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How to kill a brand in a week

How to kill a brand in a week

Thursday March 08, 2018 , 4 min Read

The Nirav Modi case has proved the brand cannot survive a scam of such massive proportions, and it would be difficult to believe that anybody would walk into a Nirav Modi store today.

Ad Age published an article four days ago where they asked experts what would happen to the brand ‘Nirav Modi’ as a result of the Punjab National Bank scam, and the experts all said nothing would happen to the brand from a consumer point of view. Nothing could be further from the truth.

By Nirav Modi's own admission in a letter to the PNB Chairman he is reported to have said: "In the anxiety to recover your dues immediately, despite my offer (on February 13, a day before the public announcement, and on February 15) your actions have destroyed my brand and the business and have now restricted your ability to recover all the dues leaving a trail of unpaid debts.”

In addition about his company, Firestar Diamonds in the same letter Nirav Modi wrote, "The erroneously cited liability resulted in a media frenzy, which led to immediate search and seizure of operations, and which in turn resulted in Firestar International and Firestar Diamond International effectively ceasing to be going-concerns."

Even bad brands have good customers. Can you get rid of the former without alienating the latter? Sure—but it's not easy.
Harvard Business Review

So how long does it take to kill a brand?

The Nirav Modi case has proved it might just take a few weeks. It would be difficult to believe that anybody would walk into a Nirav Modi store today. In addition, Nirav Modi would only be able to sell existing inventory. Once that is over there would be no more production of jewellery because his companies have been effectively shut down. So how big exactly was the brand Nirav Modi? In terms of revenue, it exceeded the default to the banks of Rs 11,300 crore, i.e., $ 1.7 billion (the newspapers reported that in a letter to PNB Modi claimed that what he owe the banks was closer to Rs 5000 crore). Consolidated income grew at a compound annual rate of 24.25 percent in 12 years from March 2005 to March 2016 to Rs 12,562.49 crore. Technically, it is necessary to deduct purchase of finished goods to arrive at the net revenue.

Fortune India

If the consolidated revenue was above Rs 12,000 crore there is a reason to believe that the Nirav Modi brand value would have been worth several times that. What many people fail to understand while running a business is that the value of the brand is many times the value of the business as shown the balance sheet.

Do brands actually die?

I have seen many brands die but not all of them have died because of a scam. Other brands that have died are PanAm, Compaq, Oldsmobile, Woolworth, Enron and many others. Enron is an interesting case because of it being another case of a brand dying because of a scam.

The Enron scandal, first publicised in 2001, eventually led to the bankruptcy of the corporation and led to the dissolution of Arthur Andersen, one of the top five global audit firms in the world.

At that time it was one of the biggest bankruptcies and biggest audit failures.

Can a dead brand live again?

Yes and no. “Brands are like people,” said Stephen King, a long time ago. So taking off from that wisdom, if a brand is dying it can be revived. But once it is completely dead it is difficult to revive it. When an individual placed cyanide in Tylenol bottles in the 1980s it almost killed the brand. But Tylenol made it back to the shelves when the company recalled every bottle and introduced 'gelcaps' which were tamper-proof.

Unfortunately, in the Nirav Modi case the designer Nirav Modi was also the brand. So while Nirav Modi might be able to make a comeback by launching a new brand, there is little doubt that the current Nirav Modi brand is dead.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)