store brand was named after its store timings as the stores were originally open from 7 a.m. to 11 p.m.

Picking the right brand name can be tough. Sometimes, it could be created using one of the above mentioned components and sometimes using multiple components in combination. Sometimes it can be created quickly and sometimes it could take months.

In short-term, entrepreneurs may think that rather than spending time and efforts on naming a brand, they can focus on other areas. But from long term perspective, it’s worth spending time on naming a brand as the name captures the essence of a business. When products of competitors become similar, when price doesn’t remain a differentiator, when customers get confused in making a choice, the thing that safe guards a company is its brand name.

Views expressed are author's personal and don't necessarily represent any company's opinions. Source http://www.forbesindia.com/blog/business-strategy/how-to-come-up-with-an-effective-brand-name/

Published in Business