CHANGING PERSPECTIVE

Issue 07 2014 / Islamic Banker ASIA / 4948 / Islamic Banker ASIA / Issue 07 2014

ISLAMIC BRANDING – MISNOMER OR

EARNEST OPPORTUNITY?

BY JOY ABDULLAH

“Islamic Branding is “branding” that’s empathetic to Shari’a values, ranging from basic Shari’a friendliness to full Shari’a compliance in all aspects of a brand’s identity, behaviour and communications, in order to

appeal to the Muslim consumer.” – Ogilvy Noor

THE TERM “ISLAMIC BRANDING” stems from the tendency of the marketing and advertising industry’s practice of consumer segmentation based on certain ‘ethnic’ parameters. On the other hand, does the ‘Halal’ stamp signify Islamic branding? The term Halal is recognised as a brand component as well as the platform for a brand’s identity. As a brand component, it communicates adherence to supply and production parameters for example in food - flagging the hygiene factor by re-assuring adherence to the slaughter process. As a platform,

the term ‘Halal’ is used to ‘flag’ that the brand is for the Muslim community. Halal branding is used as part of an offensive (penetrating) or defensive (adhering to) strategy in order to satisfy the community’s standardisation requirement. In a nutshell, an Islamic Brand is one that:i. Is empathetic to the values of Islam and adheres to all aspects of Shari’a in its identity.ii. A brand that has the required ‘Halal’ credentials.iii. Probably a brand who’s primary market is the global Muslim community.

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ISLAMIC BRANDING – MISNOMER OR

EARNEST OPPORTUNITY?

So is it a misnomer or serious opportunity? To a certain extent this labelling is a bit of a misnomer. The global Muslim community has been using mainstream brands in the past and still use it now. So a segmental approach with this kind of labelling will put a brand into a fixed spot. It is, however, a serious opportunity

for a brand interested in developing business within the global Muslim community. The sheer numbers and growth of this segment make it an opportunity for all industries.

What does it means by Muslim markets? Outside of the OIC countries, the reference to Muslim markets predominantly means geographical locations with concentrated Muslim populations. Thus there is a need to understand the ‘Global Muslim Population’. Some of the highlights are:

l 80% of Global Muslims live in Asia & MENA l Largest Muslims populations living as minorities are in Russia (16 million) & Germany (4 million)l 2/3rd of the population lives in 10 countries of

By 2050, it is predicted that more than 50% of the world’s population

will be Muslim.

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CHANGING PERSPECTIVE I ISLAMIC BRANDING - MISNOMER OR EARNEST OPPORTUNITY?

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which, 6 are in Asia: Indonesia, Pakistan, India, Bangladesh, Iran and Turkey. l By 2050, it is predicted that more than 50% of the world’s population will be Muslim. l 52% of the Muslim community are under 24 years old and part of the “Gen C”– Connected Generation”. l Exerting enormous socio-cultural influence from being digitally connected. This cultural influence will increase in years to come. l Young Muslims are already starting to stamp their influence on the consumption habits of the wider global Muslim community. l Muslims are undergoing a major re-assessment of their relationships with religious structures, cultural assumptions, authority, and the emerging, young Muslim consumer is fundamentally different because of a strong reliance on the ethical values of Islam.

Though the global Muslim population is often cited as a ‘global community’, it actually is not a homogenous market segment that can be qualified by one primary differentiator - age, language or skin colour, or through attitudes and behaviour that are in accordance to that differentiator. Unlike other cultural consumer segments the global Muslim consumer segment is made up of a myriad of socio cultural sets that have been influenced by emigration and adaptation to social and environmental norms of current place of residence and livelihood. This ‘adaptation’ has brought about today’s Muslim consumer who has a strong, unique, individual

value system and identity that is based and governed by the values of Islam. Muslims’ own belief in the significance of Islam in their lives is pervasive.

What are the challenges of engaging Muslims in a multicultural global world? How can these challenges be overcome and how banks are able build customer loyalty? At a macro level, in Islamic Banking and Finance, there is an acute need of understanding and engaging with the consumer:

1. Need for change in the business model Business methodology has a changed a lot today. Earlier we had B2B and B2C, models where business strategy was based on profitability only and people doing the business were not taken into account for example; two people interacting for business was either taken as two business entities or it was a organisation pushing products to a consumer. The socio-economic conditions coupled with the rise of social media in the past five years have brought about changes in consumer behaviour.

2. Understand the consumer The person representing the organisation and the consumer are human beings. This brings into play a very important aspect—emotions! Human beings, psychologically, are emotional beings. Thus when two people are interacting, be it for two organisations, or from an organisation to a consumer or the other way around, their perceptions, behaviour, cultural background all play a very significant role in the way they approach the buying decision, the way they interact with the brand and the way the brand is able to engage them.

Today the consumer is: i. Wary of Token-ism: The Muslim consumer is particularly wary of token-ism that still continues to masquerade in markets by brands as the engagement strategy. Stamping products as Halal or Shari’a compliant is not enough.

Young Muslims are already starting to stamp theirinfluenceonthe

consumption habits of the wider global

Muslim community.

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CHANGING PERSPECTIVE I ISLAMIC BRANDING - MISNOMER OR EARNEST OPPORTUNITY?

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ii. This consumer is very interested in the authority and provenance of brands and the companies behind them.

So, how can we overcome these challenges and how are banks able to build customer loyalty? To overcome these challenges is not an easy task. Banking business, the way it is operating, has been in operation historically. Banking models are all risk-shifting and early profit oriented for example, in the initial years of a loan the interest or cost of money is recovered first and the principle is recovered in the later years. Within this model and by adding shari’a compliance, you will have the base framework within which Islamic Banking operates. However, nowhere in this model there is a focus on:

1. Values (of the organisation) and value proposition (to the community it operates in)2. Purpose (to the community it operates in)3. People (both the employees and the community)

Consumer behaviour has changed significantly. With rising education, disposable income, social media connectivity, the clamour for transparency (of organisations’ operations) has been on therise. There is now a clear need of developing trust through delivery of perceived value, coming through loud and clear. In order to overcome the challenges, the Islamic banking industry has to review its business model and evaluate if the same model is still viable. Undeniably, it’s prudent to keep in mind that over 80% of Islamic finance and banking is in corporate finance and retail globally has really not made a dent in comparison to what their counterparts as conventional banking has.

At the same time, within the overall Islamic finance industry, the Takaful industry is still languishing in comparison to its conventional counterpart. From a sustainability perspective, this business model needs to be reviewed as without a primary focus on the 3 points mentioned earlier and a clearly identified value

proposition, engaging the community i.(the people with which the banks do business) (be it corporate or retail) would be tough. From the consumers perspective, the choices available are all the same and therefore selecting a bank brand to do business are governed by factors like ease of access, online facilities and to some extent for some product sub-categories the terms of loans.

So, what can we learn from the development of the Islamic finance industry, and where next for this sector - what trends will shape the industry? Islamic Finance has come a long way. Today the conventional finance industry is extremely interested in Islamic Finance, given the systemic and continuous shocks that the financial system has been having. With more and more discussion on Islamic finance, coupled with the growth of the industry in Malaysia, the overall framework is one that is being looked about and discussed. Highly developed and matured markets such as London are in the process of implementing regulatory, educational and processes that would help them gain a piece of the action. Simultaneously there are emerging markets across Asia and Africa that are actively looking at the Islamic finance framework all the way from an economic monetary policy downwards.

The hot brick at the moment is the focus of UAE in getting Dubai to be accepted as a ‘centre’ for Islamic economy. In terms of trends, we can clearly see the push from consumers asking for more transparency from the banking industry in terms of the products being offered, cost of those products, and clarifications on how funds are utilised.IBA

With rising education, disposable income, social media connectivity, the clamour for transparency (of organisations’ operations) has been on the rise.

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