Registering brand propels MSMEs' business growth

CRISIL studied the performance of 320 micro, small, and medium enterprises (MSMEs) for 2013-14 (financial year April 1 to March 31) that have created their own brands for their products, whether registered or otherwise. Their performance was analysed for three financial years (2011-12, 2012-13 and 2013-14). The study, which sought to analyse the impact of registering a brand on the growth of the business, revealed that MSMEs with registered brands were at a distinct advantage.

MSMEs with registered brands recorded a compounded annual growth rate (CAGR) of 24 per cent in average sales along with an operating margin of 11 per cent, whereas MSMEs with unregistered brands recorded a CAGR of 11 per cent and an operating margin of 9 per cent.

It was seen that the top five industries more conscious of brand creation are textiles, engineering, electrical, chemicals, and agro-processing. Their retail clientele bases its purchase decisions on the recognition of brands, compelling them to create differentiation through branding.

Branding is the exercise of attributing certain unique qualities and characteristics to a product, such that it develops an image in the minds of consumers, facilitating retention and recall. Registered brands command higher prices, enable market share penetration through advertising, and thereby help resist price erosion. A brand widely known in the market has greater brand recognition and builds up positive sentiment among customers, which further strengthens its position against its competitors.
Note: CRISIL has rated over 50,000 MSMEs in India. This fortnightly tracker presents to our readers insights on MSMEs, a key element of the Indian economy.