In conversation with Sunil Alagh, Chairman, SKA Advisors

NDTV: How would you define Brand Equity?

Sunil Alagh: Think of it as how did the term brand begin? It began from people branding their cattle. So it established ownership of the cattle, it could not be stolen and if it was stolen it could be recovered. Also, if you had good quality cattle because at that time in America people traded in cattle, people could say if this cattle is from this particular ranch people would know if the cattle is good or bad. So it began with that and it means literally branding in fire. Once it is put, it cannot be removed. You cannot scrape it off the skin till the cow is dead. And that is what brands should be made of. It should not be possible to scrape off unless you kill the organization - is for me a very strong brand equity. You don't need any marketing jargon image, emotion. This is it, in very simple terms.

NDTV:Amidst all the clutter present in the market today, how important is brand equity for an organization?

Sunil Alagh: You eat a food for the first time, there's a lot of excitement. A guy might say I don't know what I might get, if it's good great, if it's bad, ok. But if you are used to eating a particular dish day after day you will have a particular quality fixed in your mind in the various restaurants that you may have gone to. You have a very strong expectation from a particular product from a particular chef; you have a very strong expectation from a particular stable. For me branding is essentially setting a particular quality for yourself and more importantly that it is consistent to that. The consumer will understand or evaluate you on your consistency. And that is why brand equity is important because when you buy a product what you are looking forward to is consistency. I'll give the example of Kwality restaurants. It is not the best, it is not a 5 star but it is such a strong brand because of consistency. Whether you go in Lucknow, Kolkata or Mumbai you know your chola bhatura will be of a certain quality. So you see Kwality you walk in. Now the question comes in on increasing equity. I personally feel that first establish yourself at a level where your customer is comfortable and be consistent with it instead of trying to increase. Don't try to jump the ladder to create equity for yourself.

NDTV: What is the difference between loss of equity due to a problem with a product and a problem with a company name?

Sunil Alagh: There are certain products that have taken the name of the company and established it like the brand. So there might be sub – brands like milk chocolate etc. but the brand is Cadbury's. Similarly Britannia is the brand. But Nestle is not the brand, there are sub-brands like Nescafe. So they have gone in for a large number of sub- brands. So in that sense they have spread their risk incase of one product having a problem but at the same time they have lost advantage which a family brand name brings. So there are both positives and negatives. So that is the debate - should we take the parents' name or create children who are their own entities in their own right. But invariably service industries have to go with the mother brand. So hotels will be Oberoi hotels, there's Infosys, Wipro, Satyam obvious mother brands.

NDTV: What is the best way to wade ahead if your brand equity has taken a hit?

Sunil Alagh: The most important thing when a brand gets hit is to be immediately transparent to your key customers. So Cadbury's went to all their customers to the media and said sorry about what happened and this is what we are doing to fix this, don't stop eating us. Most of us take a long time in becoming transparent and saying we made a mistake. Satyam - what they have done very quickly is appoint a board of repute. They are suddenly saying look there was something wrong with the company, please don't blame all the intrinsic strength that was lying in the workers, in its creative talent, in its ability to provide you with the services. And now that we are giving you credible people who are leading the company we will be setting things right and you as a customer will not suffer. What the danger in a thing like this is that your key clients start looking at competitors. In fact I am sure Wipro, Infosys, TCS are already visiting Satyam clients. Invariably in all companies 20 per cent clients account for 80 per cent of the revenues. The new board should take a road show and meet them. When you become transparent you may still lose some clients but at least they will not leave you for lack of information. I would also choose a CEO who would bring credibility not only outside but also inside. The team is demoralized so talk to them very quickly. Tell them your salaries are fine, structures are fine, jobs are fine. Go meet your key clients with the faces that you will put forward. You will still lose some clients but you can win them back by showing terrific work with existing clients.

NDTV: What are the sector ramifications of a huge player collapsing. Will the Satyam saga have an impact on world perception of the Indian IT sector?

Sunil Alagh: We are a country, which overreacts to everything; a cricket loss, winning a gold medal at the Olympics. We do great stuff but we are a country of emotion and overreactions. Has confidence in American organizations failed because of what has happened? When you are talking to American companies do you say because you had Enron or Lehmann brothers, we will not do business with you. This is crazy and I don't know why people keep saying this. We should say this is a one off thing. Infosys, Wipro, TCS are fantastic. These are companies which stand out for corporate governance. Instead of talking about our strengths we will all say we are finished.

NDTV: Do you remember any case studies of companies which have faced a brand hit in the past?

Sunil Alagh: Many years ago about 15, there was a nail in a biscuit in Britannia. We immediately talked to the media, talked to the press invited them to visit our facility. We said see look at what has happened and I said it could be a deliberate attempt by somebody to harm us. Look at how we run it and it didn't affect us. Take tylenol for instance. There was a rumour that the tablets were poisoned because some crazy guy was putting stuff into it and it is a medicine that is taken by everyone. The company immediately took all the tablets off the counter. They said we will not worry whether it's a rumour or not. And they replaced all of them with fresh supplies and their sales actually grew. There was another company in Japan or China I can't remember the name right now, whose milk quality was not good. I don't think they've handled it well. They did not become transparent, they did not say to all their key customers we've made a mistake and this is how we are setting it right. A customer is very forgiving if he feels that you are being honest with them and this was a one off. What they are unfavorable to is if you have become over defensive or if you are not sharing information with them. And that is what is wrong with Satyam. Nobody is saying this happened, how much the loss is. And that is what may lead Satyam to an early death. But if we hear positive words from them they could come out bruised, but very much alive.

NDTV: What is the possibility of using brand equity as a tool for financial mismanagement?

Sunil Alagh: It requires a very convoluted mind to misuse your brand. In fact most people would like to keep their brand alive and strong to build constructively around it. There is always a bad egg but I would be very surprised to find a person using his brand name to commit fraud.