It's business, not personal: Why Snapdeal's non-renewal of Aamir Khan's contract as brand ambassador makes sense
Snapdeal, who had distanced itself from actor Aamir Khan after his statement on intolerance, has decided not to renew the contract with the Bollywood actors, reports said.
Last year, Snapdeal had distanced itself from actor Aamir Khan after his statement on intolerance, and has now decided not to renew the contract with the Bollywood actor, reports said. According to The Economic Times, the year-long endorsement ends later this month.
Snapdeal's announcement comes almost a month after Incredible India, the signature advertising campaign for the tourism ministry to promote India globally, dropped the actor as its brand ambassador. The decision, at that time, was attributed to Khan's remark on "rising intolerance in India", but the government tried to distance itself from that controversy.
Khan, as we all know, has been the target of an evolving social media revolution which started with his statement on intolerance when he said that his wife Kiran Rao had considered leaving India because of rising intolerance.
Analysts and columnists said for a thinking man like Aamir, who wears his Lagaan-esque patriotism on his sleeve, such a statement was a result of poor timing and poor judgment. That Snapdeal is preparing to dump him as a brand ambassador, in such times, does not come as a surprise, but this has nothing to do with the brand's ideology or stand on the intolerance debate.
Prathap Sulthan managing partner of Bang In The Middle, a Gurgaon-based advertising agency said, "I think the brand is being harsh on its brand ambassador. While it is good to go with the popular, the brand completely ignored the goodness that the actor is known for... It could have shown great character if it had stood by Khan."
But why should they? As a brand, the decision makes complete sense. Khan is the brand ambassador, and if the ambassador gets himself enmeshed in a controversy which is as sensitive as this one, it hurts the brand. The company faced a massive backlash on social media for having him as the face of the brand, and it had stopped using him in the 'dil ki deal' ads after the controversy came to light.
Snapdeal (or any other brand for that matter) cannot afford bad press.
The decision is a purely business decision and not a personal one. So intense was the backlash that arch rival Flipkart too thought it wise to point out there was no connection between the brand and the personal views of its ambassador.
Sachin Bansal, the co-founder and CEO of Flipkart, had tweeted at the time:
— Sachin Bansal (@_sachinbansal) November 25, 2015
It should be borne in mind, however, that Khan's brand value is what put Snapdeal up there with e-commerce leaders in India like Flipkart and Amazon. Prior to Aamir's dil ki deal, Snapdeal hardly had any prominence in the market, apart from the occasional entry to the spam folder of your email. In fact, reports said that a wave of uninstallations and mass-downvoting of Snapdeal's Android app by people protesting against Aamir's comments about intolerance ironically led to a spike in the app's ranking.
According to app data aggregator AppAnnie.com, on 23 November 2015, Snapdeal was ranked No 25 in India among all applications, and No 4 in shopping applications. Over the next three days, despite the furore over the actor's comments, the app moved up to No 20 in India, and No 3 among shopping applications.
Money can't buy that kind swift a leap in market standings.
That being said it still makes zero business sense to retain a star, even as enterprising as Khan, as brand ambassador when a controversy as sensitive as this surrounds him. The e-tailer is incurring losses — which shot up five-fold — as the Delhi-based company doled out discounts to grab buyers and acquired companies at hefty valuations. According to this article in The Times of India, Hong Kong Stock Exchange showed that Snapdeal's losses rose from around Rs 270 crore in March 2014 to nearly Rs 1,350 crore in March 2015 as the company shelled out $25 million (over Rs 150 crore) a month as discounts and marketing expenses.
Even though the e-commerce market in India might be growing, Snapdeal is feeling the heat of rising debt.
Keep this as the backdrop and sample this: According to industry estimates, Snapdeal was paying an endorsement fee in the range of Rs 15-20 crore to Khan when they roped him in. In fact, he is one of the most expensive 'brands' to have if this report is believed. Associated with the 'quality that never fails', Khan's policy of doing two to three endorsement deals per year — which is similar to his strategy of making and acting in select films over a specific time period — helps him charge a premium and the actor trumps Shah Rukh Khan when it comes to endorsement fees. In contrast with Mr Perfect, Shah Rukh charges Rs 1 crore per endorsement. It makes no sense for a loss-making company to have a costly brand ambassador, particularly one who is bringing home bad press.
And this practice is not an unheard one. When an ambassador says or does things in public that hurt the brand, he/she gets dropped. Take for example, Lance Armstrong. After the news broke in 2012 that he had been taking performance-enhancing drugs, the athlete didn't just lose seven Tour de France jerseys, he also lost lucrative sponsorships with Nike, Anheuser-Busch InBev, Trek Bicycle Corp, FRS and Honey Stinger.
And it took less than a week for the companies to do it.
The winner of the most Olympic gold medals in history, Michael Phelps found himself in hot water in 2008 after a photo emerged of him smoking a bong at a party. He lost a sponsorship with Kellogg's, which chose not to renew its contract.
US departmental store Macy's joined Univision, NBC and a host of other companies in dropping business magnate and US President candidate Donald Trump in light of his comments about Mexican immigrants where he characterised them as rapists and drug dealers.
Brands are agnostic about their ambassador's personal life and ideologies. But when the personal starts messing with the business and the brand itself, it is best to cut one's losses.
After all, it's all business, not personal.
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