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PRAXIS BUSINESS SCHOOL

                Brand Equity Measurement -

                    ‘Cadbury Dairy Milk’




Submitted To:       Prof. Srinivas Govindrajan




Presented By:       Ankita Singh

                    Arunachalam Ramanathan

                    GauravTalwar

                    Zeeshan Mohammad

                                   1
EXECUTIVE SUMMARY

In Phase-1 of the project on Cadbury Dairy Milk, the brand image of Cadbury Dairy Milk was
measured using a combination of Brand Asset Valuator Model and Zaltmann Metaphor Elicitation
Technique. In the last finding, it was indicated that Cadbury Dairy Milk will be the leader in the
chocolate market due to its excellent positioning and marketing mix

In Phase-2, equity of a brand is measured to determine the retention capacity of the brand in the
market under any circumstances. It also talks about the added value endowed on products and it
determines the capability of generating future cash flows. In order to measure Brand Equity for
Cadbury 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 their
preferred brand and their last purchased brand. From the survey conducted, it was found that Cadbury
Dairy Milk had the highest brand loyalty (37.74%) with a gravity of 0.77 and a focus of 0.87. The
probability of repurchasing Cadbury Dairy Milk was the highest (at 0.97) and the probability of
switching from other brands to Cadbury Dairy Milk was also the highest (at 0.94). This seemed to be
a good sign to the brand as it can retain its brand loyal consumers and has the potential to attract new
consumers.

Since Colombo Morrison Model couldn‘t capture the brand loyalty based on price fluctuations and
non-availability of the product, a revised model was proposed. Based on two additional questions, the
actual 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. From
the survey conducted amongst Cadbury Dairy Milk consumers and on plotting a price chart (based on
the different prices and its cumulative frequencies), it was found that the optimum price range for
Cadbury 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 were
chosen. From the results, it was found that Cadbury Dairy Milk has a high potential to extend its
brand into Cookies and Cakes category and it has a marginal success rate in Greeting cards category
as well. But, the brand name might have a risk if it is extended to Bread Loaf and Stationery category
and will be at high risk if launched in Chewing Gum category.



                                                   2
TABLE OF CONTENTS

S.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
BRAND EQUITY

Brand Equity refers to the marketing effects or outcomes that accrue to a product with its brand name
compared with those that would accrue if the same product did not have the brand name and at the
root of these marketing effects is consumers' knowledge. It is the premium that can be charged from
the 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 the
consumer level. The group is trying to measure Brand Equity of Cadbury Dairy Milk at the product
level.

         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
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 MEASUREMENT

COLOMBO MORRISON MODEL

It 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 no
other brands and automatically repurchase the last brand purchased (HCL), or he will consider
alternatives 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 or
other situational factors. By considering the relative preferences and purchases, the model computes
an ability of each brand to attract consumers from each other brand. The resulting 2 x 2 matrix
consists of ―most preferred brand‖ and ―last brand purchased.‖ Thus, the likelihood of purchasing a
given brand is the sum of the proportion of that brand‘s hard core loyal and some fraction of the
remainder. That fraction is a measure of the brand‘s ability to attract potential switchers.




                                                    5
Last Purchased Brand
                                 Cadbury    Cadbury                                  Nestle
Preferred Brand                  5 Star     Dairy Milk          Nestle Kit Kat       Munch           Others
Cadbury 5 Star                     HCL            PS                     PS               PS            PS
Cadbury Dairy Milk                  PS           HCL                     PS               PS            PS
Nestle Kit Kat                      PS            PS                    HCL               PS            PS
Nestle Munch                        PS            PS                     PS              HCL            PS


Colombo and Morrison estimated a model based on two equations:

1)     =   i+   (1- i)       i



2) µ= ∑ (1- i)           j



Where       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 who
next buy brand i.

Gravity (α) is the ratio of ‗HCL‘ consumers of a brand to the row sum of the brand

Focus (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
Analysis:

On conducting a survey amongst 53 respondents, the following table was derived based on Colombo
Morrison model:


                   Last Purchased Brand
                   Cadbury Cadbury           Nestle Kit       Nestle
Preferred Brand    5 Star    Dairy Milk      Kat              Munch        Others Grand Total
Cadbury 5 Star         7          2               0               0          3          12
Cadbury Dairy
Milk                   2            20               1             1         2             26
Nestle Kit Kat         1            1                5             0         0             7
Nestle Munch           2            0                0             5         1             8
Grand Total            12           23               6             6         6             53


The 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)                µ
Cadbury 5 Star              13.21%                      0.58             0.58       0.83        0.52
Cadbury Dairy Milk          37.74%                      0.77             0.87       0.97        0.94
Nestle Kit Kat               9.43%                      0.71             0.83       0.95        0.85
Nestle Munch                 9.43%                      0.63             0.83       0.94        0.78
Industry Average: 17.45%

Brand Loyalty:

Cadbury Dairy Milk has the highest brand loyalty followed by Cadbury 5 Star and then followed by
both Nestle Munch and Nestle Kit Kat. Since Cadbury Dairy Milk posts a market share (in sales) of
43%, the brand loyalty of other brands can be well understood with industry average minus Cadbury
Dairy Milk.


         Brands             Brand Loyalty
Cadbury 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 that
consumers purchased non-preferred brands for a change in taste and not due to non-availability or
poor distribution network.

                                                 7
Probability of Repurchasing and Switching brand:

The probability of repurchase (ρ) is highest in Cadbury Dairy Milk followed by Nestle Kit Kat and
Nestle 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 the
lowest for Cadbury 5 Star. This can pose a serious threat to Cadbury 5 Star as it has to make sure that
it doesn‘t lose its existing brand loyal customers due to its low conversion rate.

REVISED COLOMBO MORRISON MODEL

Since Colombo Morrison Model failed to capture the ‗actual brand loyalty‘ of the consumers, a
revised model was proposed. This model captures the actual brand loyalty after including two more
parameters:

        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 loyal
customers:

   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
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 Model




The 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 question
may or may not be price sensitive. Thus, the following table was derived after subtracting the
respective 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                   3


Now, the last column denotes the actual brand loyal consumers who are neither sensitive to price nor
will 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
VAN WESTENDORP PRICE SENSITIVITY METER MODEL

This is a technique for measuring consumers‘ price expectations for a product in an established
category. It enables the marketer to see a range of prices that might be appropriate, and to see the fall
off in consumer interest that occurs as price rises.

The Van Westendorp Price Sensitivity Analysis (PSA) determines a range of acceptable prices and an
optimal price point based on an analysis of price/value ratings obtained from consumers. Key data
analysed is from responses to questions about what prices for a product or service are considered too
high or too low.

Established brands will use the PSA model to guide pricing for re-positioning or other pricing
decisions, often as input to a test market.

The traditional PSM approach asks four price-related questions, which are then evaluated as a series
of four cumulative distributions, one distribution for each question. The standard question formats can
vary, 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 cumulative
frequencies are calculated. For ‗Too Cheap‘ and ‗Getting Expensive‘, the prices are arranged in the
descending order and its cumulative frequencies are calculated. For each parameter, a line graph is
plotted between the price of the chocolate and the cumulative frequencies. This is done to get the
intersection points. The intersection points are:




                                                       10
Good Value to Too Cheap - The lower bound of an acceptable price range or "Point of Marginal
Cheapness" or PMC

Too Expensive to Too Cheap- This line represents an "Optimal Price Point" or OPP. This is the
point at which an equal number of respondents describe the price as exceeding either in their upper or
lower limits

Getting Expensive to Good Value - This is described as the "Indifference Price Point" or IPP. The
IPP refers to the price at which an equal number of respondents rate the price point as either "good
value" or "getting expensive".

Too Expensive to Getting Expensive- The upper bound of an acceptable price range or "Point of
Marginal Expensiveness" or PME.




                                                 11
Analysis:

On the plotting the line graph for each parameter (prices vs cumulative frequencies), the following
graph 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 the
optimum price range for Cadbury Dairy Milk was between Rs.18 and Rs.25.




                                                                              12
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                   Greeting
Percentages Cookies         Cakes       Gum          Beverages       Jam      Loaf      Stationery     Cards
Cadbury 5
Star        77.36%            77.36%      35.85%           24.53% 24.53%      24.53%         9.43%      11.32%
Cadbury
Dairy Milk  92.45%            92.45%      20.75%           35.85% 24.53%      26.42%         9.43%      30.19%
Nestle Kit
Kat         47.17%            24.53%      22.64%           24.53% 11.32%      28.30%        18.87%       9.43%
Nestle
Munch       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
Chewing         Malt                    Bread               Greeting
Representation Cookies Cakes              Gum             Beverages     Jam       Loaf     Stationery Cards
Cadbury 5 Star             +                 +                 -                                         -
Cadbury Dairy
Milk             ++       ++                   --                                      -        -           +
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
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. No

If 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 would
not consider buying it?

6. At what price would you consider Cadbury Dairy Milk (Plain) to be priced so low that you would
feel 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 the
money?




                                                  15
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                          Cards

Cadbury
Dairy Milk
Cadbury 5
Star
Nestle
Munch
Nestle Kit
Kat




REFERENCES:

        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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Brand Equity Measurement - Cadbury Dairy Milk

  • 1. PRAXIS BUSINESS SCHOOL Brand Equity Measurement - ‘Cadbury Dairy Milk’ Submitted To: Prof. Srinivas Govindrajan Presented By: Ankita Singh Arunachalam Ramanathan GauravTalwar Zeeshan Mohammad 1
  • 2. EXECUTIVE SUMMARY In Phase-1 of the project on Cadbury Dairy Milk, the brand image of Cadbury Dairy Milk was measured using a combination of Brand Asset Valuator Model and Zaltmann Metaphor Elicitation Technique. In the last finding, it was indicated that Cadbury Dairy Milk will be the leader in the chocolate market due to its excellent positioning and marketing mix In Phase-2, equity of a brand is measured to determine the retention capacity of the brand in the market under any circumstances. It also talks about the added value endowed on products and it determines the capability of generating future cash flows. In order to measure Brand Equity for Cadbury 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 their preferred brand and their last purchased brand. From the survey conducted, it was found that Cadbury Dairy Milk had the highest brand loyalty (37.74%) with a gravity of 0.77 and a focus of 0.87. The probability of repurchasing Cadbury Dairy Milk was the highest (at 0.97) and the probability of switching from other brands to Cadbury Dairy Milk was also the highest (at 0.94). This seemed to be a good sign to the brand as it can retain its brand loyal consumers and has the potential to attract new consumers. Since Colombo Morrison Model couldn‘t capture the brand loyalty based on price fluctuations and non-availability of the product, a revised model was proposed. Based on two additional questions, the actual 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. From the survey conducted amongst Cadbury Dairy Milk consumers and on plotting a price chart (based on the different prices and its cumulative frequencies), it was found that the optimum price range for Cadbury 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 were chosen. From the results, it was found that Cadbury Dairy Milk has a high potential to extend its brand into Cookies and Cakes category and it has a marginal success rate in Greeting cards category as well. But, the brand name might have a risk if it is extended to Bread Loaf and Stationery category and will be at high risk if launched in Chewing Gum category. 2
  • 3. TABLE OF CONTENTS S.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. BRAND EQUITY Brand Equity refers to the marketing effects or outcomes that accrue to a product with its brand name compared with those that would accrue if the same product did not have the brand name and at the root of these marketing effects is consumers' knowledge. It is the premium that can be charged from the 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 the consumer level. The group is trying to measure Brand Equity of Cadbury Dairy Milk at the product level. 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. 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 MEASUREMENT COLOMBO MORRISON MODEL It 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 no other brands and automatically repurchase the last brand purchased (HCL), or he will consider alternatives 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 or other situational factors. By considering the relative preferences and purchases, the model computes an ability of each brand to attract consumers from each other brand. The resulting 2 x 2 matrix consists of ―most preferred brand‖ and ―last brand purchased.‖ Thus, the likelihood of purchasing a given brand is the sum of the proportion of that brand‘s hard core loyal and some fraction of the remainder. That fraction is a measure of the brand‘s ability to attract potential switchers. 5
  • 6. Last Purchased Brand Cadbury Cadbury Nestle Preferred Brand 5 Star Dairy Milk Nestle Kit Kat Munch Others Cadbury 5 Star HCL PS PS PS PS Cadbury Dairy Milk PS HCL PS PS PS Nestle Kit Kat PS PS HCL PS PS Nestle Munch PS PS PS HCL PS Colombo and Morrison estimated a model based on two equations: 1) = i+ (1- i) i 2) µ= ∑ (1- i) j Where 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 who next buy brand i. Gravity (α) is the ratio of ‗HCL‘ consumers of a brand to the row sum of the brand Focus (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. Analysis: On conducting a survey amongst 53 respondents, the following table was derived based on Colombo Morrison model: Last Purchased Brand Cadbury Cadbury Nestle Kit Nestle Preferred Brand 5 Star Dairy Milk Kat Munch Others Grand Total Cadbury 5 Star 7 2 0 0 3 12 Cadbury Dairy Milk 2 20 1 1 2 26 Nestle Kit Kat 1 1 5 0 0 7 Nestle Munch 2 0 0 5 1 8 Grand Total 12 23 6 6 6 53 The 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)  µ Cadbury 5 Star 13.21% 0.58 0.58 0.83 0.52 Cadbury Dairy Milk 37.74% 0.77 0.87 0.97 0.94 Nestle Kit Kat 9.43% 0.71 0.83 0.95 0.85 Nestle Munch 9.43% 0.63 0.83 0.94 0.78 Industry Average: 17.45% Brand Loyalty: Cadbury Dairy Milk has the highest brand loyalty followed by Cadbury 5 Star and then followed by both Nestle Munch and Nestle Kit Kat. Since Cadbury Dairy Milk posts a market share (in sales) of 43%, the brand loyalty of other brands can be well understood with industry average minus Cadbury Dairy Milk. Brands Brand Loyalty Cadbury 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 that consumers purchased non-preferred brands for a change in taste and not due to non-availability or poor distribution network. 7
  • 8. Probability of Repurchasing and Switching brand: The probability of repurchase (ρ) is highest in Cadbury Dairy Milk followed by Nestle Kit Kat and Nestle 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 the lowest for Cadbury 5 Star. This can pose a serious threat to Cadbury 5 Star as it has to make sure that it doesn‘t lose its existing brand loyal customers due to its low conversion rate. REVISED COLOMBO MORRISON MODEL Since Colombo Morrison Model failed to capture the ‗actual brand loyalty‘ of the consumers, a revised model was proposed. This model captures the actual brand loyalty after including two more parameters: 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 loyal customers: 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. 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 Model The 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 question may or may not be price sensitive. Thus, the following table was derived after subtracting the respective 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 3 Now, the last column denotes the actual brand loyal consumers who are neither sensitive to price nor will 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. VAN WESTENDORP PRICE SENSITIVITY METER MODEL This is a technique for measuring consumers‘ price expectations for a product in an established category. It enables the marketer to see a range of prices that might be appropriate, and to see the fall off in consumer interest that occurs as price rises. The Van Westendorp Price Sensitivity Analysis (PSA) determines a range of acceptable prices and an optimal price point based on an analysis of price/value ratings obtained from consumers. Key data analysed is from responses to questions about what prices for a product or service are considered too high or too low. Established brands will use the PSA model to guide pricing for re-positioning or other pricing decisions, often as input to a test market. The traditional PSM approach asks four price-related questions, which are then evaluated as a series of four cumulative distributions, one distribution for each question. The standard question formats can vary, 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 cumulative frequencies are calculated. For ‗Too Cheap‘ and ‗Getting Expensive‘, the prices are arranged in the descending order and its cumulative frequencies are calculated. For each parameter, a line graph is plotted between the price of the chocolate and the cumulative frequencies. This is done to get the intersection points. The intersection points are: 10
  • 11. Good Value to Too Cheap - The lower bound of an acceptable price range or "Point of Marginal Cheapness" or PMC Too Expensive to Too Cheap- This line represents an "Optimal Price Point" or OPP. This is the point at which an equal number of respondents describe the price as exceeding either in their upper or lower limits Getting Expensive to Good Value - This is described as the "Indifference Price Point" or IPP. The IPP refers to the price at which an equal number of respondents rate the price point as either "good value" or "getting expensive". Too Expensive to Getting Expensive- The upper bound of an acceptable price range or "Point of Marginal Expensiveness" or PME. 11
  • 12. Analysis: On the plotting the line graph for each parameter (prices vs cumulative frequencies), the following graph 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 the optimum price range for Cadbury Dairy Milk was between Rs.18 and Rs.25. 12
  • 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 Greeting Percentages Cookies Cakes Gum Beverages Jam Loaf Stationery Cards Cadbury 5 Star 77.36% 77.36% 35.85% 24.53% 24.53% 24.53% 9.43% 11.32% Cadbury Dairy Milk 92.45% 92.45% 20.75% 35.85% 24.53% 26.42% 9.43% 30.19% Nestle Kit Kat 47.17% 24.53% 22.64% 24.53% 11.32% 28.30% 18.87% 9.43% Nestle Munch 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. Chewing Malt Bread Greeting Representation Cookies Cakes Gum Beverages Jam Loaf Stationery Cards Cadbury 5 Star + + - - Cadbury Dairy Milk ++ ++ -- - - + 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. 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. No If 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 would not consider buying it? 6. At what price would you consider Cadbury Dairy Milk (Plain) to be priced so low that you would feel 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 the money? 15
  • 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 Cards Cadbury Dairy Milk Cadbury 5 Star Nestle Munch Nestle Kit Kat REFERENCES: 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