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PRAXIS BUSINESS SCHOOL                Brand Equity Measurement -                    ‘Cadbury Dairy Milk’Submitted To:     ...
EXECUTIVE SUMMARYIn Phase-1 of the project on Cadbury Dairy Milk, the brand image of Cadbury Dairy Milk wasmeasured using ...
TABLE OF CONTENTSS.NO              TITLE                   PAGE NO 1              Brand Equity                 4 2        ...
BRAND EQUITYBrand Equity refers to the marketing effects or outcomes that accrue to a product with its brand namecompared ...
Price Premia: The value calculated as the net present value of the future price premiums that        the brand can generat...
Last Purchased Brand                                 Cadbury    Cadbury                                  NestlePreferred B...
Analysis:On conducting a survey amongst 53 respondents, the following table was derived based on ColomboMorrison model:   ...
Probability of Repurchasing and Switching brand:The probability of repurchase (ρ) is highest in Cadbury Dairy Milk followe...
Analysis:The following table was derived after including the results from question A:                                     ...
VAN WESTENDORP PRICE SENSITIVITY METER MODELThis is a technique for measuring consumers‘ price expectations for a product ...
Good Value to Too Cheap - The lower bound of an acceptable price range or "Point of MarginalCheapness" or PMCToo Expensive...
Analysis:On the plotting the line graph for each parameter (prices vs cumulative frequencies), the followinggraph was obta...
BRAND LEVERAGABILITY MODEL:    Leveragability is the ability of the brand to be launched successfully into related or even...
Chewing         Malt                    Bread               GreetingRepresentation Cookies Cakes              Gum         ...
QUESTIONNAIRE:    1. Which is your most preferred chocolate for personal consumption?            a. Cadbury Dairy Milk    ...
9. Which of the following products will you purchase if it is provided by the brands?             Cookies Chewing         ...
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Brand Equity Measurement - Cadbury Dairy Milk

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Transcript of "Brand Equity Measurement - Cadbury Dairy Milk"

  1. 1. PRAXIS BUSINESS SCHOOL Brand Equity Measurement - ‘Cadbury Dairy Milk’Submitted To: Prof. Srinivas GovindrajanPresented By: Ankita Singh Arunachalam Ramanathan GauravTalwar Zeeshan Mohammad 1
  2. 2. EXECUTIVE SUMMARYIn Phase-1 of the project on Cadbury Dairy Milk, the brand image of Cadbury Dairy Milk wasmeasured using a combination of Brand Asset Valuator Model and Zaltmann Metaphor ElicitationTechnique. In the last finding, it was indicated that Cadbury Dairy Milk will be the leader in thechocolate market due to its excellent positioning and marketing mixIn Phase-2, equity of a brand is measured to determine the retention capacity of the brand in themarket under any circumstances. It also talks about the added value endowed on products and itdetermines the capability of generating future cash flows. In order to measure Brand Equity forCadbury Dairy Milk, three models were used:Colombo Morrison Model:This model talks about the brand loyalty of the consumers. It was conducted by asking them theirpreferred brand and their last purchased brand. From the survey conducted, it was found that CadburyDairy Milk had the highest brand loyalty (37.74%) with a gravity of 0.77 and a focus of 0.87. Theprobability of repurchasing Cadbury Dairy Milk was the highest (at 0.97) and the probability ofswitching from other brands to Cadbury Dairy Milk was also the highest (at 0.94). This seemed to bea good sign to the brand as it can retain its brand loyal consumers and has the potential to attract newconsumers.Since Colombo Morrison Model couldn‘t capture the brand loyalty based on price fluctuations andnon-availability of the product, a revised model was proposed. Based on two additional questions, theactual brand loyalty was determined to be at 16.98%Van Westendorp Price Sensitivity Meter:This model talks about the determination of the optimum price range for Cadbury Dairy Milk. Fromthe survey conducted amongst Cadbury Dairy Milk consumers and on plotting a price chart (based onthe different prices and its cumulative frequencies), it was found that the optimum price range forCadbury Dairy Milk (Plain – 40g) was Rs.18 – Rs.25 with a current market price of Rs.22.Brand Leveragability Model:This model talks about the elasticity of the brand. Based on ZMET inference, eight categories werechosen. From the results, it was found that Cadbury Dairy Milk has a high potential to extend itsbrand into Cookies and Cakes category and it has a marginal success rate in Greeting cards categoryas well. But, the brand name might have a risk if it is extended to Bread Loaf and Stationery categoryand will be at high risk if launched in Chewing Gum category. 2
  3. 3. TABLE OF CONTENTSS.NO TITLE PAGE NO 1 Brand Equity 4 2 Colombo Morrison Model 5 3 Revised Colombo Morrison 8 Model 4 Van Westendorp Price Sensitivity 10 Meter Model 5 Brand Leveragability Model 13 6 Recommendations 14 7 Questionnaire 15 8 References 16 3
  4. 4. BRAND EQUITYBrand Equity refers to the marketing effects or outcomes that accrue to a product with its brand namecompared with those that would accrue if the same product did not have the brand name and at theroot of these marketing effects is consumers knowledge. It is the premium that can be charged fromthe consumers when a brand name is added on to a product there are many ways to measure a brand.Some measurements approaches are at the firm level, some at the product level and others are at theconsumer level. The group is trying to measure Brand Equity of Cadbury Dairy Milk at the productlevel. Brand Loyalty: The extent of the faithfulness of consumers to a particular brand, expressed through their repeat purchases, irrespective of the marketing pressure generated by the competing brands. Brand loyalty is a result of consumer behaviour and is affected by a person‘s preferences. Hardcore loyal customers will consistently purchase products from their preferred brands, regardless of convenience or price. The two possible models are: o Colombo Morrison Model o Share Tier Approach Share Tier model takes into account two parameters: Price and Quality. It tests the belief and checks whether the beliefs are getting translated into actual purchase. It also helps to find out the price level of price sensitivity that a particular brand has. This model was selected since it measures the beliefs of the consumers and their conversion into actual purchase. This model also helps in gauging the resilience and leveragability of the brand. This is on the basis of the loyalty that a brand enjoys. Resilience is the ability of the brand to protect itself and generate volume and revenue year after year and leveragability will be the ability of the brand to get into other need and want satisfiers which may be related or unrelated to the brands current products or services. In the case of branded chocolate, quality is a hygiene factor. So people will buy on the basis of taste and price. Hence Colombo Morrison Model was preferred over Share Tier Approach 4
  5. 5. Price Premia: The value calculated as the net present value of the future price premiums that the brand can generate over other brands and generic competition. Most brands are intended not only to charge a premium but also to safe guard future cash flows for the company. The value generation of these brands is in securing future volumes rather than securing premium prices. The two possible models are: o Van Westendorp Price Sensitivity Meter Model o Brand Price Trade-Off Analysis (BPTO) Van Westendorp Price Sensitivity Meter Model was chosen since it is a low level involvement product and is a part of impulse purchase category Brand Leveragability: Leveragability is the ability of the brand to be launched successfully into related or even unrelated product categories. Some brands are considered to be more flexible than others in respect to satisfying needs and wants other than the ones which the brand is currently addressing. BRAND EQUITY MEASUREMENTCOLOMBO MORRISON MODELIt is a technique to classify consumers as either hard core loyal (HCL) or potential switchers (PS).Thus, after any given purchase, a consumer will either be sufficiently satisfied that he will consider noother brands and automatically repurchase the last brand purchased (HCL), or he will consideralternatives and have some probability of buying each (PS).The two assumptions of the model are: Every consumer has a preferred brand Hard core loyal consumers do not switch and potential switchers may or may not switch. Potential switchers may be variety seekers; or, they may be responding to sales promotions orother situational factors. By considering the relative preferences and purchases, the model computesan ability of each brand to attract consumers from each other brand. The resulting 2 x 2 matrixconsists of ―most preferred brand‖ and ―last brand purchased.‖ Thus, the likelihood of purchasing agiven brand is the sum of the proportion of that brand‘s hard core loyal and some fraction of theremainder. That fraction is a measure of the brand‘s ability to attract potential switchers. 5
  6. 6. Last Purchased Brand Cadbury Cadbury NestlePreferred Brand 5 Star Dairy Milk Nestle Kit Kat Munch OthersCadbury 5 Star HCL PS PS PS PSCadbury Dairy Milk PS HCL PS PS PSNestle Kit Kat PS PS HCL PS PSNestle Munch PS PS PS HCL PSColombo and Morrison estimated a model based on two equations:1) = i+ (1- i) i2) µ= ∑ (1- i) jWhere was the probability of repurchase, µ was the probability of switching from brand i to brand j, i was the proportion of hard core loyal for brand i, and i is the proportion of potential switchers whonext buy brand i.Gravity (α) is the ratio of ‗HCL‘ consumers of a brand to the row sum of the brandFocus (π) is the ratio of ‗HCL‘ consumers of a brand to the column sum of the brand If Gravity < Focus, then the brand is not able to convert the preference into purchases Reasons: o Poor distribution network o Non-availability at that moment If Gravity > Focus, then the brand is able to convert least preference into purchases Reasons: o Sales promotion during the survey period 6
  7. 7. Analysis:On conducting a survey amongst 53 respondents, the following table was derived based on ColomboMorrison model: Last Purchased Brand Cadbury Cadbury Nestle Kit NestlePreferred Brand 5 Star Dairy Milk Kat Munch Others Grand TotalCadbury 5 Star 7 2 0 0 3 12Cadbury DairyMilk 2 20 1 1 2 26Nestle Kit Kat 1 1 5 0 0 7Nestle Munch 2 0 0 5 1 8Grand Total 12 23 6 6 6 53The numbers highlighted in yellow represents ‗hardcore loyal customers‘ of their respective brands.From the above table, the following table was derived Brands Brand Loyalty Gravity (α) Focus (π)  µCadbury 5 Star 13.21% 0.58 0.58 0.83 0.52Cadbury Dairy Milk 37.74% 0.77 0.87 0.97 0.94Nestle Kit Kat 9.43% 0.71 0.83 0.95 0.85Nestle Munch 9.43% 0.63 0.83 0.94 0.78Industry Average: 17.45%Brand Loyalty:Cadbury Dairy Milk has the highest brand loyalty followed by Cadbury 5 Star and then followed byboth Nestle Munch and Nestle Kit Kat. Since Cadbury Dairy Milk posts a market share (in sales) of43%, the brand loyalty of other brands can be well understood with industry average minus CadburyDairy Milk. Brands Brand LoyaltyCadbury 5 Star 25.93%Nestle Kit Kat 9.43%Nestle Munch 9.43%Industry Average (Minus Cadbury Dairy Milk): 10.69%Gravity and Focus:All brands have gravity less than equal to focus. On doing an exploratory research, it was found thatconsumers purchased non-preferred brands for a change in taste and not due to non-availability orpoor distribution network. 7
  8. 8. Probability of Repurchasing and Switching brand:The probability of repurchase (ρ) is highest in Cadbury Dairy Milk followed by Nestle Kit Kat andNestle Munch, but a little low in Cadbury 5 Star.The probability of switching from other brands to Cadbury Dairy Milk is the highest. But, it is thelowest for Cadbury 5 Star. This can pose a serious threat to Cadbury 5 Star as it has to make sure thatit doesn‘t lose its existing brand loyal customers due to its low conversion rate.REVISED COLOMBO MORRISON MODELSince Colombo Morrison Model failed to capture the ‗actual brand loyalty‘ of the consumers, arevised model was proposed. This model captures the actual brand loyalty after including two moreparameters: Non-availability of his/her preferred brand o Whether the brand loyal consumers will buy another brand‘s product, if his/her preferred brand is not available in the shop  As per our model, if he/she answers ‗NO‘, then he/she is a brand loyal consumer (who may or may not be price sensitive) Price Sensitivity o Whether the brand loyal consumer will still buy his/her preferred brand even after an increase in the MRP of its variants  As per our model, if he/she answers ‗YES‘, then he/she is a hardcore brand loyal consumer (who is very particular about the brand and is insensitive to increase in price)These parameters have been captured in the survey by asking two questions to the brand loyalcustomers: A. If your preferred brand‘s chocolate was not available in a shop, will you buy another brand‘s chocolate at that moment? a. Yes b. No B. If your preferred brand‘s chocolate price has increased (by Rs.1 – Rs.3), will you still buy it? a. Yes b. No 8
  9. 9. Analysis:The following table was derived after including the results from question A: Brand Loyal Consumers Brand Loyal No. of Yes (Irrespective of Consumers * Responses availability) Cadbury 5 Star 7 5 2 Cadbury Dairy Milk 20 11 9 Nestle Kit Kat 5 2 3 Nestle Munch 5 2 3 * As per Colombo Morrison ModelThe last column denotes those brand loyal consumers, who are very particular about the brand(irrespective of its availability). Now, brand loyal consumers who said NO to the previous questionmay or may not be price sensitive. Thus, the following table was derived after subtracting therespective number of ‗No‘ responses (in question B) from the above table: Brand Loyal Consumers Hardcore Brand (Irrespective of No. of No Loyal availability) Responses Consumers Cadbury 5 Star 2 0 2 Cadbury Dairy Milk 9 0 9 Nestle Kit Kat 3 0 3 Nestle Munch 3 0 3Now, the last column denotes the actual brand loyal consumers who are neither sensitive to price norwill leave their preferred brand due to its non-availability.Thus, the actual brand loyalty (in purple colour) is: As per Colombo Revised Brand Loyalty Morrison Model Model Cadbury 5 Star 13.21% 3.77% Cadbury Dairy Milk 37.74% 16.98% Nestle Kit Kat 9.43% 5.66% Nestle Munch 9.43% 5.66% 9
  10. 10. VAN WESTENDORP PRICE SENSITIVITY METER MODELThis is a technique for measuring consumers‘ price expectations for a product in an establishedcategory. It enables the marketer to see a range of prices that might be appropriate, and to see the falloff in consumer interest that occurs as price rises.The Van Westendorp Price Sensitivity Analysis (PSA) determines a range of acceptable prices and anoptimal price point based on an analysis of price/value ratings obtained from consumers. Key dataanalysed is from responses to questions about what prices for a product or service are considered toohigh or too low.Established brands will use the PSA model to guide pricing for re-positioning or other pricingdecisions, often as input to a test market.The traditional PSM approach asks four price-related questions, which are then evaluated as a seriesof four cumulative distributions, one distribution for each question. The standard question formats canvary, but generally take the following form:  At what price would you consider the product to be so expensive that you would not consider buying it? (Too expensive)  At what price would you consider the product to be priced so low that you would feel the quality couldn‘t be very good? (Too cheap)  At what price would you consider the product starting to get expensive, so that it is not out of the question, but you would have to give some thought to buying it? (Expensive)  At what price would you consider the product to be a bargain—a great buy for the money? (Good Value)For ‗Good Value‘ and ‗Expensive‘, the prices are arranged in the ascending order and its cumulativefrequencies are calculated. For ‗Too Cheap‘ and ‗Getting Expensive‘, the prices are arranged in thedescending order and its cumulative frequencies are calculated. For each parameter, a line graph isplotted between the price of the chocolate and the cumulative frequencies. This is done to get theintersection points. The intersection points are: 10
  11. 11. Good Value to Too Cheap - The lower bound of an acceptable price range or "Point of MarginalCheapness" or PMCToo Expensive to Too Cheap- This line represents an "Optimal Price Point" or OPP. This is thepoint at which an equal number of respondents describe the price as exceeding either in their upper orlower limitsGetting Expensive to Good Value - This is described as the "Indifference Price Point" or IPP. TheIPP refers to the price at which an equal number of respondents rate the price point as either "goodvalue" or "getting expensive".Too Expensive to Getting Expensive- The upper bound of an acceptable price range or "Point ofMarginal Expensiveness" or PME. 11
  12. 12. Analysis:On the plotting the line graph for each parameter (prices vs cumulative frequencies), the followinggraph was obtained. Price Chart 120 IPP 100 Cumulative frequncy (in %) 80 Too Cheap 60 Good Value 40 PME Getting Expensive 20 Too Expensive PMC OPP 0 0 20 40 60 80 100 120 Price (in Rs.)From the intersection points in the graph, the following table was derived. PMC OPP IPP PME Cadbury Dairy Milk (Plain - Rs. 15 Rs. 18 Rs. 25 Rs. 30 40g)The current market price for Cadbury Dairy Milk is Rs.22. From this model it was found that theoptimum price range for Cadbury Dairy Milk was between Rs.18 and Rs.25. 12
  13. 13. BRAND LEVERAGABILITY MODEL: Leveragability is the ability of the brand to be launched successfully into related or even unrelated product categories. Some brands are considered to be more flexible than others in respect to satisfying needs and wants other than the ones which the brand is currently addressing. A company wants its brand to be highly leverage able because: 1) It helps the company to diversify in both related and non related products 2) It helps the company not to spend huge amounts in order to create a brand 3) It helps the company to decide how valuable a brand is to the company Analysis: Based on Zaltmann Metaphor Elicitation Test (ZMET) conducted in Phase 1, it was found that Cadbury Dairy Milk was related as a brand that instigated child-like behaviour and happiness. It was considered to be one of the best gifts in order to show your love and care for someone as it looked royal, affordable and convenient to purchase. Based on these parameters, the following eight categories were chosen. o Malt Beverages o Chewing Gum o Cookies o Greeting Cards o Cakes o Stationery o Jam o Bread Loaf The following table was derived from the data collected from the respondents: Chewing Malt Bread GreetingPercentages Cookies Cakes Gum Beverages Jam Loaf Stationery CardsCadbury 5Star 77.36% 77.36% 35.85% 24.53% 24.53% 24.53% 9.43% 11.32%CadburyDairy Milk 92.45% 92.45% 20.75% 35.85% 24.53% 26.42% 9.43% 30.19%Nestle KitKat 47.17% 24.53% 22.64% 24.53% 11.32% 28.30% 18.87% 9.43%NestleMunch 64.15% 60.38% 24.53% 28.30% 20.75% 26.42% 7.55% 9.43% After doing normalisation and representing them with symbols, the following table was derived 13
  14. 14. Chewing Malt Bread GreetingRepresentation Cookies Cakes Gum Beverages Jam Loaf Stationery CardsCadbury 5 Star + + - -Cadbury DairyMilk ++ ++ -- - - +Nestle Kit Kat -- + + ++Nestle Munch Codes Meaning ++ High Potential Category + Potential Category Neutral Category - Risky Category -- Very Risky Category From the above table it was found that, o Cadbury 5 Star has a marginal success rate in Cakes and Chewing Gum category and it might fail in Malt Beverages and Greeting Cards. o Cadbury Dairy Milk can be extended to Cookies, Cakes where it has high potential to become successful and it has marginal success rate in ‗Greeting Cards‘ category. The categories where it might fail are Bread Loaf and Stationery. It is very risky to enter into Chewing Gum category where it will affect its brand name o Nestle Kit Kat has high potential in Stationery category and a marginal success rate in Chewing Gum and Bread Loaf categories. It will fail if it launches in Cakes category. o Nestle Munch can be successful only in its existing category i.e. chocolate category RECOMMENDATION: Based on the three models, it was found that Cadbury Dairy Milk has an excellent potential in the chocolate market as it has the highest brand loyalty and has a current market price well within the optimum price change. The brand also has the capability to extend itself into cookies and cakes category. If launched in these segments, it will have a very high success rate. 14
  15. 15. QUESTIONNAIRE: 1. Which is your most preferred chocolate for personal consumption? a. Cadbury Dairy Milk b. Cadbury 5 Star c. Nestle Munch d. Nestle Kit Kat e. Others (Please Specify) 2. Which chocolate did you purchase last for your personal consumption? a. Cadbury Dairy Milk b. Cadbury 5 Star c. Nestle Munch d. Nestle Kit Kat e. Others (Please Specify) 3. If your preferred brand‘s chocolate was not available in a shop, will you buy another chocolate at that moment? a. Yes b. No 4. If your preferred brand‘s chocolate price has increased (by Rs.1 – Rs.3), will you still buy it? a. Yes b. NoIf you have consumed Cadbury Dairy Milk at least once, answer the following questions:(Weight of Cadbury Dairy Milk (Plain): 40g)5. At what price would you consider Cadbury Dairy Milk (Plain) to be so expensive that you wouldnot consider buying it?6. At what price would you consider Cadbury Dairy Milk (Plain) to be priced so low that you wouldfeel the quality wouldn‘t be very good?7. At what price would you consider Cadbury Dairy Milk (Plain) starting to get expensive?8. At what price would you consider Cadbury Dairy Milk (Plain) to be a bargain—a great buy for themoney? 15
  16. 16. 9. Which of the following products will you purchase if it is provided by the brands? Cookies Chewing Malt Cakes Bread Stationery Jam Greeting Gum Beverage Loaf CardsCadburyDairy MilkCadbury 5StarNestleMunchNestle KitKatREFERENCES: http://www.5circles.com/van-westendorp-pricing-the-price-sensitivity-meter/ http://www.bnet.fordham.edu/public/mrktg/rcolombo/PDF_files/colombo.pdf http://researchaccess.com/2011/08/determining-price-the-van-westendorp-price-sensitivity- meter/ Marketing Management 13th Edition – Philip Kotler 16

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