Submitted By:

Runu Kumari Shaw

Sandipan Bhowmick
The Rationale of Brand Value Chain

It is the marketing activity associated with the program that affects the customer mind-set with respect
to the brand. But the big question is, in what ways have customers’ perception has been changed as a
result of the marketing program? This mind-set, across a broad group of customers, results in certain
outcomes for the brand in terms of how it performs in the marketplace. This is the collective impact of
individual customer actions regarding the time and volume of their purchase, the price that they are
willing to pay, and so on.

The brand value chain is a structured approach to assessing the sources and outcomes of brand equity
and the manner in which marketing activities create brand value. The brand value chain is based on
several basic premises.

The brand value creation process begins when the firm invests in a marketing program targeting actual
or potential customers. Any marketing program that can be attributed to brand value development,
either intentional or not, falls into this category — product research development, and design; trade or
intermediary support; and marketing communications. The investment community then considers
market performance and other factors such as replacement cost and purchase price in acquisitions to
arrive at an assessment of shareholder value in general and the value of a brand in particular.

The model also assumes that a number of linking factors intervene between these stages and determine
the extent to which value created at one stage gets transferred to the next stage. Three sets of
multipliers moderate the transfers between the marketing program and the subsequent three value
stages — the program multiplier, the customer multiplier, and the market multiplier.

The program multiplier determines the ability of the marketing program to affect the customer mind-set
and is a function of the quality of the program investment. The customer multiplier determines the
extent to which value created in the minds of customers affects market performance. This result
depends on contextual factors external factors external to the customer.

Three such factors are:

I. Competitive Superiority (how effective is the quantity and quality of the marketing investment of
other competing brands),
II. Channel and Other Intermediary support (how much brand reinforced and selling effort is being
put forth by various marketing partners), and
III. Customer Size and Profile (how many and what types of customers, profitable or not, are
attracted to the brand).
The market multiplier determines the extent to which the value shown by the market performances of a
brand manifested in shareholder value. It depends, in part, on the actions of financial analysts and
investors. Thus 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

Let us now discuss about the brand value chain of the brand “Cerelac” from NestleTM

Marketing Market
Customer Shareholde
Program Performan
Mindset r
Investment ce
Value
New texture High Premium Stock Price
Stages New Features Awareness Price PE Ratio
TV Nutritious 15-25% Market Cap.
Commercials Food Share
Hoardings Balanced Expansion
Free samples Diet Success
Medical Healthier (High)
Market
Detailing Stock Value Investor
ProgramLife Place
Teams (High) sentime
Quality Conditio nt
Multipl SeminarsClarity ns High
iers Portability Market
Pull Strategy
Relevance Maximum Dynamics
Cost
Distinctive CoverageStructure High Growth
Consistency High (Effective) Brand
Bargaining Contribution
power of (stand 4th in
Nestle place in
Health Nestle Family)
conscious Risk Profile
parents (Low)
Loyal
customers
Highly
Profitable
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’s major investments on the marketing activities in last few years (2009-2010) were its TV
Commercials (TVCs). Campaigns were launched to spread awareness regarding: i) Nestle Cerelac stage 3
– new texture, ii) Nestle Cerelac all stages – Bifidus.

 Hoardings were used aptly to attract customers by putting; Nestle Cerelac Bifidus displays on the high
exposure places.  POS (Point-of-sale) materials were used effectively 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,
who have a high involvement with this kind of a product through various seminars on the scientific
aspects of the product.

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.
Analysis of Nestle Cerelac 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 specialists
are used to explain 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? The degree of differentiation in the promotional
campaign. 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.

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 ads also
this thing present, but the presence of experts and common people makes them more reliable.
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 forward by various channel
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: It is suitable for each and every brand including 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 Cerelac.
The inflation rate and power crisis in Pakistan are the hindering factors for Cerelac brand. 

Risk profile: The risk profile is Low for Nestle Cerelac. Nestle Cerelac Apple 400g is the market leader and
there is no competition exists for it. It is the only reason why, the brand was comfortably insulated from
inflation rate or economic meltdown. These crises didn’t have much effect on the brand’s share, both
locally and globally. 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.

After considering all the Value Stages and the Multipliers, it can easily conferred that as a brand Cerelac
has evolved over the years and has pretty decent brand value based on consumer loyalty. This loyalty
was built over the years through delivery of assured quality products as promised to customers. As a
result of undisrupted delivery of quality service the consumers’ awareness of the brand has grown over
the years, resulting in an increased association and attachment of more customers to the brand.

-------------©-------------