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Praxis Business School

Brand Equity

On

Maggi Noodles

Submitted to

Prof. S. Govindrajan

Product & Brand Management

Part 1: Brand Image Measurement

By

Anil Nandyala (B11005)

Richa Daruka (B11035)

Rohit Khattar (B11036)

Sonam Keshri (B11042)

 

 

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Index

Page No. Executive Summary 3 Brand Equity 5

Analysis Measure of Brand Equity

Loyalty 10 Price Premium Leveragibility 15

Recommendation 17

Annexure 18

 

 

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Executive Summary: Brand equity as a concept has emerged and gained popularity in 1980’s. Until than brand was one of the neglected aspect of total marketing. Lot of the development of in the field of brand management owes to brand equity concept.

Brand Equity is the ability of the brand to manage the changed market conditions. It is dependent on two factors Existing & Changed conditions.

Existing conditions can be found using BAV (Brand Asset Valuator), which we have done in Phase-1 of the project.

Changed market conditions can be broadly classified in to two categories, first being competition and second being Life cycle of the category & Leveragability of the brand.

Competition is subdivided in to four parts

• Loyalty with respect to the competition • Price premia gives whether the brand has flexibility with price • Distribution strengths of all brands

Based on the survey, with sample size of 37 & secondary research following conclusions are drawn.

Conclusions Derived from Analysis:

Loyalty: The preference of Maggi is very high compared to competitors and recommendation by consumers is as high as 94%, which shows the brand has high loyalty. But, from the analysis we found that gravity of the brand is low as compared to focus that indicates Maggi is not able to hold all its customers the reason could be sales promotion strategy, urge to try new brands and retail’s push is high in this category.

Price Premia: As per the Van Westendor model the price of a product should fall between the range of bargain and getting expensive. As per our survey maggi customers feel value for money when the product price is under price range of 9-11 Rs that is equal to market price. Customers feel it is getting expensive at a price range of 12-14 for a 100gm pack. So from this we can say Maggi is treated as value for money brand.

Leveragability: From the survey it is found that more than 35% of consumers feel that Maggi can enter in to cookies, Chips, health drinks & Juices. Only 3% of the consumers feel that Maggi brand cannot be leveraged for other products. The over all leveragability of the brand Maggi is very high.

 

 

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Recommendations:

From the survey & Secondary Research it was found that Loyalty & Distribution network of Maggi is far ahead of competition. But, Increasing competition from Knorr & Yuppie that have good distribution network may hurt Maggi in future. For Maggi in order to retain it’s existing market share depends on how well it can engage consumers. Maggi’s consumer engaging programs like “Meri maggi 2 min mein khushiyan” will play a crucial role.

Analysis of Poters five forces reveals that category has low entry & exit barriers and the product has many substitutes so it’s better for maggi to leverage it’s brand strength in other category of products. The survey shows that Maggi can leveraged in the categories such as Cookies & biscuits, chips, health drinks & Juices.

 

 

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BRAND EQUITY:

History: Brand equity as a concept has emerged and gained popularity in 1980’s. Until than brand was one of the neglected aspect of total marketing. Lot of the development of in the field of brand management owes to brand equity concept.

According to Davis A.Aaker, brand equity is a set of assest(and liabilities) linked to a brand’s name and symbol, that adds to (or subtracts from), the value provided by a product or service to a firm.

Brand equity is the added value endowed on products and services. It may be reflected in the way consumers think, feel, and act with respect to the brand, as well as in the prices, market share, and profitability the brand commands for the firm.

Brand Equity is the ability of the brand to manage the changed market conditions. It is dependent on two factors Existing & Changed market conditions.

 

Brand Equity is the ability of the brand to manage the changed market conditions. For a brand to with stand the changed conditions is dependent on the brand’s existing conditions that can found by using BAV (Brand Asset Valuator) and changed market conditions that is dependent on the competition and product life cycle.

EXISTING CONDITIONS

BRAND ASSET VALUATOR

BRAND EQUITY

CHANGED CONDITIONS

LOYALTY

COMPETITION PREMIUM

DISTRIBUTION

PRODUCT LIFE CYCLE LEVERAGIBILITY

 

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The ability of a brand to with stand the competition is broadly classified in to four factors

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.

METHODS TO FIND BRAND LOYALTY:

COLOMBO MORRISON MODEL:

Colombo and Morrison distinguished buyers in to two groups. Hard-core loyals, who buy the same brand with absolute certainty at every single purchase occasion. Potential switchers, who choose at every purchase occasionally one of the brands according to a certain probability distribution.

Therefore, the two important parameters of the model reflect a brand’s reliance on highly loyal customers and its success in attracting brand switchers. The first groups are those who have a positive attitude toward the brand (prefer it) and who buy it. The second groups are those who buy it on a given purchase but who may prefer another brand.

An assumption of the model is that every consumer has a preferred brand. If these consumers have a preference, why are they “switching?” Although all consumers have a preferred brand, some preferences are stronger than others. Weak preferences characterize potential switchers. 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.

Share Tier Model:

This model takes into account two parameters Price & Quality. This model takes in to account two parameters Price & Quality. It tests the belief and checks whether the beliefs are getting translated into Behaviour, i.e. actual purchase. It also helps to find out the price level of price sensitivity that a particular brand has. This model also helps in gauging the resilience and leveragability of the brand.

Rational for choosing Colombo Morrison Model:

The category noodles we have chosen falls under low level of involvement that means people’s chance of trying other brand is high. Analyzing Colombo Morrison Model gives the reasons why people choose other brand over preferred brand. This model helps to find out the problems existing in the brand.

 

 

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PRICE PREMIA: It is the ability of the brand to charge the premium

METHODS TO FIND PRICE PREMIUM:

Brand Price Trade off Method:

BPTO is one of the simplest to find relative value of the brand compared to competitors. In this method different brands are shown to customers and they are asked to choose their preferred brand at the same comparable price level. Then prices of the products are revised and then the customers are asked to choose from the adjusted price level.

The ranking of the preferred can be inferred in relation to the prices customers can pay or willing to pay.

Van Westerndrops Price Sensitivity Meter::

The method was developed in the 1970s by Dutch economist Peter H. Van Westendorp. The Price Sensitivity Meter (PSM) is a market technique for determining consumer price preferences.

The traditional PSM approach asks four price-related questions, which are then evaluated as a series of four cumulative distributions.

▪ 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/High Side)

▪ At what price would you consider the product to be a bargain—a great buy for the money? (Cheap/Good Value)

A graph is plotted by taking price on X-axis & number of respondents on y-axis.The Optimal Price Point (OPP) is the place on the graph that too inexpensive line crosses too expensive line. The Optimal Price Range/Band is the area in the graph between the PMC (Point of Marginal cheapness) and PME (Point of Marginal Expensive). PMC is where too inexpensive crosses expensive. Whereas the PME is where inexpensive crosses too expensive. The PMC is the threshold where the product becomes cheap and the PME is the threshold where the product becomes expensive.

 

Changes Made to Van westendorps price sensitivity Meter: As per the method the questionnaire should be open ended. Open ended questions in this method works well when the level of involvement for the product is high. Since, the category we have chosen fall under low level of involvement, Closed end questionnaire gives better results.

 

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Rational for choosing Van westendorps price sensitivity Meter:

This method gives clear about how consumers perception about a product changes with the change in price of the product.

Rational for not choosing Brand Price Trade-off Method:

This method gives relative value of a brand compared to its competitors. Since, Maggi has a market share of around 90% and the rest of the brands sharing 10% market share, adopting this method makes results skewed towards Maggi. In order get better results using this method we have take more sample size for competitors.

DISTRIBUTION: The main advantage of Maggi over other brands is early mover advantage & distribution network. Only few noodles brands like Maggi, Yuppie & Knorr has good distribution network. But Yuppie & Knorr are still in the early growth stage. Wai-Wai is present only in Eastern region & Top Ramen has entered tie-up with Marico to tap other markets. Clearly Maggi has the advantage over other brands in terms of availability.

PRODUCT LIFE CYCLE: Product life cycle is a tool that provides a way to trace the stages of product’s acceptance from introduction to decline. The market share of Maggi noodles is around 90%. The present market size of instant noodles is Rs 1300 crore and is expected to grow around Rs 3000 – 3500 crore by 2015. But, increased competition from Sunfeast Yuppie, HUL’s Knorr & other brands make hard for Maggi to increase its market share.

 

 

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LEVERAGIBILITY: It is the power of the existing brand name to support a company’s entry in to a new product category. The new category can gain the strength of existing

Brand because consumers relate pre-existing knowledge of a brand’s level of quality with new category of products.

 

 

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Analysis Measure of Brand Equity

Questionnaire for Loyalty:

Which among the following brands do you prefer most?

Which brand of noodles did you purchase/have last time?

Rational: As per the Colombo Morrision model we aim to find out the focus percentage which tells the purchase made by customer who prefer the brand by the total number of customers who purchase the brand and the gravity percentage i.e. the customers who prefer the brand by the total number of people who buy the brand.

Last Brand Purchased

YippeeHorlicks Foodles

MaggiWai Wai

Top Ramen

Knorr Soupy

Noodles Total

Pref

erre

d B

rand

Yippee X X**

Horlicks Foodles X

Maggi X

Wai Wai

X

Top Ramen X* X

Knorr Soupy Noodles

X

Total

Where,

X = No. of customer loyal to their brand

X*= Customers who prefer Top Ramen but their last purchase made was Yippee i.e they switch

 

X** = Customers who prefer Yippee but their last purchase made was Yippee

 

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Last Brand Purchased

Yippee Horlicks Foodles

MaggiWai Wai

Top Ramen

Knorr Soupy

Noodles Total

Pref

erre

d B

rand

Yippee 2 0 1 0 0 0 3

Horlicks Foodles 0 0 0 0 0 0 0

Maggi 3 0 29 0 0 1 33

Wai Wai 0 0 0 0 0 0 0

Top Ramen 0 0 1 0 0 0 1

Knorr Soupy Noodles

0 0 0 0 0 0 0

Total 5 0 31 0 0 1 74

In the above table column Total shows the share of preference of each brand. Over here Maggi’s share of preference is 44.59% (33/74). Row Total tells us the market share for each brand. According to the response taken from 37 respondents, the market share for Yippee is 6.75%, for Maggi is 41.89%, for Knorr soupy noodles its 1.35% and for rest all other brand its 0.

From above matrix we derive the Gravity and Focus Ratio Matrix

Gravity Focus

Yippee 67% 40%

Horlicks Foodles 0% 0%

Maggi 88% 94%

Wai Wai 0% 0%

Top Ramen 0% 0%

Knorr Soupy Noodles

0% 0%

Industry 42% 42%

Industry minus Maggi

6.5% 6.1%

Customeloyal to

 

rs  

brand 

 

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From the above Gravity and Focus matrix we can see that the

Industry Average of both Gravity and Focus Ratio is 42% which is calculated as [(2+0+29+0+0+0)/74] i.e. the loyalty consumers of all the brand by total consumers (both preferred and purchased).

If we look upon Maggi’s Gravity Ratio: 88% and Focus Ratio: 94%. Though both the gravity and focus ratio is greater than the industry average, but Maggi is not able to convert its preferred to purchase because its gravity ratio is greater than its focus ratio.

Whereas, Yippee noodles are able to convert its preferred customers to purchase customers, since its focus ratio is less than its gravity.

Here, focus ratio(94%) of Maggi is more than fifteen times to that of ‘Industry minus maggi’ focus ratio(6.1%). It means that that loyalty of maggi is increasing. Therefore the brand is robust to genearte future cash flow.

If you get similar noodles (as your preferred brand) at a cheaper price, will you switch to that brand?

Rational: This question is actually to check if in the changing situation a new brand comes in with a price less than maggi will the customers switch to the brand or not. This tells us the threat of competitors price per se and so that we can be prepared for any such changes.

58%

42%

0%

10%

20%

30%

40%

50%

60%

70%

 

Loyal Switchers

Percentage of loyal and switchers of Maggi

 

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If your preferred brand is not available, what will you do?

Rational: The question was asked to check the degree of loyalty, as people who will buy only maggi even if it is not available in a shop indicates he is very loyal to the brand.

12%

33%

55%

0%

10%

20%

30%

40%

50%

60%

I will not buy Buy another brand Buy from other shop‐keeper

Brand Loyalty

Do you recommend your preferred brand to others?

Rational: The question again measures the degree of loyalty of a customer as a highly loyal customer of a brand becomes a brand.

94%

6%

0%10%20%30%40%50%60%70%80%90%100%

 

Recommend Does not Recommend

Recommendation by the consumers

 

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Conclusion for Loyalty: The preference of Maggi is very high compared to competitors and recommendation by consumers is as high as 94%, which shows the brand has high loyalty. But, from the analysis we found that gravity of the brand is low as compared to focus that indicates Maggi is not able to hold all its customers the reason could be sales promotion strategy, urge to try new brands and retail’s push is high in this category.

 

 

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Price Premia :

Question: At what price range would you consider your preferred brand to be so expensive that you will not consider buying it?

Rational: This question was asked to find at what price range consumers think the price of the product is too expensive and would not afford to buy.

Question: At what price range would you consider your preferred brand to be so low that you will feel the quality will not be good?

Rational: This question was asked to find at what price range consumers think the price of the product is too cheap and quality is deteriorated.

Question: At what price range would you consider your preferred brand starting to get expensive, so that it is not out of the question, but you have to give some thought to buy it?

Rational: This question was asked to find at what price range consumers think the price of the product is getting expensive, but give some thought to consider it

Question: At what price range would you consider your preferred brand to be a bargain, a great buy for money?

Rational: This question was asked to find at what price range consumers think the price of the product is value for money.

 

 

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Conclusion for Price Primia: As per the Van Westendor model the price of a product should fall between the range of bargain and getting expensive. As per our survey maggi customers feel value for money when the product price is under price range of 9-11 Rs that is equal to market price. Customers feel it is getting expensive at a price range of 12-14 for a 100gm pack. So from this we can say Maggi is treated as value for money brand.

 

 

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Leveragability:

Which of the following category of products will you buy if offered by your preferred brand?

Rational: This question was asked to find in which category of products the brand could be leveraged.

Conclusion for Leveragibility: From the survey it is found that more than 35% of consumers feel that Maggi can enter in to cookies, Chips, health drinks & Juices. Only 3% of the consumers feel that Maggi brand cannot be leveraged for other products. The over all leveragability of the brand Maggi is very high.

 

 

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Recommendations: From the survey & Secondary Research it was found that Loyalty & Distribution network of Maggi is far ahead of competition. But, Increasing competition from Knorr & Yuppie that have good distribution network may hurt Maggi in future. For Maggi in order to retain it’s existing market share depends on how well it can engage consumers. Maggi’s consumer engaging programs like “Meri maggi 2 min mein khushiyan” will play a crucial role.

Analysis of Poters five forces reveals that category has low entry & exit barriers and the product has many substitutes so it’s better for maggi to leverage it’s brand strength in other category of products. The survey shows that Maggi can leveraged in the categories such as Cookies & biscuits, chips, health drinks & Juices.

 

 

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Annexure