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

ƒ Loyalty 10
ƒ Price Premium
ƒ 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.

EXISTING  BRAND ASSET 
CONDITIONS VALUATOR

LOYALTY

BRAND EQUITY

COMPETITION PREMIUM

CHANGED 
DISTRIBUTION
CONDITIONS

PRODUCT LIFE 
LEVERAGIBILITY
CYCLE

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.

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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

Knorr
Horlicks Wai Top
Yippee Maggi Soupy Total
Foodles Wai Ramen
Noodles

Yippee X X**

Horlicks Foodles X

Maggi X
Preferred Brand

Wai Wai X

Top Ramen X* X

Knorr Soupy
X
Noodles

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

Knorr
Horlicks Wai Top
Yippee Maggi Soupy Total
Foodles Wai Ramen Customers 
Noodles loyal to 
brand 
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
Preferred Brand

Wai Wai 0 0 0 0 0 0 0

Top Ramen 0 0 1 0 0 0 1

Knorr Soupy
0 0 0 0 0 0 0
Noodles

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
0% 0%
Noodles

Industry 42% 42%

Industry minus
6.5% 6.1%
Maggi

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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.

Percentage of loyal and switchers of Maggi
70%

60% 58%

50%
42%
40%

30%

20%

10%

0%
Loyal Switchers

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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.

Brand Loyalty
60% 55%

50%

40%
33%
30%

20%
12%
10%

0%
I will not buy Buy another brand Buy from other shop‐keeper

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.

Recommendation by the consumers

100% 94%
90%
80%
70%
60%
50%
40%
30%
20%
10% 6%
0%
Recommend Does not Recommend

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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

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