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Mansoor Khan



                                2009
Branding of SME




                                               Th...
2     Branding of SME



    Contents
    Introduction ......................................................................
3    Branding of SME



    Introduction
    Small and medium-sized enterprises (SMEs) are the backbone of all economies a...
4    Branding of SME




    Branding the SME

    As has been demonstrated in the past, a brand commands a higher price a...
5    Branding of SME


    Highlight that USP and the feature set of the product once you’ve launched yourself as a brand,...
6    Branding of SME


    A small firm - Chemical Consultants, Mumbai runs a boiler maintenance and repair business.
    ...
7    Branding of SME


    Swiss Chocolates. All these have effectively used the country as a powerful brand name.
    Per...
8    Branding of SME



    Financing
    As we have seen so far branding will definitely improve the finances of the SMEs...
9    Branding of SME



    Steps for SME loans by State Bank of India




    Steps for SME loans by ICICI bank
10    Branding of SME



     Comparison of Loans
     Comparison of Loans across sectors wrt Interest charged, Repayment ...
11    Branding of SME




     References

     Online
        1. Three Questions You Need to Ask About Your Brand - Kevin...
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Branding Of SMEs

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Branding Of SMEs

  1. 1. Mansoor Khan 2009 Branding of SME This document talks about the SME in India and the need to brand them. It will discuss the benefits of branding, how to go about it and the financial options available for raising any money that may be required for the effort. SIBM Pune 9689947101 mansoorkhan83@gmail.com
  2. 2. 2 Branding of SME Contents Introduction .................................................................................................................................................. 3 Definition of SME .......................................................................................................................................... 3 SME sector in India ....................................................................................................................................... 3 Branding the SME ......................................................................................................................................... 4 The Brand Name ....................................................................................................................................... 4 Financial Advantage of branding .............................................................................................................. 4 Targeting and Positioning ......................................................................................................................... 4 Sharpening the USP .................................................................................................................................. 4 Quality ....................................................................................................................................................... 5 Sales and Distribution ............................................................................................................................... 5 Value Proposition ...................................................................................................................................... 5 Parity and Differentiation ......................................................................................................................... 6 Association with bigger brands ................................................................................................................. 6 Collaborative Value Chain ......................................................................................................................... 6 Made in India ............................................................................................................................................ 6 Financing ....................................................................................................................................................... 8 Why Financing is important? .................................................................................................................... 8 Brand Banking ........................................................................................................................................... 8 Steps for SME loans by State Bank of India .............................................................................................. 9 Steps for SME loans by ICICI bank ............................................................................................................. 9 Comparison of Loans............................................................................................................................... 10 Conclusion ................................................................................................................................................... 10 References .................................................................................................................................................. 11 Online ...................................................................................................................................................... 11 Firms Mentioned as SME examples ........................................................................................................ 11 Other Firms mentioned as examples ...................................................................................................... 11
  3. 3. 3 Branding of SME Introduction Small and medium-sized enterprises (SMEs) are the backbone of all economies and are a key source of economic growth, dynamism and flexibility in advanced industrialized countries, as well as in emerging and developing economies. SMEs constitute the dominant form of business organization, accounting for over 95% and up to 99% of enterprises depending on the country. They are responsible for between 60-70% net job creations in Developing countries. Small businesses are particularly important for bringing innovative products or techniques to the market. Microsoft may be a software giant today, but it started off in typical SME fashion. SMEs are vital for economic growth and development in both industrialized and developing countries Definition of SME Units in Small and Medium Enterprises (SME) Sector will include all units in tiny and Small Scale industrial (SSI) sector and also those industrial units whose investment in plant and machinery is up to INR 100 million. SME sector in India
  4. 4. 4 Branding of SME Branding the SME As has been demonstrated in the past, a brand commands a higher price and has a steady flow of orders and creates a pull in the market. This will improve the cash flow for the firm and give it more recognition. These are among the reasons why branding should be important to any SME The Brand Name The first step in branding of the SME is the creation of a brand name as this is what will differentiate this brand from the commoditized products and create the all important Brand Recall. The brand name should include one or more of the following features: What the company does - eg AT&T Values of the company – eg Creative Catchy sounding non dictionary term – eg Sony Financial Advantage of branding It is noteworthy that the brand exists only in the customers mind. So obviously to an SME that is generally not financially loaded, this could look like frivolous expenditure. I can almost hear voices saying ‘I’d rather put the money in process improvement’ or ‘I’d rather give out bonuses to employees to boost morale’ or ‘Where is the money?’ The branding will cost money, but if successfully done will result in higher margins that will justify the spend. Take the example of Lijjat Pappad and the premiums it commands over so many other ‘local’ or commoditized pappad brands. Or the classic example of Nirma – which was just like many other chemical concoctions selling as detergents in the market before it launched itself as a brand. Consider the empire that it built on the power of branding. Some options for raising finances are explored later. Targeting and Positioning Now one of the differences between a non branded and branded item is that the former doesn’t really target anyone and the latter targets certain customer segments and positions the product to suit them. At least it tries to create the perception of the fit to certain customers. Consider the example of Nirma’s Positioning – A reasonably priced ,everyday use detergent for the masses. Now this has enabled the company to shape the direction and fund allocation into various departments that achieve the goals of Low cost, high value and high availability. Sharpening the USP Branding will crystallize your USP. From a wayward track you will move to a predictable, modeled trajectory that will maximize returns for your business.
  5. 5. 5 Branding of SME Highlight that USP and the feature set of the product once you’ve launched yourself as a brand, it’s important. You’ve got to drill-in in the customers head the specific benefits that he will get if he goes for a branded product and especially your brand. The sales people must ensure that they convey these things effectively to the distributers or the businesses that they supply to. If your product is a B2C product you will have to incentivize the retailers to push your products. You may also consider buying some shelf space in the stores you target to achieve visibility. Quality Process standardization and quality control is also an important issue for a brand. If in the past as a commoditized products supplier you were able to get away with somewhat irregular quality ensure that those days are over. As a brand that charges premium, all the products must be of a uniform quality while meeting the expected quality norms. So do SME’s have to spend money on process re engineering and other fancy stuff like quality certifications? No such drastic changes are needed. And certifications while adding some value to the brand aren’t exactly necessary. Let me give an example - Consider a ‘big fish’ – what happens to Nike’s AirMax range if their specifications allow a small hole in the air trap? Looks will not change and the sale will still probably be made. As a brand however, Nike will never allow this. Because they do not want the perception that AirMax shoes from Nike offer similar or worse comfort than normal foam cushion. Nike is too high a brand and air cushioning too complex for SME standards? How about that little strip of metal that runs through the insoles to prevent deshaping of the shoe. How much importance does a local brand give to product consistency here? If you haven’t given much importance to it in the past and got away with it –then as a brand you’ve got to. This is because you not only want a sale but you also don’t want the negative perception that Shoes from Mirza footwear (a tannery and footwear manufacturing unit in Kanpur) de-shape quickly. I do not think that is too much expense added for brand building. All industries have these little things that could have big impact on the product quality. Sales and Distribution A Sales & Distribution trick that one must perform as a brand is to supply to as many different chains and stores and customers as possible. This will reinforce the brand name and give it credibility – potential customers will see it at different places and this will form a positive image in their minds. Agreed it might be more stable to have a hundred deals with one customer – but that’s exactly the SME-unbranded-OEM mentality that must be resisted while building a brand. So you must aim at one deal with hundred customers for the growth of the brand. Value Proposition Is the firm aiming at product leadership, Operating excellence, or Customer Association? Whatever area you choose to excel in, you cannot neglect the other two and must maintain reasonable competence in these.
  6. 6. 6 Branding of SME A small firm - Chemical Consultants, Mumbai runs a boiler maintenance and repair business. Now as a small player, they cannot compete in this field with the likes of BHEL on Product leadership or operating excellence. But they excel in Customer Association by answering all questions, customizing the operations according to needs and taking in all the suggestions and the MD being personally present on atleast one day at the site where work is on. In certain other fields like IT for instance, it is easier for SME’s to gain a foothold in the business by focusing on product leadership. Parity and Differentiation It is important to position the product such that the points of parity and points of difference are clear. A small firm that manufactures inverters: APE inverters and UPS, Lucknow- how does it compete with the likes of Microtek and Luminous? These guys inform the customers through print and billboards and sales incentives that they manufacture sine wave inverters and combine them with the best inverter batteries forming a high value product for less cost. They differentiate themselves by highlighting that they have got a circuit that simulates sine wave better than other manufactures. They have got charts and diagrams to prove that. But this is a little too technical for the average consumer. So they educate the consumer of the benefits of a better sine wave and give demos where they show that a fan once switching to their inverters do not produce any change in sound or speed. They also give big warranties and even a money back policy to buyers to allay any fears of the product quality. Association with bigger brands Highlighting the fact that a firm supplies to a big brand name company can often boost its own brand. If an auto ancillaries firm is supplying to Tata or Ford then highlighting that on the visiting cards of sales people will actually give the firm more credibility and higher chances of conversion of prospects. Collaborative Value Chain A group of SME’s can also form a collaborative value chain – this can boost their chances against the big fish. This can be vertical on horizontal collaboration. A vertical collaboration will work like an assembly line and give you a finished product that you can directly take to the market - this ensures that all the margins and profits are with the collaborating entities. For instance a Carpet manufacturer can tie up with farmers of cotton or wool, small scale yarn producers, a logistics company etc and decide the revenue share before hand. This will lead to a win-win situation as profits are maximized for every one. This ensures that everyone works for and thinks like a brand while also ensuring quality control at every step. Or SME’s could also come together under an umbrella brand and sell their produce under that brand alone. This will give the brand formed enough size and visibility in the market to compete effectively with the big fish of the market. An example of this is Lijjat pappad where small time manufacturers come together and supply their produce and sell under the brand name Lijjat Made in India A tactic that will help SMEs in India in the long run is promotion of the ‘India’ brand name. Some examples that come to mind are French wines- you really don’t need to know the actual brand but if it’s from France, there is some credibility automatically attached. Or Swiss Watches or
  7. 7. 7 Branding of SME Swiss Chocolates. All these have effectively used the country as a powerful brand name. Perhaps India can do the same thing with its agri products and handicrafts. Promote the ‘Made in India’ tag and it will pay dividends in time to come.
  8. 8. 8 Branding of SME Financing As we have seen so far branding will definitely improve the finances of the SMEs by bolstering both the top and bottom line and increasing cash flows. There should not be any doubt that branding is the way to go forward. However that costs money. So here are some options of SME Finance. Why Financing is important? The most common source of finance is Bank Financing. The main channel used by the SMEs is specialized loans by various Banks. The Main reason for choosing bank loans by SMEs compared to other sources of financing like venture capital, PE funding etc is there is only interest to be paid and no stake is to be diluted thus the whole command of the SME is with the owner. There are a number of Private as well as Public sector banks who assist SME in Financing.the biggest players are SBI and ICICI Bank. Brand Banking As of now no loans are given for branding per se but loans are given for various other things like modernization and working capital needs etc which can be availed of. This is an opportunity for banks to come up with brand cells and provide branding advice backed by loans. Small brand clinics could also come up with a corpus of funds to accentuate their advice with cash loans for profit loosely on the lines of investment banking.
  9. 9. 9 Branding of SME Steps for SME loans by State Bank of India Steps for SME loans by ICICI bank
  10. 10. 10 Branding of SME Comparison of Loans Comparison of Loans across sectors wrt Interest charged, Repayment Time, Eligibility, Service charges etc Conclusion In the cutthroat world of business, branding has become one of the most important success factors for every business. Once brand recognition is achieved, it allows a company to charge a higher price and retain a greater market share than would otherwise be expected from an unbranded product. A strong brand image prevents erosion of a product's market share; creates higher growth margins and serves as a weapon against consumers switching due to sales promotion.
  11. 11. 11 Branding of SME References Online 1. Three Questions You Need to Ask About Your Brand - Kevin Lane Keller, Brian Sternthal, and Alice Tybout Harvard Business Review September 2002 2. http://www.icicibank.com/ 3. http://www. smallindustryindia.com/ 4. http://www.statebankofindia.com/ 5. http://www. smeiift.com/ 6. http://www.laghu-udyog.com/ Firms Mentioned as SME examples 1. Mirza Tannery and Footwear, Kanpur 2. APE Inverters and UPS, Lucknow 3. Chemical Consultants, Mumbai Other Firms mentioned as examples 1. Nike Corporation 2. Lajjat Pappad 3. Nirma

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