Impact of brand investments in the Indian two wheeler industry on investment community and the company stock

Abstract

The objective was to assess the Impact if investments (specifically advertising) in the Indian Two Wheeler industry on investment community and the company stock. The research which has been undertaken is preliminary contributing to initial stages of a larger project under the aegis of Institute of Brand Sciences Emory University (Atlanta) with the broad objective of how to use brands profitably. The research will further cover other sectors as well Context Companies nowadays want to clearly understand and concretely value the benefits accruing to them through building brands. The project attempts to understand the relationship between brand investments and stock performance and whether stock analysts look at the softer aspects of business like brand and channel building while giving stock recommendations. For making this study more focused we have concentrated in the two wheeler industry in India. 2) Research questions: • How to place value on a company`s brands specifically using the example of Two wheeler manufacturing company? • How to identify the effect of Brand Investment in increase or decrease of Share Price? • Do Indian Equity research analysts factor in the ad-spend while making stock recommendations? 3) Methodology : We did a preliminary interview of the customers purchasing bikes and found that brand does play an important role in influencing purchases decisions .To quantify this influence we modeled a conjoint questionnaire and analyzed the responses gained from over 120 respondents. To map the impact of investment on brand on the stock performance we have done a regression analysis argument we interviewed a few analysis to understand whether Indian Equity research analysts factor in the ad-spend while making stock recommendations. 4) Findings: This preliminary study aimed at assessing the effect of brand investments on a companu`s stock has dug out some very interesting insights. Through the regression analysis we have proved with a fair degree of accuracy that the stock price of a company is significantly dependent on its brand investments. Since there in no formal way known to the investment community to quantify the benefits accruing to a company`s stock due to its brand building activities analysts and fund managers use proxies like efficacy of past campaigns their own subjective judgment brand premiums charged etc. to get ball park estimates. However the Indian two –wheeler market is characterized by fierce competition among the players who are present in every segment and following broad-based strategies. In such a backdrop the key is to run as fast as you can to stay marketing expenditure. The biggest incentive for doing so can be proved through the conjoint analysis conducted by us. This analysis highlights that brands are an important influencer in the purchasing decision and hence it makes a lot of sense for companies to invest in brand strengthening exercises.