At a time when the world economy is in gloom, a host of Indian companies have tasted unprecedented success.
With India’s stock markets touching record highs, at least 15 companies launched their initial public offerings (IPOs) in 2020 and were welcomed with a roaring cheer by investors. At least three of these offerings were subscribed more than 150 times. In the first two months of this year already, seven companies have gone public, and over 20 others are expected to hit the markets before December.
This has triggered hope that large, small, and medium enterprises (SMEs), and startups may soon explore the IPO route as they look to raise funds to stabilise and grow their businesses in the post-pandemic world.
But while it might be relatively easier for state-owned firms such as Indian Railway Finance Corporation and RailTel to have stellar IPOs—given the fact they come with government backing—other firms may not be as fortunate.
For one, many companies that may be aspiring for an IPO right now would have low recall value among retail investors. And not all companies can afford to spend millions of dollars on marketing almost overnight.
It is unfortunate that several good companies that could do wonders with IPO funds will miss out on a golden opportunity simply because they so far did not pay attention to the financial power of their brand.
Ever so often, we are approached by companies—some that have been in the business for decades—that have started their IPO journeys only to realise that their brand is not strong enough to attract individual investors. Some of these companies are established players in their segments with multi-crore turnovers. But marketing has been of little interest to them because the revenue was growing and profits were decent.
Now, with a deadline to do an IPO within 12 to 24 months, several such companies want to establish a brand name as quickly as possible and are thus forced to make heavy investments to achieve this goal.
Surely there is a reason for such a decision and science behind how to achieve this objective, but I fail to understand why decision-makers do not see that these processes could be much easier and far more streamlined if only marketing was seen as an important function from the start.
In fact, even if we leave an IPO aside for a moment, research proves that having an established and well-known brand improves cash flows and profits for a business.
“Increases in customer brand strength can translate into several advantages in the marketplace: a higher unit market share as people will choose it more often over other options, a higher price point as customers will be willing to pay more for it, and increased distribution as retailers are apt to carry the brands people want most. This results in a greater velocity of sales given the size of the category and a higher margin for each of these sales. Together these lead to greater operating cash flows for the firm,” a 2018 white paper by New York-based Marketing Accountability Standards Board said.
Coming back to IPOs, in 2019, repliCMO worked with a large infrastructure and construction firm that was targeting an IPO in two years. Worked mostly in the business-to-government space and no consumer-facing functions, the leadership had thus far not felt the need to spend on marketing or brand building.
The company did not have a communications team and a substantial social media presence. The management decided it was important to set up these functions to tap into external and internal stakeholders and succeed at the stock exchanges.
However, due to mixed sentiments and subsequently Covid-19 pandemic, the company decided to push back its IPO plans. With that, it also went back to considering marketing as an unimportant function, ignoring and dismantling the well-oiled processes that had been put in place.
Now, many months later, with the IPO market booming, the client might want to pick up from where it left. The company would need at least twice the amount of investment and effort that it would have required had it continued with the processes that had been established earlier.
The company may surely be able to revive its branding even now and have a bumper IPO, but this approach is far from what the best practice should be.
Marketing and brand building do not need to include a multi-million-dollar annual commitment or high-profile hiring. There are, in fact, small steps that can go a long way in helping most businesses—big or small, private or state-owned, startup or legacy—ensure they’re IPO-ready always.
Build an image: It may not be important to be a household name, but it is important to be a trusted brand. Having an established and trustworthy brand name can go a long way in making both retail and institutional investors believe in you. Of course, there is a lot of financial due diligence that goes into making an investment decision, but a good brand image can make a company stand out in a crowd and pull a potential investor’s attention.
Everybody needs marketing: Very often, the leadership teams of business-to-business (B2B) and business-to-government companies feel it is not important for them to invest in building a public image. After all, their clients know them and that’s all that matters. But if you look at the top B2B companies across the world, they are brands that would have at least some recall even among those who have never done business with them. India’s largest IT company, Tata Consultancy Services (TCS), is a great example of this. The company, which is primarily in the business of providing tech and consulting solutions to other businesses, has a vibrant social media presence with over 460,000 followers on Twitter. TCS also sponsors events such as New York City Marathon that further strengthen its brand recall in the North American region, which is its largest market (pdf).
Create a digital footprint: In today’s savvy world, the first thing most people do when they hear of something for the first time is to look it up on the internet. The top results that Google throws up when a company’s name is searched are like the critical “first impression.” This impression must at all times—IPO or not—reflect what the company stands for. An impressive digital footprint will not only please investors that a company is actively wooing, but also catch the attention of others who may be looking for investment avenues.
A communication dossier is as important as a financial dossier: Before a company launches its IPO, its leadership spends several months finalising financial presentations and projections that they would share with regulators and bankers. But in all this number crunching, an important aspect that is often overlooked is the need to tell your story. Nothing connects people better than real stories told with passion. Having a well-planned communication dossier handy at all times can set a brand apart. Such dossiers need to be thought out strategically so that they share enough information without overwhelming the receiver.
Before and after an IPO: It might seem really convenient to give a CEO a five-minute crash course just before he is supposed to address potential investors or speak to the media. But such an approach is sure to backfire someday. In a world full of uncertainties, having a thought-out marketing strategy is critical at all times as it not only helps handle tough situations but often ensures that a company can anticipate future hurdles and have the time to prepare for them.
Lastly, even though the pandemic has hurt the Indian economy, data show that urban middle-class Indians have surplus funds that they are looking to invest. So even if an IPO is the last thing on your mind today, it might be in your best interest to be visible to them.