Oct 16, 2010
‘A structured approach to assessing the sources and outcomes of brand equity and the manner by which marketing activities create brand value’
The brand value chain consists of four value stages and three multipliers as:
Value Stages: 1.Marketing Program Investment, 2.Customer Mind-set, 3.Market Performance and 4.Shareholder Value.Multipliers: 1.Program Quality, 2.Marketplace Condition and 3.Investor Sentiment.Brand-Oriented Value Chains
Now we will discuss it one-by-one for our selected brand “Nestle Cerelac”.
First Value Stage – Marketing Program Investment:
The brand value creation process begins when the firm invests in a marketing program targeting its actual and potential consumers. This marketing program can be product research and development, design, trade or intermediary support, advertising, promotion, sponsorship, direct or interactive marketing, personal selling, publicity, public relation and employee training.
Nestle Cerelac major investments on the marketing activities in year 2009 were its TVCs. First one launched in March for Nestle Cerelac stage 3 – new texture. Second one launched in September for Nestle Cerelac all stages – Bifidus. Hoardings of Nestle Cerelac Bifidus on the high exposure places. POS (Point-of-sale) material to support trade partners in better displaying the product. For employees who have babies, free Nestle Cerelac for 6 months. Making doctors company employees by hiring them for “Medical detailing team” of Nestle. Providing knowledge to the doctors and mothers through various seminars on the scientific aspects of the product only.
First Multiplier – Program Quality Multiplier
The ability of the marketing program to affect the customer mind-set will depend on its quality. It has four major dimensions to judge the quality of a marketing program as: Clarity, Relevance, Distinctiveness and Consistency.
Nestle Cerelac Analysis for program quality multiplier is as: Clarity; It means how understandable the marketing program is for the customers? Recent TVC is easily understandable and for more clarity “Nadia Khan” is explaining the product message for the customers, Relevance; Do consumers feel that the brand is one they should seriously consider? How meaningful is the marketing program for the customers. Latest TVC is of Bifidus Cerelac related with the digestive system functional improvements of babies. Also delivering the full product related research, development and knowledge to the customers, Distinctiveness; How unique is the marketing program? How creative or differentiating is it? TVC of Bifidus Cerelac is really a creative one. It clearly demonstrates how Bifidus kills the harmful bacteria and generates positive bacteria and also enhances the immunity of the digestive system to fight with the other diseases and Consistency; How cohesive and well-integrated is the marketing program? Does it effectively relate with the past marketing programs and properly balance continuity, change and evolving the brand in the right direction? Cerelac all previous ads focus on the product features and attributes and in the recent TVC of “Nadia Khan” this thing also present.Cerelac Banana
Second Value Stage – Customer Mind – set
The customer mind-set includes everything that exists in the minds of the customers with respect to the brand. It includes thoughts, feelings, experiences, images, perceptions, beliefs, and attitudes.
Five dimensions to measure the customer mind-set are as: Brand Awareness, Brand Associations, Brand Attitudes, Brand Attachment and Brand Activity.
Brand Awareness: The extent and ease to which customers recall and recognize the brand and can identify the product features and attributes with which it is associated. Nestle Cerelac has high awareness among customers. This awareness mainly is as: It is commonly used for babies from 6 months to 3 years. Available in different tastes and textures, SKUs are 350gm, 175gm, and 25gm sachet pack. Brand Associations: The strong, favorable and unique associations perceived by the customers about the brand. Nestle Cerelac is a nutritious food and a balance diet which makes babies life healthier. A product that is easy to digest for babies and taking care of baby’s internal system.
Cerelac is a reliable and innovative product too. Brand Attitudes: Overall evaluation of the brand in terms of its quality and the satisfaction it generates. Customers perceived Nestle Cerelac as a best quality product and a symbol of commitment. It’s a consumer-centric product that takes care of consumers specific needs. Brand Attachment: The degree of loyalty the customer feels towards the brand. Customers of Nestle Cerelac feel a sense of community as they feel socially strong by using it. Brand Activity: The extent to which customers use the brand, talk about it and seek the product related information. Customers of Nestle Cerelac are in active engagement with the brand. On web company has an advisory council for the product with which customers discuss problems and have appropriate solutions from experts.
Second Multiplier – Marketplace Condition Multiplier
It has three factors as: Competitive Superiority, Channel and other intermediary support and Customer size and profile.
Competitive Superiority: How effective are the marketing programs of the competing brands? Nestle has no a tough kind of competition. Market has very few local cereal manufacturers which are not in a position to do heavy advertisement as Nestle Cerelac. Channel and other intermediary support: How much brand reinforcement and selling effort is being put forth by various marketing partners?
Nestle Cerelac used initially “Pull Strategy” by investing on TVC so that customers demand the product by themselves. And by doing so the trade partners are bound to stock the product. Nestle Cerelac provide no trade promotions to the intermediary because company knows that it is the only brand available for babies and that they have high bargaining power. Also company has the strategy of maximum market coverage to fulfill the consumer’s demands. Customer size and profile: How many loyal customers the brand has and what type of customers are attracted to the brand? Are they profitable? Nestle Cerelac has 40% loyal customers. Health conscious parents are the major customers of the brand. They are highly profitable as they are not price sensitive but belong to quality conscious.
Third Value Stage – Market Performance
Customer mind-set affects how customers react in the marketplace in six main ways.Nestle Cerelac, Rice with Milk
Premium Price: Customers of Nestle Cerelac are willing to pay the premium price for quality products. Price Elasticity: No price elasticity of Nestle Cerelac exists in the market. Market Share: Nestle Cerelac has 15 % market share, 2 % is in the hands of other local manufacturers and 3 % belongs to the imported brands. Brand Expansions: Nestle Cerelac has a successful brand expansion in the form of various new tastes and new textures. Cost Structure: Nestle has a very effective cost structure as company spend only in the advertising heavily and not on the trade promotions to maintain the marketing expenditures. High Stock Value: As Nestle is a multinational so the factors like inflation, power crises, political issues matters less for it and maintains the high stock value.
Third Multiplier – Investor Sentiment
It has four factors: Market dynamics, Growth potential, Risk profile and Brand contribution.
Market dynamics: What are the dynamics of market as a whole (interest rates, investor sentiment, and supply of capital)? Suitable for Nestle Cerelac to maintain investor, creditor and market confidence and to sustain the future development. Board of Directors monitors the return on capital employed which the Company defines as operating income divided by total capital employed. The company paid dividend per share as 25 Rs last year. Growth potential: What is the growth potential or prospects for the brand in which it operates? Very high growth for the Nestle Cerelac as 80 % of the market is the opportunity for it. Being a Multinational company, Nestle has social approval and no legal bonding. These are the facilitating factors for Cerelec. The inflation rate and power crisis in Pakistan are the hindering factors for Cerelac brand. Risk profile: What is the risk profile for the brand? Low for Nestle Cerelac. Nestle Cerelac Apple 400g (England)
Nestle Cerelac is the market leader and there is no competition exists for it. So that’s why inflation rate or power crisis not much affected the brand’s share. Customers pay for the quality and nutritious food. Brand contribution: How important is the brand to the firm’s brand portfolio? Nestle Cerelac stands 4th in the brand portfolio after the milk and dairy, water and beverages. But overall in the baby food category, Cerelac is the only brand in the Pakistan that best available in market.
Fourth value stage – Shareholder Value:
Three important indicators for shareholder value are as: Stock price, The P/E ratio and Market capitalization
Stock price: The current price of the share is called stock price. So the stock price of the Nestle increasing day by day. Price/Earning ratio: It is the stock price divided by the earning per share. The current price or value of the share when divided by EPS (Earning per share) then we get P/E ratio. High the P/E ratio high the investors – investors willing to invest more. The P/E ratio of Nestle currently, is 17.2 % almost. Its mean investors pay 17 Rs to earn one rupee. Market Capitalization: Market Capitalization is the total market value of a company's outstanding shares. Market capitalization is calculated by multiplying the number of shares outstanding by the market price per share which is the current value of a company.
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