Wednesday, January 9, 2013

When rumours reigned and trust broke...

It was October 2008 when ICICI Bank stood accused of having overleveraged its exposure to the devastating sub-prime crisis, consequently endangering its very existence. Today, when the worst of the crisis is over, has the brand regained the hallowed position it held before the crisis? 4Ps B&M gleans out four critical crisis management lessons from the ICICI Bank fire-fighting case study

“Dear customer, your deposits with ICICI Bank are safe. Your bank is well capitalised with good liquidity. Please do not listen to baseless rumours.” India’s second largest lender (just behind State Bank of India) must have understood how deadly rumours could be when they were forced – on October 10, 2008 – to send this SMS to all its customers to save itself from a crash in terms of the market price of its shares, as well as liquidity. In fact, the day was no less than a ‘Black Friday’ for the bank as its stock price nose-dived by a mind boggling 28% (from Rs.453.50 on Oct. 8, 2008 to Rs.326.70 on Oct. 10, 2008) amid rumours of the bank’s potential exposure to the global financial turmoil, particularly to the collapsed global financial giant, Lehman Brothers.

The real damage, however, for the bank came in the form of a sharp fall in its brand value. Brand Finance Global Banking 500 report for the year 2009 indicated massive erosion in ICICI’s brand value as compared to 2008. As per the report, ICICI Bank’s brand value plummeted over 60% to $939 million in 2009 from $2.6 billion in 2008. Moreover, the bank’s ranking (in the list of top financial brands across the globe) went down from 64 to 108.

Today, when one can safely say that the worst part of the global financial turmoil is over, the moot question is whether ICICI Bank has been able to rebuild its brand value to past levels? Apparently, the answer is yes. As per Brand Finance Global Banking 500 report for year 2011, not only has ICICI Bank’s brand value reached a figure of $2.5 billion, it has also climbed up the ladder once again, from No.108 in 2009 to No.70 in 2011. What have been the strategic manoeuvres that ICICI Bank used to achieve this image makeover?

The answer is quite straightforward actually, straight out of the crisis management manuals and consists of four key lessons.

Lesson #1: Increase advertising investment
Professors Li Li Eng and Hean Tat Keh proved in their paper The Effects of Advertising and Brand Value on Future Operating and Market Performance how “spending on advertising results in better brand sales and brand profitability.” ICICI Bank followed the lesson to the rote. For one year post the crisis, ICICI Bank went ballistic in terms of advertising campaigns. Data available with AdEx shows that between November 2008 and October 2009, the bank’s ad volume recorded remarkable growth, with a higher focus on television media as compared to the industry average in the BFSI domain. In terms of TV ads, while the volume of the BFSI segment went down by 24%, the duration for which ICICI Bank’s ads met the audiences’ eyes was 64% higher than it was for the year ago period (Nov. 2007 and Oct. 2008). Similar was the case in print media. Although ICICI’s ad volume registered a 5% fall in print media, it was still better than the industry average, which witnessed a 14% fall. The trend continues till date. While the bank’s advertisement & publicity expenses were Rs.11.08 billion in FY2010, it expended over Rs.14.87 billion in promotional & branding activities in FY2011.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
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