Goodwill v/s Revenue

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Ever since the customers have become aware of the market trends, goodwill as an intangible aspect has become a favorite topic for everyone. Reputation management & maintenance is all that generates revenues which yet again increases the overall goodwill in the market. Both goodwill and revenue are interrelated concepts and their correlation and indispensability cannot be overlooked. In order to survive a target based and highly competitive surroundings, a company must follow the balanced scorecard approach that focuses on both aspects in an equitable manner.

To say that only goodwill can help increase revenues or vice versa would be a mere understatement. These two might be different tangents but run parallel to each other. If we examine closely, we will observe how goodwill boosted the sales and then the revenue.

Word of Mouth

Lijjat Papad as a brand as we are well versed of, has had a remarkable journey from rags to riches. The goodwill magnified the revenues and it was just a word of mouth that publicised the brand. The Brand started its operations with a modest loan of Rupees 80 and has now annual sales exceeding Rs. 301 crore. It has been all because of the goodwill that the revenue generation could be made possible. The basic Indian values are placed at the apex level and women follow them religiously while the brand leverages that and earns out of it.

Goodwill has led to revenue generation for Lijjat Pappad.

Money Making Machine

ITC is a household name now with every child knowing about the brand and its diversified product lines. From FMCG to paperboard industry products, ITC is making huge money along with having a stable GOODWILL. However, things were not in place until the late 20th Century. It was only after 2000 that ITC entered the Fashion Industry, FMCG paperboards among others. Until this time the brand ITC was only making revenue with almost no goodwill of its own. However, with the changes in the market and integration among the market forces, ITC very well understood the need to pick up pace and place both GOODWILL AND REVENUE parallel to each other.

The above examples explain how making a comparison between GOODWILL and REVENUE will only make it worse for a company to have a prolonged presence in the market. Since both the concepts are interlinked and dependent on each other, it is impossible to separate them. Having said that, it is also to be noted that a perfectly balanced portfolio mix needs to be strategized in order to achieve the optimum results.

Whether goodwill earns revenue or revenues amortizes the goodwill is hard to tell. The only conclusion one can draw from the market study is that both are equally important and are strong pillars of support to the life of a business.