Description
Brand Equity & Brand Valuation – Close-up Toothpaste using inter brand method.
Brand Equity & Brand Valuation – Close-up Toothpaste
Brand Management
Toothpaste Industry Overview: Indian oral care industry (including toothpaste and toothpowder) is about Rs. 35 billion. Colgate and HUL contribute around three fourth of the total market. Other major players include Dabur and Anchor group together contributing around 15% of total market.
Oral Care Industry Market Share
4% 13% 46%
12%
HUL Colgate Dabur Anchor
25%
Others
World over the oral care market is largely represented by toothpaste and toothbrush. Other products in this category include mouthwash, sprays and oral rinses. In India, there is a significant presence of toothpowder as well. Many other people in India still clean teeth with traditional products like neem twigs, salt, ash, tobacco or other herbal ingredients. Recent studies have indicated dual usage (powder and paste) in 10% of rural households. The younger generation is increasingly shifting to toothpaste even in rural areas. In relative terms, penetration of toothpowder is higher in North and toothpaste in South. This could be due to higher education, purchasing power and urbanization in the South. Indian urban toothpaste per capita consumption is about 92 grams per month compared to
219 grams of China; and only 7% of Indian urban class brush twice a day compared to 86% in Malaysia. Thus there is tremendous scope for growth of doing business in India. Toothpaste industry growth has been low as compared to other products. For market leader Colgate, in 2007 growth had been around 12%. For same brands like Babool the market growth was as high as 50%. As per India Infoline Sector report, about 60% of toothpaste in India is sold on family platform; there is single toothpaste for the entire family. Specialized toothpaste such as for children has been available in India only in last 2-3 years (mainly imported products) and usage is extremely low. About 35% of toothpaste is sold on cosmetic propositions. These are targeted mainly at young consumers and upper urban class on the proposition of fresh breath, white teeth and functional benefits of controlling plaque, preventing cavity etc. There is a niche market (5% of total) for toothpaste with therapeutic benefits. Toothpaste is also segmented based on product attributes as White, Gel, Herbal, etc. Some products are also available as a combination of both Whites and Gel. World over toothpaste positioned on anti-cavity platform, contains fluorides. Excessive usage of fluoride can cause a disease called Fluoresces, to which children are particularly vulnerable. In India, there is a strong societal aversion to fluoride toothpaste. Price wise, toothpastes can be segmented as Economy, Regular and Value-added segments. The price range varies from Rs.15-20 for a 100 gm pack in the economy segment to Rs.30-35 for a 100 gm pack in the Regular Segment to Rs.50 for a 100 gm pack in the medicated/value added segment.
About Closeup: Closeup is the original youth brand of India. The first brand targeting youth in the oral care market, with an edgy and youthful image which stays relevant till date. Ever since its launch in 1975 Closeup was the first gel toothpaste to be launched in India and has led the gel toothpaste segment ever since. Closeup became the first Gel toothpaste with fluoride in the Indian market. The brand umbrella also includes Closeup Lemon Mint, gel toothpaste with the whitening benefits of lemon. The
latest entry in the closeup stable is Closeup Milk Calcium- revolutionary new toothpaste with goodness of milk calcium. 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. In other words, consumers' knowledge about a brand makes manufacturers/advertisers respond differently or adopt appropriately adept measures for the marketing of the brand. The study of brand equity is increasingly popular as some marketing researchers have concluded that brands are one of the most valuable assets that a company has. Brand equity is one of the factors which can increase the financial value of a brand to the brand owner, although not the only one.
Methodology: There are many ways to measure a brand. It includes: 1. Firm Level 2. Product Level 3. Consumer Level For the current study we have used Customer Level measurement approach. This approach seeks to map the mind of the consumer to find out what associations with the brand that the consumer has. This approach seeks to measure the awareness (recall and recognition) and brand image (the overall associations that the brand has). Free association tests and projective techniques are commonly used to uncover the tangible and intangible attributes, attitudes, and intentions about a brand. Brands with high levels of awareness and strong, favorable and unique associations are high equity brands. All of these calculations are, at best, approximations. A more complete understanding of the brand can occur if multiple measures are used.
Data Collection: The data was collected from 15 users of branded toothpaste. These people were selected based on the brand of toothpaste used by them. The random sampling was used to select the respondents. Five users of Closeup, Colgate and Pepsodent were used as respondents.
Brand_Equity_Questi onnaire_1.doc
Data Analysis: Brand/Dimension 1. Brand Awareness a. Top of the mind b. Unaided recall c. Aided recall 2.Brand Loyalty a. Switching cost b. Liking c. Satisfaction d. Commitment 3.Perceived Quality
Taste Freshness Teeth Protection Assurance of Quality Value for Money
Closeup 7 56 50 78 74 78 76 76 82 72 70 78 82 86 78 81 76 85 1285
Colgate 66 70 50 73 86 86 88 84 82 88 86 82 82 64 80 81 76 74 1398
Pepsodent 27 65 50
70
84 86 82 80 68 82
76 76 80 74 78
4. Brand Association a. Strength of association b. Uniqueness of association c. Favourability of association 5.Other Proprietary Assets a. Brand Name b. Logo c. Slogan Total score
88 74
76
1316
Note: All the dimensions except aided and unaided recall are allotted a maximum of 100 points. Unaided is
allotted 70 points while aided recall is allotted 50 points. The detailed explanation regarding the computation of the points for each brand for its brand equity is beyond the scope of this study.
Based on the data collected from the respondents, the analysis was done on the same. 1. Brand Awareness: Brand awareness can be classified into three parts a. Top of the mind recall: Colgate was the brand which was most recalled by the respondents. In fact 67% of the respondents named Colgate when the question was posed to them. Pepsodent was second with 27% and Closeup was third with 7% respondents. It can be clearly seen that Closeup top of the mind recall is lowest among the all three brands. b. Unaided recall: Most of the respondents knew about all the three brands of toothpaste. Colgate was again the highest with 100% brand recall, pepsodent was close second with 14 out of 15 people were able to recall the brand. Closeup was the third among the three brands with 12 out of 15 were able to recall the brand without any aid. c. Aided recall: All the three brands were successful in this case as the entire respondents were able to recognize the brands. 2. Brand Loyalty: Brand loyalty was again analyzed using four attributes namely: a. Switching Cost: In case of switching cost, Closeup was the brand that scored the highest among all the three brands. It meant that when it came to switching, people were more loyal to closeup than any other brand. It was followed by Colgate and Pepsodent. b. Liking: In terms of liking, Colgate was the most favored brand closely followed by Pepsodent. Closeup is scoring low as compared to the other two brands. c. Satisfaction: When we talk about the satisfaction from the brand, Colgate and Pepsodent users were most satisfied. Closeup was again scoring low as compared to its two rivals.
d. Commitment: In terms of commitment, again Colgate is scoring highest followed by Pepsodent, Closeup is again behind its two competitors. 3. Perceived Quality: The quality of the toothpaste was captured by using the following variables: a. Taste: Colgate is again the most favored brand when it comes to taste followed by Pepsodent. Closeup is scoring low and is at third position with respect to taste. b. Freshness: Closeup and Colgate are the leading brand when it comes to freshness with both scoring equal points. Pepsodent was the distant third. c. Teeth Protection: Colgate was the most preferred brand with repect to teeth protection; Pepsodent and Closeup were second and third respectively. d. Assurance of Quality: Colgate is the brand which consumer perceive as best in terms of quality, Pepsodent and Closeup are second an third respectively but are scoring quite low as compared to Colgate. e. Value for money: Colgate scores high again on this dimension, Closeup is scoring the nest best and Pepsodent is third with respect to value for money. 4. Brand Association: Association of a brand is calculated using three dimensions: a. Strength of Association: All the three brands are doing well when it comes to strength of association. Closeup and Colgate scored highest but very closely followed by Pepsodent. b. Uniqueness of Association: Closeup is scoring very high on this factor. Pepsodent and Colgate are at second and third position respectively but are scoring quite low than Closeup. c. Favorability of Association: All the three brands are scoring high on this factor. Colgate is the highest but is very closely followed by Pepsodent and Closeup. 5. Other Proprietary Assets: These are classified into three variables a. Brand Name: Pepsodent is the most favaored brand name but are very closely followed by Closeup and Colgate. b. Logo: All the three are doing almost equally well when it comes to logo.
c. Slogan: Closeup is socring highest when it comes to slogan. Pepsodent and Colgate are second and third but quite behind Closeup. We also collected data from the consumer that what action they take when their brand is not available with their dealer. We got mixed response from the users. 3 out of 5 users of Closeup buy other toothpaste while 2 users go to the other dealer. For Colgate, we see more brand loyalty as 3 out of 5 users go to other dealer, 1 waits for the brand to be available and only 1 user switch to some other brand. For Pepsodent, 3 out of 5 users buy some other tooth paste, 1 usre goes to the other dealer and 1 waits for the brand to be available.
Brand Valuation: Brand Value can be defined as the monetary value of the brand which is the result of the Brand Strength shown in the market and reflected through earnings. Inter brand method: Inter brand value can be calculated as: Brand Value = f(brand strength, discount rate/multiple, brand earnings) Here, Brand Strength: Factors Leadership Stability Market Internationality Trend Support Protection Brand strength Max.score Closeup Colgate Pepsodent 25 22 23 21 15 12 14 13 10 8 9 7 25 22 21 20 10 7 8 7 10 8 7 8 5 4 4 4 100 83 86 80
The brand strength is calculated based upon the perception about the brand and how the brand is performing in the market. Here we got brand strength as 83 for Closeup. Discount rate: Based on the brand strength, the discount rate can be calculated from the S curve. The value obtained from the curve is 18. Brand Earning: The brand earning of Closeup brand can be calculated by evaluating the Annual report of Hindustan Unilever (HUL), as Closeup is the brand of HUL. We have made an assumption that the Profit before Tax (PBT) are in proportion to the sales. Closeup is a part of Personal Care division of HUL of which accounts for 29% of HUL sales. Therefore approximately closeup accounts for 1.5% of HUL sales. Based on this we have calculated the brand earnings. 2007 13035.06 29% 1.5% 1861.68 539.8872 27.93 1 27.93 38.07 2008 13675.43 29% 1.5% 2146.33 622.4357 32.19 2 64.39 2009 20239.33 29% 1.5% 3025.12 877.2848 45.38 3 136.13
Sales Pesonal Products Closeup Share Profit Before Taxes PBT (Personal Products) PBT (Closeup) Weights PBT (Closeup) * Weights Brand Earnings
Therefore, Brand value = Brand Earning * Discount rate = 38.07*18 = 685.34 crores Therefore, we calculated the brand value of Closeup Brand as Rs. 685.34 crores.
Reference:http://www.hul.co.in/investorrelations/http://www.wikipedia.org Brand Valuation Power Point Presentation, Prof. Simon George Brand Equity Power Point Presentation, Prof. Simon George
doc_180995386.docx
Brand Equity & Brand Valuation – Close-up Toothpaste using inter brand method.
Brand Equity & Brand Valuation – Close-up Toothpaste
Brand Management
Toothpaste Industry Overview: Indian oral care industry (including toothpaste and toothpowder) is about Rs. 35 billion. Colgate and HUL contribute around three fourth of the total market. Other major players include Dabur and Anchor group together contributing around 15% of total market.
Oral Care Industry Market Share
4% 13% 46%
12%
HUL Colgate Dabur Anchor
25%
Others
World over the oral care market is largely represented by toothpaste and toothbrush. Other products in this category include mouthwash, sprays and oral rinses. In India, there is a significant presence of toothpowder as well. Many other people in India still clean teeth with traditional products like neem twigs, salt, ash, tobacco or other herbal ingredients. Recent studies have indicated dual usage (powder and paste) in 10% of rural households. The younger generation is increasingly shifting to toothpaste even in rural areas. In relative terms, penetration of toothpowder is higher in North and toothpaste in South. This could be due to higher education, purchasing power and urbanization in the South. Indian urban toothpaste per capita consumption is about 92 grams per month compared to
219 grams of China; and only 7% of Indian urban class brush twice a day compared to 86% in Malaysia. Thus there is tremendous scope for growth of doing business in India. Toothpaste industry growth has been low as compared to other products. For market leader Colgate, in 2007 growth had been around 12%. For same brands like Babool the market growth was as high as 50%. As per India Infoline Sector report, about 60% of toothpaste in India is sold on family platform; there is single toothpaste for the entire family. Specialized toothpaste such as for children has been available in India only in last 2-3 years (mainly imported products) and usage is extremely low. About 35% of toothpaste is sold on cosmetic propositions. These are targeted mainly at young consumers and upper urban class on the proposition of fresh breath, white teeth and functional benefits of controlling plaque, preventing cavity etc. There is a niche market (5% of total) for toothpaste with therapeutic benefits. Toothpaste is also segmented based on product attributes as White, Gel, Herbal, etc. Some products are also available as a combination of both Whites and Gel. World over toothpaste positioned on anti-cavity platform, contains fluorides. Excessive usage of fluoride can cause a disease called Fluoresces, to which children are particularly vulnerable. In India, there is a strong societal aversion to fluoride toothpaste. Price wise, toothpastes can be segmented as Economy, Regular and Value-added segments. The price range varies from Rs.15-20 for a 100 gm pack in the economy segment to Rs.30-35 for a 100 gm pack in the Regular Segment to Rs.50 for a 100 gm pack in the medicated/value added segment.
About Closeup: Closeup is the original youth brand of India. The first brand targeting youth in the oral care market, with an edgy and youthful image which stays relevant till date. Ever since its launch in 1975 Closeup was the first gel toothpaste to be launched in India and has led the gel toothpaste segment ever since. Closeup became the first Gel toothpaste with fluoride in the Indian market. The brand umbrella also includes Closeup Lemon Mint, gel toothpaste with the whitening benefits of lemon. The
latest entry in the closeup stable is Closeup Milk Calcium- revolutionary new toothpaste with goodness of milk calcium. 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. In other words, consumers' knowledge about a brand makes manufacturers/advertisers respond differently or adopt appropriately adept measures for the marketing of the brand. The study of brand equity is increasingly popular as some marketing researchers have concluded that brands are one of the most valuable assets that a company has. Brand equity is one of the factors which can increase the financial value of a brand to the brand owner, although not the only one.
Methodology: There are many ways to measure a brand. It includes: 1. Firm Level 2. Product Level 3. Consumer Level For the current study we have used Customer Level measurement approach. This approach seeks to map the mind of the consumer to find out what associations with the brand that the consumer has. This approach seeks to measure the awareness (recall and recognition) and brand image (the overall associations that the brand has). Free association tests and projective techniques are commonly used to uncover the tangible and intangible attributes, attitudes, and intentions about a brand. Brands with high levels of awareness and strong, favorable and unique associations are high equity brands. All of these calculations are, at best, approximations. A more complete understanding of the brand can occur if multiple measures are used.
Data Collection: The data was collected from 15 users of branded toothpaste. These people were selected based on the brand of toothpaste used by them. The random sampling was used to select the respondents. Five users of Closeup, Colgate and Pepsodent were used as respondents.
Brand_Equity_Questi onnaire_1.doc
Data Analysis: Brand/Dimension 1. Brand Awareness a. Top of the mind b. Unaided recall c. Aided recall 2.Brand Loyalty a. Switching cost b. Liking c. Satisfaction d. Commitment 3.Perceived Quality
Taste Freshness Teeth Protection Assurance of Quality Value for Money
Closeup 7 56 50 78 74 78 76 76 82 72 70 78 82 86 78 81 76 85 1285
Colgate 66 70 50 73 86 86 88 84 82 88 86 82 82 64 80 81 76 74 1398
Pepsodent 27 65 50
70
84 86 82 80 68 82
76 76 80 74 78
4. Brand Association a. Strength of association b. Uniqueness of association c. Favourability of association 5.Other Proprietary Assets a. Brand Name b. Logo c. Slogan Total score
88 74
76
1316
Note: All the dimensions except aided and unaided recall are allotted a maximum of 100 points. Unaided is
allotted 70 points while aided recall is allotted 50 points. The detailed explanation regarding the computation of the points for each brand for its brand equity is beyond the scope of this study.
Based on the data collected from the respondents, the analysis was done on the same. 1. Brand Awareness: Brand awareness can be classified into three parts a. Top of the mind recall: Colgate was the brand which was most recalled by the respondents. In fact 67% of the respondents named Colgate when the question was posed to them. Pepsodent was second with 27% and Closeup was third with 7% respondents. It can be clearly seen that Closeup top of the mind recall is lowest among the all three brands. b. Unaided recall: Most of the respondents knew about all the three brands of toothpaste. Colgate was again the highest with 100% brand recall, pepsodent was close second with 14 out of 15 people were able to recall the brand. Closeup was the third among the three brands with 12 out of 15 were able to recall the brand without any aid. c. Aided recall: All the three brands were successful in this case as the entire respondents were able to recognize the brands. 2. Brand Loyalty: Brand loyalty was again analyzed using four attributes namely: a. Switching Cost: In case of switching cost, Closeup was the brand that scored the highest among all the three brands. It meant that when it came to switching, people were more loyal to closeup than any other brand. It was followed by Colgate and Pepsodent. b. Liking: In terms of liking, Colgate was the most favored brand closely followed by Pepsodent. Closeup is scoring low as compared to the other two brands. c. Satisfaction: When we talk about the satisfaction from the brand, Colgate and Pepsodent users were most satisfied. Closeup was again scoring low as compared to its two rivals.
d. Commitment: In terms of commitment, again Colgate is scoring highest followed by Pepsodent, Closeup is again behind its two competitors. 3. Perceived Quality: The quality of the toothpaste was captured by using the following variables: a. Taste: Colgate is again the most favored brand when it comes to taste followed by Pepsodent. Closeup is scoring low and is at third position with respect to taste. b. Freshness: Closeup and Colgate are the leading brand when it comes to freshness with both scoring equal points. Pepsodent was the distant third. c. Teeth Protection: Colgate was the most preferred brand with repect to teeth protection; Pepsodent and Closeup were second and third respectively. d. Assurance of Quality: Colgate is the brand which consumer perceive as best in terms of quality, Pepsodent and Closeup are second an third respectively but are scoring quite low as compared to Colgate. e. Value for money: Colgate scores high again on this dimension, Closeup is scoring the nest best and Pepsodent is third with respect to value for money. 4. Brand Association: Association of a brand is calculated using three dimensions: a. Strength of Association: All the three brands are doing well when it comes to strength of association. Closeup and Colgate scored highest but very closely followed by Pepsodent. b. Uniqueness of Association: Closeup is scoring very high on this factor. Pepsodent and Colgate are at second and third position respectively but are scoring quite low than Closeup. c. Favorability of Association: All the three brands are scoring high on this factor. Colgate is the highest but is very closely followed by Pepsodent and Closeup. 5. Other Proprietary Assets: These are classified into three variables a. Brand Name: Pepsodent is the most favaored brand name but are very closely followed by Closeup and Colgate. b. Logo: All the three are doing almost equally well when it comes to logo.
c. Slogan: Closeup is socring highest when it comes to slogan. Pepsodent and Colgate are second and third but quite behind Closeup. We also collected data from the consumer that what action they take when their brand is not available with their dealer. We got mixed response from the users. 3 out of 5 users of Closeup buy other toothpaste while 2 users go to the other dealer. For Colgate, we see more brand loyalty as 3 out of 5 users go to other dealer, 1 waits for the brand to be available and only 1 user switch to some other brand. For Pepsodent, 3 out of 5 users buy some other tooth paste, 1 usre goes to the other dealer and 1 waits for the brand to be available.
Brand Valuation: Brand Value can be defined as the monetary value of the brand which is the result of the Brand Strength shown in the market and reflected through earnings. Inter brand method: Inter brand value can be calculated as: Brand Value = f(brand strength, discount rate/multiple, brand earnings) Here, Brand Strength: Factors Leadership Stability Market Internationality Trend Support Protection Brand strength Max.score Closeup Colgate Pepsodent 25 22 23 21 15 12 14 13 10 8 9 7 25 22 21 20 10 7 8 7 10 8 7 8 5 4 4 4 100 83 86 80
The brand strength is calculated based upon the perception about the brand and how the brand is performing in the market. Here we got brand strength as 83 for Closeup. Discount rate: Based on the brand strength, the discount rate can be calculated from the S curve. The value obtained from the curve is 18. Brand Earning: The brand earning of Closeup brand can be calculated by evaluating the Annual report of Hindustan Unilever (HUL), as Closeup is the brand of HUL. We have made an assumption that the Profit before Tax (PBT) are in proportion to the sales. Closeup is a part of Personal Care division of HUL of which accounts for 29% of HUL sales. Therefore approximately closeup accounts for 1.5% of HUL sales. Based on this we have calculated the brand earnings. 2007 13035.06 29% 1.5% 1861.68 539.8872 27.93 1 27.93 38.07 2008 13675.43 29% 1.5% 2146.33 622.4357 32.19 2 64.39 2009 20239.33 29% 1.5% 3025.12 877.2848 45.38 3 136.13
Sales Pesonal Products Closeup Share Profit Before Taxes PBT (Personal Products) PBT (Closeup) Weights PBT (Closeup) * Weights Brand Earnings
Therefore, Brand value = Brand Earning * Discount rate = 38.07*18 = 685.34 crores Therefore, we calculated the brand value of Closeup Brand as Rs. 685.34 crores.
Reference:http://www.hul.co.in/investorrelations/http://www.wikipedia.org Brand Valuation Power Point Presentation, Prof. Simon George Brand Equity Power Point Presentation, Prof. Simon George
doc_180995386.docx