Brand Equity Measurement of

Airtel

A report
Submitted to
Prof. S. Govindrajan

In partial fulfilment of the requirements of the

course
Brand Management
On
27.08.08

By

Ankita Ghosh (b07006)

Pratik Gupta (b07027)

Raj Kumar Pari (b07030)

Yatharth Bhuwalka (b07050)

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 CONTENT

• Executive Summary

• Brand Equity

• Methods of valuing Brand Equity

o Share Tier Model

o Net-Promoter Model

• Analysis

• Emotional Connect

• Recommendations

• Conclusion

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 EXECUTIVE SUMMARY
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. It is the premium that can be charged from the
consumers when a brand name is added on to a product

There are many ways to measure a brand. Some measurements approaches are
at the firm level, some at the product level and others are at the consumer level.
The group is trying to measure Brand Equity of Airtel at the product level.

The group has selected two models to measure brand equity by using two
models.
1. Share Tier Model
2. Net Promoter Model

Share Tier Model:

This model takes into account two parameters: Price and 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 was selected since it measures the beliefs of the consumers and their
conversion into actual purchase, i.e. Behaviour. This model also helps in gauging
the resilience and leveragability of the brand. This is on the basis of the loyalty

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that a brand enjoys. Resilience is the ability of the brand to protect itself and
generate volume and revenue year after year and leveragability will be the ability
of the brand to get into other need and want satisfiers which may be related or
unrelated to the brands current products or services.The findings of the research
conducted showed that in the Belief Grid, Airtel has the highest presence in the
category where Quality is Good and Price is a Minor Barrier. The purchase pattern
for the brand is diversified. People who perceive the brand to be superior as well
as price is not a barrier have 100% purchase behaviour. It also has a high
presence in the category where Quality is good and Price is a Minor Barrier. The
same was conducted for the other competitors also i.e. Vodafone, BSNL,
Reliance. It became very clear from the grid analysis that Airtel is the leader and
right now the strongest among the rest.

The main aim of finding the brand equity of a brand is to find the marketing ROI.
Airtel enjoys high brand loyalty and has a high score could be that most users
identify with Airtel. However Vodafone is very close to Airtel in almost all the
aspects.

Net Promoter Model – This model tests the brand loyalty factor on the basis of
whether or not present users recommend the brand to prospective users. It is a
tool that measures the level of customer satisfaction and in turn customer
loyalty. This model has two basic elements i.e. Promoters and Detractors.
Promoters are loyal enthusiastic customers, who are very satisfied with the brand
and recommend it to prospective users, and Detractors are customers who feel
so badly treated that they cut back on purchases, switch to the competition, and
warn others to stay away from the company.

On a user base of 30 (30 out of 50 respondents were Airtel Users), Airtel has
86.66% users who were satisfied with the brand and would recommend it to new
users (Promoters). It has 13.33% users who were not satisfied with the brand and
hence would not recommend it to other users (Detractors). Hence the Net
Promoter Score for Airtel was 73.33% Questions were asked to respondents to
check the level of their emotional connect to the brand, Airtel. This helped the
group to dig deep into the reasons of the high loyalty score and the high Net
Promoter Score that Airtel has. The group found that Airtel in most cases is the
brand which has the highest emotional connect to its users as well as non users.

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On the basis of the findings of the above used models, Airtel is clearly the brand
with the highest loyalty. The group recommends Airtel to build on the perceived
differentiation that Airtel enjoys in the minds of the consumers. Vodafone is close
on Airtel’s heels on most of the parameters. Also, the market is increasing and
newer players are entering regularly. Hence, there is no room for complacence
for Airtel .This is an industry where competitors can easily copy what a particular
player does. Thus, there is very little scope of developing a unique core
competence in this industry. Hence, most of the differentiation is perceived in the
minds of the consumers. Airtel scores high in this respect. Thus, Airtel should
keep building on the perceived differentiation that it enjoys, to stay ahead in this
very competitive industry.

.
Brand Equity

Brand equity is a set of perceptions, knowledge and behaviors on the part of

customers that creates demand and/or a price premium for a branded product—
in other words, what the brand is worth to a customer. Brand equity may also be
defined as a set of elements such as brand associations, market fundamentals
and marketing assets that help distinguish one brand from another. While
measuring brand value has its usefulness, the act of measurement by itself will
not make a brand more valuable or less risky. Quantifying and managing brand
equity, however, using a customized measurement model, is critical to
transferring value to the corporation’s shareholders.

It 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
consumers respond differently to 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.

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There are many ways to measure a brand. Some measurements approaches are
at the firm level, some at the product level and still others are at the consumer
level.

Firm Level: Firm level approaches measure the brand as a financial asset. In
short, a calculation is made regarding how much the brand is worth as an
intangible asset. For example, if you were to take the value of the firm, as
derived by its market capitalization - and then subtract tangible assets and
"measurable" intangible assets- the residual would be the brand equity. One high
profile firm level approach is by the consulting firm Interbrand. To do its
calculation, Interbrand estimates brand value on the basis of projected profits
discounted to a present value. The discount rate is a subjective rate determined
by Interbrand and Wall Street equity specialists and reflects the risk profile,
market leadership, stability and global reach of the brand.

Product Level: The classic product level brand measurement example is to

compare the price of a no-name or private label product to an "equivalent"
branded product. The difference in price, assuming all things equal, is due to the
brand. More recently a revenue premium approach has been advocated.

Consumer Level: 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.
Any of these calculations are at best approximations. A more complete
understanding of the brand can occur if multiple measures are used.

Relevance of Brand Equity

Brand equity consists of elements such as the brand associations, market
fundamentals and marketing assets that distinguish one brand from another and
that influence a customer’s perceptions of or knowledge about a brand. When
brand elements are favourable in a customer’s mind, brand equity is considered
to be positive. When they are not favourable, the brand equity is negative.

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Positive associations of a brand in a customer’s mind are generally stronger and
more sustainable than those of a product, assuming that sufficient investments
are being made in appropriate brand management. Brands with positive equity
will consistently generate, maximize and grow cash flows. They achieve this by
commanding a price premium, allowing for brand extensions and licensing,
creating barriers of entry, attracting and retaining more valuable customers, and
reducing the costs of customer acquisition.

Positive brand equity drives customer value, which in turn drives shareholder
value. To leverage positive brand equity, marketers must take a measured
approach to identifying, developing and managing brand elements relevant to
the corporation and its products.
Thus, measuring brand equity becomes so important for the organization.

The Share Tier Method 7|Page

Brand Equity
We are going to judge the brand equity of Airtel, by the Share Tier Method. Brand
equity has become very important of late as it is a measure by which the ROI of
marketing spend can be valued which helps marketers as well as the finance
division.

Rationale
Brand equity can be divided in resilience as well as leveragability. Resilience is
the ability of the brand to protect itself and generate volume and revenue year
after year. Whereas leveragability will be the ability of the brand to get into other
need and want satisfiers which may be related or unrelated to the brands current
products or services. The share tier method helps us to find these attributes of
the brand.

To find the equity for Airtel we have taken a comparison of three other mobile
service provider brands for the analysis. The brands are follows.

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 • Airtel
• BSNL
• Reliance
• Vodafone

We have taken price and quality to be the two parameters on the share tier grid.
The rationale behind taking price as one of the parameters is to find what the
respondent perceives about the price of the brand. He has a perception of price
and we try to find out if price is a barrier or not a barrier for the respondent to
buy the brand. The following are choice for the price part of the grid.

• Price is not a barrier

• Price is a minor barrier
• Price is a major barrier
• Price is an absolute barrier

The second parameter is quality; we have taken this parameter to find out what
the respondent perceives about the quality of the brand. We find out the
positioning of the brand in form of quality. The respondent was given four choices
for quality. The following are the choice for the quality part of the grid.
• Superior quality
• Good quality
• Acceptable quality
• Poor quality

Sample & Questions

Our sample size of respondents is 30. We have asked respondents to match the
price perception with quality perception for each brand. This is their belief grid
where they perceive a brand to for example have superior quality and for the
respondent price is not a barrier for purchase.

Then we have asked respondent to pick a brand which they would like to
purchase. This states their behaviour grid. There are times when a respondent
perceives to brand to be of superior quality and has no price barrier but still does
not buy the brand.

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After this we have asked the respondent to state the amount he or she will spend
on an average on the brand per month i.e. the spending on mobile per month.
From this we have derived the market share for the brands and we can take step
forward and develop the equity share of the brand.

The respondents might purchase the brand because of various reasons, but may
not stick with the brand. To find the brand loyalty we have asked respondents if
they will continue with the brand. From this we have found the brand loyalty of a
customer towards a particular brand.

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Findings:
Airtel

Belief
Grid
Quality
1 2 3 4
Price Brand Airtel has the highest
1 3 3 2 0 presence in the category
2 7 12 0 0 where the brand is
3 1 1 1 0 perceived as of good quality
4 0 0 0 0 and price is not a barrier of
12 respondents out of 30.
Belief
% out of 30
Grid In the behaviour grid we find
Quality that 20 out the 30
1 2 3 4
Price respondents chose to
1 10% 10% 7% 0%
purchase brand Airtel which
2 23% 40% 0% 0%
is 67% of respondents. We
3 3% 3% 3% 0%
see that the purchase
4 0% 0% 0% 0%
pattern is diversified.
Behaviour Grid
The people who perceive the
Quality
1 2 3 4 brand to be superior as well
Price
as price is not a barrier have
1 3 2 0 0
2 6 7 0 0
100% purchase behaviour.
3 1 1 1 0 The brand looses out in the
4 0 0 0 0 good quality and price not a
barrier where only 58%
purchase.
% of
Belief
purchase
Grid Moving forward we have found
r
Quality the average monthly spend of
1 2 3 4 each of the 20 respondents
Price
1 100% 67% 0% 0% who have decided to purchase
2 86% 58% 0% 0% Airtel. The total of the monthly
3 100% 100% 100% 0% average spend is Rs9175.
4 0% 0% 0% 0%
After this we find the people
9175 who will continue to stick with
Quality Airtel. We find that 14 out of
1 2 3 4
Price 20 people who would buy will
1 2150 1075 0 0 stick around with Airtel giving
2 2800 2700 0 0
it a brand loyalty. of 70%.
3 200 250 0 0
4 0 0 0 0

Purchaser who will continue

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 Quality
1 2 3 4
Price
1 3 2 0 0
2 5 4 0 0
3 0 0 0 0
4 0 0 0 0

BSNL
Belief Grid
Brand BSNL has the highest
Quality
1 2 3 4 presence of 27% in the category of
Price
Acceptable Quality and Price a
1 1 0 0 0
Minor Barrier. It is followed by a
2 0 7 8 3
3 1 4 3 1 presence of 23% in the category of
4 0 0 0 0 Good Quality and Price a Minor
Barrier.

% out In the behaviour grid, however, we

Belief Grid find that none of the respondents
of 30
Quality who perceived BSNL to be of Good
1 2 3 4 Quality and Price not a Barrier
Price
1 3% 0% 0% 0% chose to purchase brand BSNL.
2 0% 23% 27% 10% Also the respondents, who
3 3% 13% 10% 3% perceived Airtel to be of
4 0% 0% 0% 0% Acceptable Quality and Price a
Minor Barrier, did not purchase
Behaviour Grid BSNL. Only 3% (1 out of 3
Quality respondents) who perceived BSNL
1 2 3 4
Price to be of Superior Quality and Price
1 1 0 0 0 not a Barrier actually purchased it.
2 0 0 0 0 This shows that although brand
3 0 0 0 0 BSNL has managed to create a
4 0 0 0 0
good perception about itself, it has
not managed to translate those
perceptions into actual purchase.

The people
Moving who perceive
forward we havethe brand
found
% of
Behaviour Grid purchas the average monthly spend of is
to be superior as well as price
not a of
each barrier
the have 100% purchase
respondents, who
er behaviour. The brand looses out in
Quality have decided to purchase BSNL.
1 2 3 4 the total
The goodofquality and price
the monthly not a
average
Price barrier where only 58% purchase.
1 100% 0% 0% 0% spend is Rs 500, which is much
2 0% 0% 0% 0% less when compared to Airtel.
3 0% 0% 0% 0%
After this we find the people who
4 0% 0% 0% 0%
will continue to stick with BSNL.
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We find BSNL enjoys 100% brand
loyalty. This is because there is
only 1 BSNL user.
 500
Avg Monthly spend by
purchasers
Quality
1 2 3 4
Price
1 500 0 0 0
2 0 0 0 0
3 0 0 0 0
4 0 0 0 0

500
Purchaser who will
continue
Quality
1 2 3 4
Price
1 1 0 0 0
2 0 0 0 0
3 0 0 0 0
4 0 0 0 0

Brand Reliance has the highest

presence of 30% in the category of
Good Quality and Price a Minor
Reliance
Barrier. It is followed by a presence
of 27% in the category of
Acceptable Quality and Price a
Belief Grid
Minor Barrier.
Quality
1 2 3 4
Price In the behaviour grid, however, we
1 0 2 0 0 find that none of the respondents
who perceived Reliance to be of
2 1 9 8 0 Good Quality and Price a minor
3 1 3 5 0 Barrier chose to purchase brand
Reliance. Also the respondents, who
4 0 0 1 0 perceived Reliance to be of
Behaviour Grid Acceptable Quality and Price a
Quality Minor Barrier as well as Good
1 2 3 4
Price Quality and Price a Major Barrier,
1 0 0 0 0 did not purchase Reliance. Only
2 0 0 1 0 1.25% (1 out of 8 respondents) who
3 0 0 0 0 perceived Reliance to be of
4 0 0 0 0
Acceptable Quality and Price a
Minor Barrier actually purchased it.
% out of This shows that although brand
Belief Grid Reliance has managed to create a
30
Quality 1 2 3 4 good perception about itself, it has
not managed to translate those
perceptions into actual
13 | Ppurchase.
age
There is only 1 person who
purchased Reliance and that
respondent considered Reliance to
be of Acceptable Quality with Price
Price
1 0% 7% 0% 0%
2 3% 30% 27% 0%
3 3% 10% 17% 0%
4 0% 0% 3% 0%

% of
Belief Grid purchas
er
Quality
1 2 3 4
Price
1 0% 0% 0% 0%
2 0% 0% 13% 0%
3 0% 0% 0% 0%
4 0% 0% 0% 0%

We have found the average

Avg Monthly spend by purchasers
600 monthly spend of each of the
Quality respondents, who have decided to
1 2 3 4
Price purchase Reliance. The total of the
1 0 0 0 0 monthly average spend is Rs 600,
2 0 0 600 0 which is much less when compared
3 0 0 0 0 to Airtel.
4 0 0 0 0
After this we find the people who
will continue to stick with Reliance.
Purchaser who will
600 Here, much like BSNL, Reliance
continue enjoys a 100% brand
Quality
1 2 3 4
Price Brand Vodafone has the highest
1 0 0 0 0 presence in the category where
2 0 0 1 0 the brand is perceived as of Good
3 0 0 0 0 Quality and Price is not a Barrier of
4 0 0 0 0 17 respondents out of 30. Among
all the players, Vodafone has the
highest presence in this category
with a 56% presence.
Vodafone In the behaviour grid we find that
only out the 3 respondents chose
to purchase brand Vodafone which
Belief Grid
Quality is 17.5% of respondents.
1 2 3 4
Price The people who perceive the
1 0 3 0 0 brand to be Superior as well as
2 4 17 1 0
Price a Minor Barrier have 50%
3 0 2 3 0
purchase behaviour. The brand
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loses out on customers
perceive the brand to be of Good
Quality and Price a Minor Barrier
where it has only a 17.6%
4 0 0 0 0

Behaviour Grid
Quality
1 2 3 4
Price
1 0 1 0 0
2 2 3 0 0
3 0 0 2 0
4 0 0 0 0

Belief % out
Grid of 30
Quality
1 2 3 4
Price
1 0% 10% 0% 0%
2 13% 57% 3% 0%
3 0% 7% 10% 0%
4 0% 0% 0% 0%

% of
Belief
purchas
Grid
er
Quality We have also found out the
1 2 3 4
Price
average monthly spend of the
1 0% 33% 0% 0%
people who have decided to
2 50% 18% 0% 0%
3 0% 0% 67% 0%
purchase Vodafone. Their
4 0% 0% 0% 0% average monthly spend is Rs.
3300. This is the next best after
Airtel. Also the purchase basket
is highest for the grid where the
Avg Monthly spend by purchasers 3300 respondents perceived brand
Quality
1 2 3 4 Vodafone to be of Good Quality
Price and Price a Minor Barrier.
1 0 550 0 0
2 700 1500 0 0 We also found out the people
3 0 0 550 0 who would stick to brand
4 0 0 0 0
Vodafone. This figure comes to
62.5%, which is the closest to
Purchaser who will continue 3300 Airtel. Airtel has a figure of 70%
Quality in this category.
1 2 3 4
Price
1 0 1 0 0
2 1 2 0 0
3 0 0 1 0
4 0 0 0 0

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NOTE:
Quality Price
Superior (1) Price not a barrier (1)
Good (2) Price is a minor barrier (2)
Acceptable Price is a major barrier (3)
(3)
Poor (4) Price is a absolute barrier (4)

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 Analysis

Total Loyalty

Purchasers Purchasers % Continuity Continuity%

Airtel 20 67% 14 70%
Vodafone 8 27% 5 63%
BSNL 1 3% 1 100%
Reliance 1 3% 1 100%

The respondents were asked to choose a brand which they will purchase after
choosing their belief about the price and quality. Out of 30% respondents 20
choose Airtel giving it a 67% purchasing behaviour. 8 respondent chose Vodafone
whereas 1 each for BSNL and Reliance.
Now from these purchasers we have asked them if they will continue with their
preferred brand or not. We find that 14 out 20 respondents will continue with
Airtel giving it a 70% brand loyalty where as BSNL and Reliance have a 100%
brand loyalty as they have only one respondent which chooses to purchase the
brands and continue using it. For Airtel the respondents who perceive Airtel to
have a superior quality and for them price is not a barrier for purchase, have
purchased brand Airtel and also continue using it. This gives Airtel 100% loyalty
in the top box.

Brand loyalty will lead to brand resilience. Brand resilience is a brand’s ability to
protect itself and generate consistent volume and revenue, year after year.
Resiliency also describes a brand’s ability to gain more than its fair share of
category revenue and profits in the face of inadequate marketing or competitive
attack. We find that Airtel has a brand loyalty of 70% amongst the respondents
giving in 70% brand resilience. The brand loyal customers will stick to Airtel if
other brands take out sales promotion and other techniques to win over Airtel’s
customers. These loyal customers will help Airtel to generate cash flows and
volumes over time to giving it continuity.

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Equity Market Share Vs Market Share

Sales Mkt Share % Loyalty Loyalty Equity

Contributio share
n
Airtel 9175 68% 70% 6422.5 67%
Vodafon 3300 24% 63% 2062.5 22%
e
BSNL 500 4% 100% 500 5%
Reliance 600 4% 100% 600 6%
Total 1357 100% 9585 100%
5

At the time of the interview we had asked respondents for their monthly average
spend on the brands they will purchase. From this we find out total sales for each
brand. The brand sales give us an idea of the expenditure of the respondents for
all the brands. After that we can simply find out the market share of each brand,
this can be done by finding the sales contribution of each brand to the total sales
of the entire brands. We see that Airtel has the highest market share compared
to all the brands for the respondents.

We have already found the loyalty of the respondents, therefore we find out the
sales generated by the loyal customers. Airtel again has the maximum sales
generated by the by the loyal customers. From this we can find the equity index
of each brand. The total of the loyalty sales for each brand divided by the total
loyalty sales for all the brands, gives us the equity share for each brand. We find
the equity share is high compared to other brands; the share is 68% the other
brand Vodafone has 22%. Whereas BSNL and Reliance who had a brand loyalty of
100% each can only convert an equity share of 5% and 6% respectively as the
respondent who will stick with these brands generate a small sum of revenue for
the respective brands. Equity share 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. It can be translated into both sales and profit figures but is specific to
brand performance and has no category equivalent. In our example below, Brand
A has “equity share” that is disproportionate to its market share.

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Leveragability

Sales Loyalt Loyalty Sale Loyalt Loyalty sales

y sales s y
Q1P2 Q1P2 Q1P2 Q2P Q2P1 Q2P1 Leveragabilit
1 y
Airtel 2800 83% 2333 1075 100% 1075 68%
Vodafon 700 50% 350 550 100% 550 39%
e
BSNL 0 0 0 0 0 0 0%
Reliance 0 0 0 0 0 0 0%

Brand leveragability 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. To find the brand leveragability we
have found out the leveragability index which will help us to quantify the
leveragability of the brand.

To find this index we have taken the second best grids after superior quality and
price not a barrier as the customers are in this grid. The grids taken are superior
quality and price a minor barrier (Q1P2) and good quality and price not a barrier
(Q2P1). For these grids we find the total sales as well as the loyalty amongst
customers. From this we get the loyalty sales for each of the grid. The
leveragability index can be found out by the formula Q1P2 loyalty sales/ (Q2P1
loyalty sales Q1P2 loyalty sales).

The leveragability index gives us a picture that the highest leveragability is for
Airtel 68% coming second is Vodafone with 39%.

Weightage
Quality 1 2 3 4
Price
1 5 4 3 2
2 4 3 2 1
3 3 2 1 1
4 2 1 1 1

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Quadrants/Bran Airtel BSNL Reliance Vodafone
ds
Q1P1 15 5 0 0
Q1P2 20 0 0 4
Q2P1 8 0 0 4
Q2P2 12 0 0 6
Q3Q3 0 0 1 1
Total 55 5 1 15

Brands Market Brand Equity Share Quality

Share Index Index
Airtel 68% 55 37.17%
BSNL 4% 5 0.20%
Reliance 4% 1 0.04%
Vodafone 24% 15 3.60%

The main aim of finding the brand equity of a brand is to find the marketing ROI.
We can find this with the help of brand equity index. This index gives us the
contribution of loyal customer. From our question to the respondent will they
continue with the brand which they purchase we have found out the loyalty
contribution and we know on which grid of the quality and price grid are each of
the respondents.

After this exercise we assign weights to the top grid and all the grids Q1P1 has
better weights that Q1P2, these weights are assigned from 5 to 1, 5 being the
highest. Now we know the weights for each grid, we multiply the loyal customers
with these weights. We find out the total of the loyal customers into the weights
for the grids, the total of this gives us the brand equity index for each brand.
From the BEI share we can find the share quality index which is the true value or
equity of the brand in the marketplace. Share quality index can be found by
multiplying the brand equity index into the market share. We find that Airtel has
a share quality index of 37.17%.

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 Market Equit Loyalty Leveragabili Brand Share

Share y Contributi ty Index Equity Quality

Share on Index Index

Airtel 68% 67% 70% 68% 55 37.17%
BSNL 24% 22% 63% 39% 5 0.20%
Reliance 4% 5% 100% 0% 1 0.04%
Vodafon 4% 6% 100% 0% 15 3.60%
e

From our findings and analysis we can conclude that Airtel has high brand equity
and is the leader in all the attributes of brand.

The Emotional Connect:

We conducted a survey among 30 respondents to find out the level of emotional
connect that each respondent has with different brands. They were asked to
identify a brand with different brands. This is because the more a consumer
identifies with and connects with a brand, the more he/she will purchase it. Also it
can result in better brand loyalty leading to better brand resilience and higher
brand leveragability.

The findings were almost completely in favour of Airtel. Most number of

respondents connected emotionally. The different words that were used were
Leader, Respectable, Successful, Humble, Approachable, Honest, Powerful,
Sincere, Creative, and Reliable. One of the reasons why Airtel enjoys high brand
loyalty and has a high NPS score could be that most users identify with Airtel.
Airtel has a good brand personality to its users. However Vodafone is very close
to Airtel in almost all the aspects. Airtel should emphasise on building on this
strong emotional connect that it has got it has with its users.

The findings are shown below graphically:

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The Net Promoter Model

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Net promoter Model:
The Net Promoter Model is developed by Fred Reichheld. It tests the brand loyalty
factor on the basis of whether or not present users recommend the brand to
prospective users. It is a tool that measures the level of customer satisfaction
and in turn customer loyalty. The real challenge for organizations is to make
employees just as accountable for providing a superior customer experience as
they now feel for delivering superior profits. Traditional satisfaction surveys
simply don't work; they don't measure what companies really need to know. The
Net Promoter is a unique model that can focus an entire organization on
improving every customer's experience. The process is both simple and radical.
Companies need to ask this all-important question in a regular, systematic, and
timely fashion. They need to track and publicize the answers, and they need to
put the information to work immediately. Companies that actively use this
process can manage customer loyalty and the growth it produces just as
rigorously as they can manage for profits.

To do this companies have to identify customers as Promoters and Detractors.

Promoters are loyal enthusiasts - people who will talk up a company to their
friends and family, while detractors are unsatisfied customers who will spread ill-
will. Once a company determines the percentage of each, it can compute its NPS.
The higher the NPS, the more promoters a company has. Obviously a company
must strive towards having a high percentage of promoters. With a simple click
of a button via the Internet, detractors can share their dissatisfaction with
thousands of potential customers, thereby strangling a company's growth. One of
the temptations that a company must fight against is the lure of bad profits -
profits that come at the customer's expense, such as charging a high fee to
change a plane ticket, charging higher renewal fees to current subscribers than
to new ones, and not giving credit for unused gas when a rental car is returned,
for example. Research shows that the most common reason a company fails to
achieve growth and gain loyal promoters lies in these kinds of bad profits, and
many companies are hooked on them without even realizing it. Bad profits, he
shows, cut off a company's best opportunity for true growth.

Elements of The Net Promoter Model:

The Net Promoter Model has two basic elements i.e. Promoters and Detractors.
Promoters and detractors exhibit dramatically different behaviours and produce

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dramatically different economic results. The value of a promoter or a detractor
can be quantified. Given the vital role of word-of-mouth, indeed, it must be
quantified. Several factors distinguish detractors and promoters - and why
companies need to increase the number of promoters and decrease the number
of detractors. We shall look at each of the elements separately:

Promoters:
Promoters are customers who are so enthusiastic about a firm or brand that they
not only increase their own purchases, but also refer their colleagues or friends.
They are satisfied with the brand of the products that they are using and this
result in positive word of mouth publicity. They buy more of the brand and also
bring in new users. These customers are the ones that provide the company
insulation from price wars, and short term fads. It also provides the company
some amount of surety of purchase thereby resulting in maintaining market
share. The company needs to treat these customers with great care as these are
the customers who bring repeat business at much lower costs.

Detractors:
Detractors are customers who feel so badly treated that they cut back on
purchases, switch to the competition, and warn others to stay away from the
company. These are the customers that are not satisfied with the brand. This
results in negative word of mouth publicity. They detract from the brand and also
take away prospective users. These customers are price sensitive and move
away towards lower prices and sales promotional gimmicks by the competitors.
Companies sometimes earn profits at the expense of the customers by providing
dubious goods and services. These earnings turn customers into detractors and
are called BAD PROFITS. The company needs to be wary of these customers as
they can take way a majority of the prospective customers by negative word of
mouth publicity.

A comparison of Promoters and Detractors on various attribute is shown below:

Parameters Promoters Detractors
Retention High Retention Rates as Low retention rate as
Rate satisfaction is high satisfaction is low
Price Low sensitivity to price High sensitivity to price
Sensitivity fluctuations fluctuations
Annual Higher annual spend Lower Annual Spend

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Spend
Word Of Positive Negative
Mouth

Good Profits:
Good profits are earnings from creating customer value, which in turn, creates
customers who are promoters. Satisfied customers become, in effect, part of the
company's marketing department, not only increasing their own purchases but
also providing enthusiastic referrals. They become promoters. The right goal for a
company that wants to break the addiction to bad profits is to build relationships
of such high quality that those relationships create promoters, which generate
good profits, and fuel true growth. Also these profits come at relatively lower
costs as the publicity is mostly word of mouth and the market spend need not be
high. Some examples of good profit earned by companies are:

Amazon: Amazon.com could easily afford to advertise more than it does; instead
it channels its investments into free shipping, lower prices, and service
enhancements. Founder and CEO Jeff Bezos have said, "If you do build a great
experience, customers tell each other about that."

Southwest Airlines: Southwest Airlines doesn't charge for flight changes, instead
offering passengers a credit that can be used anytime over the next twelve
months. The carrier has also replaced the industry's elaborate segmented pricing
structure with a transparent two-tier pricing policy. Southwest now flies more
domestic passengers than any other U.S. airline and boasts a market
capitalization greater than the rest of the industry combined.

These examples show that these companies focussed on maintaining good

customer relationships than earning a few big bucks in the short term. This
resulted in positive referrals for the companies. This lead to lower customer
acquisition costs.

Bad Profits:
Bad profits are profits earned at the customer's expense; in other words, profits
earned from customers, which then become detractors. Most companies can
boost short-term profits by exploiting customer relationships by raising prices
whenever they get away with it. Or they can cut back on services or product

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quality to save costs and boost margins. Instead of focusing on innovations to
improve value for customers, companies can boost bad profits by channelling
their creativity into finding new ways of extracting value from customers. But no
company can do that and achieve sustained growth, because their customers will
be converted into detractors. Although the company may earn profits in the short
run, in the long run it loses present as well as prospective clients. Some
examples of bad profit earning by various companies are;

Financial Services: Mutual funds bury often-exorbitant administrative fees in the

fine print, so that customers won't know what they're paying. Brokerage firms
slant their research to support investment-banking clients, thus bilking their
stock-buying clients. Retail banks charge astonishing fees for late payments or
bounced checks. Banks also develop algorithms that process the largest checks
first each day, so that depositors will be hit with more insufficient-funds
penalties.

Healthcare: Hospitals, Pharmaceutical Companies, : Many hospitals won't reveal

the deals they have cut with insurance companies. Many insurers do their best to
exclude people who might actually need the coverage - and if you do have
coverage, they drown you and your doctor in complicated paperwork. Many
pharmaceutical companies pay doctors to push their drugs, while quashing
studies suggesting that a potentially lucrative new drug may be ineffective or
dangerous. Many HMOs promise to provide cradle-to-grave coverage, yet balk at
paying for many procedures their physicians recommend.

Mobile Phone Operators: Most mobile-phone operators have created pricing plans
that cleverly trap customers into wasting prepaid minutes or incurring
outrageous overages. One mobile-phone operator calculates that proactively
putting customers in the plan that was best for them would cut profits by 40%.
Providers also lobbied to restrict the portability of phone numbers. In their efforts
to trap customers, they ensured that customer loyalty would decline and that
they would lose the potential to expand their tarnished brands into related
markets.

Rationale behind using this model:

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The group has chosen a brand, i.e., Airtel in the telecom sector. This sector is one
which is very highly competitive. There is tremendous competition among the
existing players. Also newer players are entering the market which will intensify
the competition. The mobile penetration rate in India is on a high and the
competition is only going to intensify in the coming future.

Moreover mobile operators create short term tariff plans that lure customers into
using them. These plans keep changing frequently. Also, in India number
portability is not yet allowed. This implies that the customers get ‘stuck’ with a
number. Hence testing the brand loyalty becomes difficult. This is because
subscribers stay on with a brand of service providers as the exit costs are high.
Also, the category on a whole is relatively sensitive to price. The Net Promoter
model will help the group identify the brand loyalty enjoyed by a particular brand.
The group asked the respondents whether they would recommend their brand to
new users. This helped the group ascertain the level of user satisfaction that a
brand enjoys.

Research Methodology:
The group prepared a questionnaire for this model. The questionnaire was
administered to 50 respondents. The respondents were students of Praxis
Business School. The sample was representative of Airtel Users and Non Users.
The questionnaire had three questions.

Method of Survey: Questionnaire

Sample Size: 50.
A graphical representation is shown below:

Questions

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Q1) Are you an Airtel user?
Rationale: This will help the group know how many users of Airtel are there in the
sample. Also it will help in identifying what percentage of Airtel users/non users
recommend Airtel.

Q2) Would you recommend Airtel?

Rationale: This will help the group test the brand loyalty that Airtel enjoys. If a
user is loyal to a brand, he/she will recommend it to prospective users. This will
also help the group identify the promoters and detractors of brand Airtel.

Q3) If other players were to reduce their prices would you still use Airtel?
Rationale: Brand loyalty is characterised by price insensitivity. This question will
help the group ascertain the price insensitivity that Airtel enjoys. The more the
number of price insensitive users, the more is the brand loyalty that Airtel enjoys,
and hence higher the brand equity that Airtel has.

Findings:
There were 30 Airtel Users and 20 Non Airtel Users in the sample of 50 that we
chose. Out of the 30 Airtel users, 26 users said that they would recommend
Airtel. This comes to a healthy 86.66%. This means that they are satisfied with
the product offerings of Airtel. Also among the 30 Airtel users 22 said that they
would stick to Airtel even if the competitors were to increase their prices. This
means that 73.33% of the Airtel are brand loyal as they are not price sensitive.
This is a pretty high figure. Also of the 20 Non Airtel Users, 20% said that they
would recommend Airtel. This means that Airtel has certain degree of respect
and loyalty even among non users.

From the above analysis we can also comment on the brand resilience of Airtel.
Brand Resilience means the capacity of a brand to withstand trends. This
insulation is provided by brand loyal customers. A figure of 86.6% is proof of
Airtel’s resilience. In the telecom sector tariff rates change very frequently. On
being asked whether the users would stick to Airtel even in the face of
competitors cutting prices a high percentage (73.33%). This provides Airtel the
insulation against fluctuating market trends.

Net Promoter Scores:

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The Net Promoter Score is arrived at by deducting the percentage of detractors
from the percentage of promoters.

Promoters are the users who would recommend the brand to others. They are the
satisfied customers who spread positive word of mouth for the brand and also
bring new customers.
Detractors are the users who would not recommend the brand to others. These
are the unsatisfied/dissatisfied customers. These customers spread negative
word of mouth publicity and take away prospective consumers from the brand.
Also these customers are price sensitive and change brands as the prices
fluctuate. Also these customers can be easily lured away by the competitors
through sales promotion techniques.
Therefore:

NPS=% of Promoters- % of

The NPS provides the means for gauging performance, establishing

accountability, and prioritizing investments because it connects to growth. If a
company's "growth engine" were running at perfect efficiency, it would convert
100% of its customers into promoters. The worst possible engine would convert
100% of its customers into detractors. The best way to gauge the efficiency of
the growth engine is to calculate a company's NPS.

The Net Promoter Score for Airtel is given below:

% of Promoters of Airtel: 86.66% (26 out of 3o Airtel users said they would
recommend Airtel)
% of Detractors of Airtel: 13.33% (4 out of 30 Airtel Users said they would not
recommend Airtel)

NPS =86.66%-13.33% = 73.33%

How the Net Promoter Score correlates to Corporate Growth:

Individual customers can't have a Net Promoter Score (NPS); they can only be
promoters, passives, or detractors. But companies can calculate their NPS for
particular segments of customers, for divisions or geographic regions, and for
individual branches or stores. NPS is to customer relationships what a company's
net profit is to financial performance. It's the one number that really matters.

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Companies that maintain higher % NPS's also demonstrate higher growth rates;
whereas companies that maintain lower % NPS's also demonstrate lower growth
rates. This implies that Airtel has a fairly high score of net promoters. This means
that 73.33% of its users are satisfied with Airtel’s offerings and would
recommend it to other users. . Also, Airtel has a figure of 73.33% of its users who
will stick to Airtel even if competitors reduce their prices. This means Airtel is
fairly insulated against price wars and enjoys a high degree of brand loyalty.

Recommendations:
Airtel has a Net Promoter Score of 73.33%. This means that 73% of Airtel’s
customers are its Promoters (as defined). This score is quite high. However there
is still scope for improvement for Airtel. A high NPS score implies that its
customers are not only loyal but also bring in new customers at a much lower
cost.

However, Airtel should keep working on this aspect. Bad profits earned at the
cost of Promoters can turn them into Detractors. Airtel has to keep differentiating
itself in this tremendously competitive industry to maintain having an edge.

This industry is not a very highly differentiated one. Product offerings can be very
easily copied by the competitors. It is mostly perceived differentiation by the
consumers. This is where Airtel scores high. The recommendation for Airtel on
the basis of its NPS would be to keep building on the perceived differentiation
which it enjoys among its users.

Airtel has a high loyalty contribution percentage of 70%. This loyalty factor
provides Airtel insulation against short term fads and sales promotional activities

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by competitors. Also Airtel has the highest Brand Equity Index. Airtel is clearly the
leader with the highest brand equity among all the major mobile service
providers. Airtel can leverage this fact to move into different but related product
categories like content development for mobiles etc. Also with the launch of
Apple’s iPhone, and Vodafone also providing this service, Airtel’s brand
leveragability will be tested again.

The key recommendation, for Airtel, Airtel will however be to keep differentiating
itself from competition. This differentiation is mostly perceived as competitors
can easily copy leading to an absence of absolute core competence. This
perception is something which will give Airtel more number of Promoters and will
help it to grow.

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