Brand Building or Hype ???

These days, there is a lot of talk on whether or how Indian companies should go for aggressive brand-building. "Tata's should do this, Bharti should do this etc...". But sometimes brand building goes negative. Aggressive marketing and brand-building can boost stock prices by raising customer and investor expectations. Some companies create hype about their products. They go aggressive while buliding their brand. Thus brands are created much before the real product arrives in the market. But the penalties for not delivering on marketing promises are fast becoming as significant as not meeting quarterly earnings targets. Failing promises lead to demotivation among the investors. Examples like Apple and Boeing have suffered themselves.

Boeing had banked over 700 orders from 50-plus airlines when a prototype 787 was showcased to the public. Boeing marketers did a terrific job of positioning the "Dreamliner" as a step change improvement in air travel. But the 787 was behind on its production schedule, with multiple parts suppliers falling short of their delivery targets. And thus Boeing stocks went wobbly on the news, that test flights and initial deliveries of the Dreamliner would be delayed.

Same story happened with Apple.The iPhone was heavily promoted at the time of its June 29 launch, resulting in long lines and spot shortages at Apple and AT&T retail stores. Despite a retail price over $500, iPhones were quickly being offered on eBay for $100 extra.But, the reviews were mixed. At that retail price and with that level of hype, the critics were tough but a raft of concerns came from delayed activation and sluggish email. The hype had brought forward demand from the Apple afficionistas who love all things Apple. But these loyal customers were the very ones caught short when Apple announced a $200 iPhone price decrease 8 weeks after launch.This suggested iPhone sales had slowed considerably below post-launch expectations and might not meet holiday season targets. The stock price was punished immediately.Apple's stock, although it rebounded after a strong earnings report, dropped six percent when the company announced a $200 price cut on the iPhone.

So, do not risk marketing hype unless the company is sure of both, supply curve and demand curve. Hype can hurt stock prices and investor confidence when expectations are not met. So be a step ahead, be cautious, and always glued to the earth, before announcing and creating any hypes about the product.