brand equity measurement

Submitted By Abhilash Das(01)

Biraja Prasanna dash(12) Shovan Dash(47) Sangram Keshari Jena(42)Ravenshaw Management Centre, Ravenshaw University, Cuttack.

BRAND EQUITY MEASUREMENT Of Lux

Submitted to Prof. S.Govindarajan

Table of Contents

1. EXECUTIVE SUMMARY 2. BRAND LOYALTY MEASUREMENT 3. LEVERAGABILITY 4. BRAND EQUITY MODEL BASED ON SHARE TIER APPROACH 5. THE LOYALTY TABLE6. THE EQUITY SHARE CALCULATION 7. THE LEVERAGABILITY INDEX CALCULATION8. BRAND INDEX EQUITY CALCULATION 9. SHARE QUALITY INDEX CALCULATION 10. BRAND PRICE TRADE OFF TECHNIQUE 11. RECOMMENDATION

APPENDIX – THE QUESTIONNAIRE, THE EXCEL SHEET OF ALL THE CALCULATION

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Executive Summary In our last study we have measured the brand image of lux by using the BAV model. The result of our research suggested that our brand lux has a good brand image. In the next step of our research we tried to find out the strength of lux by measuring its brand equity.

Brand equity has the capacity to charge a premium, capability to increase sales, capacity to get a discount, capacity to withstand attacks. In the present study we have measured the brand loyalty, the price-quality classification, leveragability index, the equity share to know the strength of our brand lux.

We began our study by measuring the brand loyalty by using two mathematical models. Both the models explain about the loyal customers and the potential switcher customers of the brand. We have used 2x2 matrix to relate the preferred brand and also the last brand purchased in the first model. Then we have calculated the gravity which explains about the power of the brand to maintain its customers who prefer it and the focus explains about the proportion of the sales comes from the customers who identify it as the preferred brand. In the second mathematical model we have taken the preferred brand and the no of purchases. The result of our second model explains that lifebuoy has gravity and focus ratio of 51% and 59% respectively which is higher than the lux. Then we have used the Colombo-Morrison model, to find out the loyalty index and the result showed that lux, lifebuoy and santoor has the loyalty index respectively as .662,.730 and .587 respectively. The result suggests that brand lifebuoy has more loyal customers than that of lux.Then we have followed the brand equity model based on the share tier approach where we have used the price quality classification of all the brands to know the behavior pattern of the consumers towards different brand which can be linked to brand perception and the consumer loyalty. From our analysis we have observed that our brand lux has done well in managing good price with some good quality but still

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for certain section of the people the price appears as a minor barrier. So we think lux has to do a little work in his pricing policy. After that we have calculated the leveragability of the three brands and the result suggested that lux can go for other categories because it has high leveragability than of its competitor in all the categories. Then we have calculated the loyalty table to understand the loyal respondents to all the three brand.

Then we have gone for the calculation of equity share and we have found that all the three brands have equity share 38.62%, 45.55% and 15.83% respectively, which suggests that the brand lifebuoy has more equity share than lux and also from santoor.

Then we have calculated the leveragability index based on the respected sales of all the three brand and by taking the price quality classification of all the brands. The result showed that all the brands have 20.91%, 46.49% and 29.86% respectively and the brand lifebuoy and santoor have more leveragability index than that of lux.Them we moved to calculate the brand equity which explained the power of each brand in the market. For the calculation we have considered the price quality classification as well as the current sales of each brand. The obtained results were lux has 95.175%, lifebuoy has 101.52% and santoor has 40.79% brand equity. Then we also calculated the share quality index by multiplying the market share with brand equity and the result showed that lifebuoy has a share quality index 42.75% in comparison to 37.57%of lux and 7.51% of santoor. Then we have used the BPTO techniques to analyze the premium charging capacity of all the three brands and we found that lux has a very good potential to charge a premium.In the end lux is seen as a very good product and if it concentrates a little bit more on its promotional and pricing strategy then it will definitely able to attract more consumers and will do well.

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Brand Loyalty Measurement

The brand loyalty measurement can be done using two mathematical approaches which measure the loyal as well as potential switchers.

MODEL 1: (BASED ON LAST BRAND PURCHASED)In the first mode we have taken a 2x2 matrix which takes into account of the last purchase and the most preferred brand.. This model explains about the loyal customers and the customers who shift there preferences. Thus, the likelihood of purchasing a given brand is the sum of the proportion of that brand’s loyal and some fraction of the remainder. That fraction explains about the ability of a brand to attract the potential switchers. So the success of the brand is exclusively depending upon its loyal customers and its ability to attract the switching customers. The loyal customers have a positive attitude towards the brand and they buy that brand. The other group of customers may purchase it but they eventually prefer another brand.The model is based on the assumption that the consumer has the preference for a brand or in other terms they have a preferred brand. Based on the relative preferences and purchase the model measures the ability of a brand to attract the customers from the other brand. We explain the whole thing in a tabular form. The diagonal entries represent the number of consumers who last bought the brand which they have preferred. The off-

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diagonal entries represent those consumers who last bought something other than their preferred brand.

Table 1Preferred brand by frequency matrix

Preferred brand

Last brand purchase

Lux Lifebuoy Santoor

Others

Lux x z Lifebuoy y x

Santoor x

Others x

X: Loyals who bought the brand they preferred.Y: Switchers who prefer Lifebuoy but buy LuxZ: Switchers who prefer Lux but buy Santoor.

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Preferred brand

Last brand purchase

Lux Lifebuoy Santoor

Total

Lux 6 4 2 12Lifebuoy 4 7 2 13

Santoor 1 1 3 5

Total 11 12 7 30

In our analysis we have taken 30 respondents from the Ravens haw university campus Cuttack. The right hand of the column indicates that the people who have identified the each brand as preferred brand as shown in the table 12, 13, and 5 in case of lux, lifebuoy, and santoor. The diagonal entries indicate that the purchases of the preferred the brand. The preference measures indicate perceptions of brand quality or brand equity. The brand which has a strong consumer preference has more competitive advantage. In our case the lux has 40 % (12/30*100) preference among the preference set and lifebuoy and santoor has 43% and 17 % respectively. From the diagonal entries we come to know about the people who have purchased their preferred brand. We get the proportion of the preferences that were converted into sales. In our case lux has 50%, lifebuoy has 53% and santoor has 60%. This proportion is termed Gravity—the power of the brand to maintain consumers who prefer it. A brand with

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high gravity has consumers who are very loyal to their favorite brand. Lux was able to convert 50% of its preferred customers into sales; whereas lifebuoy has able to convert 53%.of its preferred customers into sales and 60% is in case of santoor. The gravity indicates that though the lux has some good preference shared but it still below the lifebuoy, so it may have to probably think about converting more preferred customers into sale by reducing the price.

If we compare the diagonal number with the total last purchased then it may give another aspect of the market. This ratio represents the proportion of sales that come from consumers who identify the brand as most preferred and is termed focus. In case of lux it is 54% where as it is 58% and 42% respectively in case of lifebuy and santoor. A brand with high focus gets sales mostly from consumers who prefer it. Brands with low focus steal customers from other brands. In our case lifebuy has the highest focus ratio i.e. 58%.

The above analysis suggests that lifebuy has a strong loyalty focus percentage and our brand lux rely on the ability to attract consumers who preferred other brands, capturing brand switchers.

Gravity and Focus Ratios

Brand Gravity

Focus

Lux 0.5 0.54Lifebuoy

0.53 0.58

Santoor 0.60 0.42

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Inter-brand competition and threats to loyalty can be analyzed by examining the individual off-diagonal entries. These results suggest that both lifebuoy and santoor are threatened by lux. Lux has stolen 4 out of 13 customers of lifebuoy and 1 out of 5 in case of santoor. These two ratios 4/13 and 1/5 indicate the weakness of those two bands. Lux gets 30% of people who prefer lifebuoy and 2% of people from santoor.

MODEL 2 (BASED ON NUMBER OF PURCHASES)

Model I explains about the measurement of loyalty. But in our case we have taken only 30 respondents so the second model replaces the term the last purchase with number of purchase.

Preferred brand

No of purchase

Lux lifebuoy Santoor

Total

Lux 24 18 6 48

Lifebuoy 18 32 12 62

santoor 6 4 11 21

Total 48 54 29 131

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Discussion and Analysis:The analysis of the second model is done in the very similar manner as in the case of the first one. In case of preferred no i.e. 48 people purchase 24 times in case of lux i.e. 50% and it is 51% and 52% respectively in case lifebuy and santoor. The focus ratios are 50 %( 24/48) in case of lux and 60 %( 32/54) in case of lifebuoy and 37 %( 11/29) in case of santoor. So the gravity and the focus ratios are written in the table.

Gravity and Focus Ratios

Brand Gravity

Focus

Lux 0.5 0.5

Lifebuoy

0.51 0.60

Santoor 0.52 0.37

It is very evident from the table that lifebuy has the biggest sale i.e. 54 where as lux and santoor have 48 and 29 respectively. The focus ratio tells us how many of the purchases were made with the brand as the ‘preferred brand’ out of the total no. of purchases for that particular brand.

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BRAND SWITCHERS –The brand lux is able to stolen 30% customers from lifebuoy and 28% customers from santoor.So 58% of the selling comes from the brand switchers in case of lux. So it is a threat for the rivals. Lifebuy has a .51 gravity and .60 focus ratio. But in case of lux the focus ratio is little bit low so it really relies on the brand switchers for its objective.ImplicationsA final implication of the model comes from a consideration of the off-diagonal entries. Relatively high scores indicate brands that are potential threats or targets-reasons to act upon through competitive promotions/advertising.

Brand Loyalty comes from 2 stages: The hard core loyals who are extremely loyal to the brand: brand’s ability to maintain loyal customers. Switchers from another brand: the brand’s ability to convert potential switchers.

Based on the Colombo-Morrison model, loyalty index can be measured as a weighted average of ρ and σ which represent repurchase and switching indices respectively. Weights assigned are 67% and 33% respectively (based purely on assumptions)

ρ=α + (1- α) π (expressed in percentage terms)

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σ = Σ (1-αi ) πj (expressed in percentage terms)

Loyalty Index = 0.67* ρ + 0.33* σ

FOR LUX ρ = .50+(1-.50)*.50=.750σ= (1-0.51)*.50+ (1-.52)*.50 =.485Loyalty Index =.67*.750+.33*.485=.662

FOR LIFEBUOY ρ = .51+ (1-.51)*.60=.804σ= (1-.50)*.60+ (1-.52)*.60=.588Loyalty index= .67*.804+.33*.588 =.732

FOR SANTOOR ρ = .52+ (1-.52)*.37=.697σ= (1-.50)*.37+ (1-.51)*.37=.366Loyalty index = .67*.697+.33*.366=.587

Brand ρ σ Loyalty index

Lux 0.75 0.485

.662

Lifebuoy

0.745

0.588

0.732

santoor 0.697

0.366

0.587

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LeveragabilityLeveragability is the potential energy to extend a brand successfully into related, or even unrelated, product categories. Some of the brands are considered to be more flexible than others when considered for satisfying need and wants which are different from the ones which it is currently addressing. A company would want the leveragability of its brand to be high since it will help the company in related and unrelated diversification. The monetary costs of extending a current brand name to another product is much lower when compared to the cost of creating a brand from scratch. Thus leveragability of a brand is one of the crucial components of its brand equity and further helps us in deciding how valuable a brand is for the company. In our analysis we have taken four categories where the brand can go into. Then we calculate the brand leveragability of all brands.

.

brand powder

deodorant

Cream lotion

lux 12 8 6 4

lifebuoy

11 5 4 3

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santoor

6 3 2 1

Brand powder

deodorant

cloth lotion

Lux 40.00%

26.67% 20.00% 13.33%

lifebuoy

36.67%

16.67% 13.33% 10.00%

Santoor

20.00%

10.00% 6.67% 3.33%

ANALYSIS In our research we have taken some of the categories like deodorant, powder, the lotion, and the cream for the analysis of the brand leveragability. We have found that lux is the brand which is seen as the most leveragability brand in comparison to other brands. So lux can go for diversification.

Brand Equity Model based on share tier approachThen we followed the share tier approach for measuring the brand equity. In this model we have taken the price/quality classification of all three brands. It will help us in identifying the behavioral pattern of the customers towards the brand. The data obtained from the Price/Quality classification will be used to calculate the percentage

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of sales made by each category of respondents (for instance say a respondent has a perception that lux superior quality and price is not a barrier for him.. For the purpose of our analysis we have assumed that the respondent base represents the total market and therefore the cumulative sum of percentages will equal the total sales i.e. 100% of the sales made by the brand. The percentage figures in each box in the 4x4 grid will represent the percentage of total shares for respondents who think that the brand belongs to that Price/Quality classification. The loyalty share for the four cells viz Q1P1, Q2P1, Q1P2, Q2P2 was calculated based on their responses to the Price/Quality classification and the responses to the loyalty based questions in the questionnaire. Hence we could find out the percentage of loyal respondents for the three brands in all the four cells. We have then calculated the equity share for the brands using the loyalty contribution data for each brand which was obtained from the percentage of loyal customers for each brand. This metric reflects the relative percentage that a brand owns of the sales attributable to all loyal customers in the category. It represents the brand’s share of the category’s most desirable, and profitable, customers. The leveragability index was calculated based on the loyalty data and the sales in the cells of the price quality grid. These metrics attempts to measure the relative importance of product quality with respect to price, suggesting that if the degree of quality perception is much stronger than price, there is a potential to leverage that perception into other areas beyond the immediate market.

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The measurement of brand equity index and the share tier index to find out a composite index for brand equity was the next logical step and a model was developed to calculate this which will be explained in detail in the analysis part.

lux Superior quality

Good quality

Acceptable quality

Quality not acceptable

Price not a barrier

0.27 0.3 0.1 0

Price minor barrier

0.1 0.17 0 0

Price sufficient barrier

0 0 0 0.03

Price absolute barrier

0 0 0.03 0

lifebuoy Superior quality

Good quality

Acceptable quality


Price not a barrier

0.2 0.23 0 0

Price minor barrier

0.23 0.27 0 0

Price sufficien 0 0 0.03 0

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t barrierPrice absolute barrier

0 0 0.03 0

santoor Superior quality

Good quality

Acceptable quality


Price not a barrier

0.2 0.23 0.13 0

Price minor barrier

0.1 0.13 0.03 0.03


0 0 0.07 0.03


0 0 0.03 0

ANALYSIS – As it can bee seen from the table that in case of lux 57% of people considered price is not a barrier for them for the good and superior quality of lux where as 27% of people believed that price is a minor barrier to them for the good and superior quality of lux. But in case of lifebuoy price is not a barrier for 43% people for good and superior quality but 50% of people believed that price is a minor barrier. So

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good number of people finds good quality of lux and for them price is not a barrier.

Loyalty TableThe loyalty share for the four cells viz Q1P1, Q2P1, Q1P2, Q2P2 was calculated based on their responses to the Price/Quality classification and the responses to the loyalty based questions in the questionnaire. Hence we could find out the percentage of loyal respondents for the three brands in all the four cells. The following data was obtained from the above mentioned analysis

Quality

Superior

Good

luxlifebuoy

santoor lux

lifebuoy

santoor

Price Sensitivity

None lux

62%

58%

lifebuoy 54% 61%

santoor 53% 48%

Minor lux

46%

35%

lifebuoy 53% 34%

santoor 47% 32%

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EQUITY SHARE CALCULATION The main reason for the calculation of the equity share because with this we can know the particular sales of the brand due to its loyal customers. These customers are really responsible for bringing profit for the organization.

METHODOLOGY

We have taken the market share of three brands and their sales. Then we calculate the proportionate market share. We have already know the loyalty contribution percentages of different brands and taking that into account we have calculated the loyal sales and the equity share of different brands.

BRANDSales (Rs. Crore)

Market Share

Proportionate Market Share

Loyalty Contribution

Loyalty Sales

Equity Share

LUX 1125 15% 39% 66.00% 742.5 38.62%

Lifebuoy 1200 16% 42% 73.00% 876 45.55%

Santoor 525 7% 18% 58.00% 304.5 15.83%Category Total

2850 38% 100% 1923 100.00%

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ANALYSIS

The equity share represents the relative percentage of each brand’s loyal customers on the basis of the total customers in the category. Lux has a good current market share than its competitor. But in our study we have found that the equity share of lifebuoy is more than that of lux. Because lifebuoy has more loyal customers and therefore the loyal sales is also very high. One thing lux can do is they should try to have more loyal customers and try to increase their sales.

LEVERAGABILITY INDEX CALCULATIONThe leveragability index calculation is done to have an idea about the perception of the customers about the quality and price. Which thing is taking into account or giving more importance.

METHODOLOGY FOR THE CALCULATION

BRANDQ1P2 Sales

Q1P2 Loyalty

Q1P2 Loyalty Sales

Q2P1 Sales

Q2P1 Loyalt

y

Q2P1 Loyalty Sales

Leveragability Index

lux 112.5 46% 51.75 337.5 58% 195.75 20.91%lifebuo

y276 53% 146.28 276 61% 168.36 46.49%

santoor

52.5 47% 24.675120.7

548% 57.96 29.86%

We have taken into the loyalty percentage of each brand and we have calculated the Q1P2 and also

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Q2P1 by multiplying the price quality with the existing sales. Then we have calculated the leveragability index. We have done the calculation in the excel sheet.

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ANALYSIS

The actual reson for taking the Q1P2 sales into account because it explains about those customers for which the brand is able to give some good quality but for these customers price can be a minor barrier. The above table shows that the leveragability index of lifebuoy is higher than that of lux. So people’s perception about the quality offered by lux is little bit low than that of lifebuoy. For the future lux should take into account of this index.

BRAND EQUITY INDEX CALCULATIONThe next step in the analysis is the brand index calculation. This will help us to estimate the power of each brand in the market.

lux Superior quality

Good quality

Acceptable quality


Price not a barrier

304 338 113 0

Price minor barrier

113 191 0 0


0 0 0 34


0 0 34 0

lifebuoy Superio Good Acceptabl Quality

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r qualityquality e quality

not acceptable

Price not a barrier 240 276 0 0

Price minor barrier

276 324 0 0


0 0 36 0


0 0 36 0

santoor Superior quality

Good quality

Acceptable quality


Price not a barrier

105 121 68 0

Price minor barrier

53 68 16 16


0 0 37 16


0 0 16 16

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WEIGHTS

W1 12%

W2 10%

W3 8%

W4 6%

W5 5%

BrandMARKET SHARE

BRAND EQUITY INDEX

SHARE QUALITY INDEX

lux 39% 95.175 37.57%lifebuoy 42% 101.52 42.75%santoor 18% 40.7925 7.51%

Methodology For the calculation of the brand equity index we have taken into account of the current sales of each brand and also we have used the price quality classification table. The price quality percentage figure was multiplied with the sales to find out the turn over volume of each quadrant. Then we have used the decrease weight and also the share tier approach for

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the calculation of brand equity. Then also we have calculated the share quality index of each brand.

ANALYSIS – Form the above calculation we have seen that the brand equity index of lux is lower than that of lifebuoy and also the proportionately market share for lux is also very low .

SHARE QUALITY INDEX CALCULATIONThen we have calculated the share quality index and it was calculated as by multiplying the market share with the brand equity. Lifebuoy has more share quality index than the brand lux.

BRAND PRICE TRADEOFF TECHNIQUEIntroduction BPTO is a method of marketing research and it is considered to be one of the simplest ways of finding out the relative value of the brand when compared to its competitors in the same product category. In this method, several brands or products are shown at once and the customers are asked to choose their preferred brand at the same comparable price level. Then prices are adjusted and then the customer is asked to choose again from the same adjusted price level list. The end result is that ranking of preferred brand can be inferred in relation to the prices the customers can pay or are willing to pay. The result allows building a model which shows the likely purchase of the brands at different prices. This model speaks about the ability of the leader to charge a

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premium and helps to estimate the price elasticity of the product. This also helps in isolating the brand equity as the extra revenue which can be achieved just by the use of the name of the brand.

Methodologywe have taken 30 respondents from various background to know the premium charging capacity of the all three brands. We have asked them about different prices they were ready to offer for their preferred brand and based on their responses we have calculated the premium. We have taken Rs 10/- which is the market rate for a general soap.

Analysis

First we have taken the case of lux. We have interviewed 30 respondents out of which 10 people were ready to give maximum 18 Rs for lux, and 12 people were ready to give maximum 14 Rs for lux while 3 people were ready to give maximum 12 Rs for lux and 5 people were ready not to give more than 10 Rs for lux. The maximum price that was considered to be optimal for lux is Rs 15 by 6 people while four of them considered it Rs 11/- as the optimum price. So the capability of charging a premium for the brand lux varies from Rs 2/- to Rs 8/- .Then the next preferred brand is lifebuoy for which 9 people were agreed to pay 14 as the maximum price while 14 people are ready to pay 13 as the maximum price and the rest 9 people were ready to pay maximum Rs 12/- . so the premium that can

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be charged by the brand is varied between Rs 2/- to Rs 4/. Then in case of santoor the premium that the brand can charge varies between Rs 1/- to 3Rs3/-.After the calculation of premium that all the brand can charge then we moved for the inter brand comparison. In case of lux the people are ready to give maximum Rs 8/- but after that they may move to the next preferred brand. So what we have seen from the analysis is that lux has some very good capacity to charge a premium because it has good hold in the minds of the consumer.

Recommendation - From all the analysis we came to know that people see lux as a very good brand. They see lux is a brand with good quality with good price. But the focus ratio and the gravity ratio of lux is low than to its competitor. So lux has to concentrate more on its promotional and sales strategy to attract the customers. Lux has also low market equity and brand equity as compared to its competitors and also it has low loyal sales.. The BPTO technique gives us the idea that lux has the god capacity to charge premium but the only problem as disused earlier is the problem of holding or attracting the consumers. So in the end we will recommend that lux should be more focus in building the loyal customers as well as bringing some new customers. The current market share of lux is good but if it want to do consistently well then it must come up with some very good sales and promotion strategy to attract different customers from different areas.

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Questionnaire

1.Which is the brand you like most?lux lifebuoy Santoo

r Other

2.how satisfied do you on your brand lux ?Not satisfied Little satisfied Fully satisfied

3.how likely are you to repurchase lux?Not at all Some what

likelyFully likely

4.how likely are you to recommend lux to your friend?

Not at all Some what likely

Fully likely

5. do you agree that lux has the ability to deliver what it promises?

Strongly disagre

disagree

Neutral Agree Strongly agree

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e

6. Please tick the bran which you will purchase in the future or most likely to purchase

Brand Likely More likely Definitely LuxLifebuoySantoor

7.tick the most favorite brand of yours Lux Lifebuoy Santoor Others

8. Please tick the last brand which you have purchased

Lux Lifebuoy Santoor Others

9. How many times you have purchased lux?0 1 2 3 4 5

10. How many times you have purchased lifebuoy out of your last five purchases?

0 1 2 3 4 5

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11. How many times you have purchased santoor out of your last five purchases?0 1 2 3 4 5

12. To which of the following categories do you think that your brand can be entered ?

Brand powder lotion Deodorant

cream

LuxLifebuoySantoor

13. Please put a tick in the box which conforms your believe about the quality and price aspect of your brandBrand (lux)Price is not a barrierPrice is a minor barrierprice is a

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sufficient barrierPrice is an absolute barrier 14 . please put a tick in the box which conforms your believe about the quality and price aspect of your brandBrand (lifebuoy)Price is not a barrierPrice is a minor barrierprice is a sufficient barrierPrice is an absolute barrier 15. Please put a tick in the box which conforms your believe about the quality and price aspect of your brand

Brand (santoor

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)Price is not a barrierPrice is a minor barrierprice is a sufficient barrierPrice is an absolute barrier

16. what is the maximum price you can pay for lux as your preferred brand ?10 1

213 14 15 16 18 more

17. what is the maximum price you can pay for lifebuoy as your preferred brand ?

8 11 10 12 13 14 15 more

18. What is the maximum price you can pay for santoor as your preferred brand?10 11 12 13 14 17 18 mor

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brand equity measurement

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