Ingredient Branding

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					   Ingredient Branding
A win-win situation or a zero-sum
             game?

         Jeff G.Turner
             Principal
            Incub8 S.A.
     The Ingredient Branding
            Dilemma
• Why Ingredient Branding?
• Assessing the Ingredient’s Perspective.
• Evaluating the Host Brand’s Perspective.
• What are the limits on Sustainability?
• Considering options for the future.
     Why Ingredient Branding?
• An ingredient or component of a product which has
  its own brand.
• At its best, a symbiotic relationship providing
  tangible benefits for both the host and ingredient
  brands.

      “Ingredient branding hurts the
      top-end players just as often as
      it helps the bottom-end players”.
                                      David Aaker.
Some Ingredient Brands
            Characteristics of an
              Ingredient Brand
• A clear differentiating functional attribute -e.g.
   Teflon®    =    non-stick
   Dolby®     =    ultimate sound reproduction
   Intel®     =    microprocessor speed
   Lycra®     =    recoverable stretch
• Associations of quality & performance.
• High target audience awareness, relevance and
  preference.
  The Ingredient’s Perspective
• A natural progression of branding the ingredient.
   – Involves extending the brand franchise beyond the
     direct customer, ultimately to the final consumer.
   – Part of competitive marketing strategy.
   – Industrial trade-names can evolve to become consumer
     brands over time - e.g. Teflon®, ABS
• A leadership characteristic.
   – once you “own” the attribute, difficult to be substituted.
   The Ingredient’s Trade-off.
+ Builds sustainable      - Can limit future
  advantage through         strategic options - e.g.
  preference and            Intel in consumer
  specification.            electronics.
+ Supports price          - Adds cost and
  premium.                  complexity to
+ Secures business          business.
  versus competition.        - Branding is rarely an
                               ingredient supplier’s
+ Potential to transfer        core competence.
  positive equity from
                          - Risk of transfer of
  host brand.
                            negative image from
                            host brand.
       The Host’s Perspective
• Ingredient brands provide reassurance of content
  & product performance.
• Allows host brand to concentrate on building
  “lifestyle” image, unencumbered by need to
  communicate physical attributes & benefits.
• Relative ingredient brand strength, positioning and
  life-cycle all factors in decision.
            The Host’s Trade-off.
+ Leverage ingredient brand to   - Higher costs (ingredient
  increase perceived value,        price and/or license fee).
  quality and performance.       - Risk of negative image
+ Gain market acceptance           transfer from ingredient -
  where ingredient brand           e.g. Teflon®.
  profile is stronger than       - Ingredient’s image
  host’s.                          dominates host’s - e.g.
+ Increased distribution           Intel.
  channel acceptance.            - Who else gets it?
+ Preferential access to            - Lack of control
  technology & marketing            - Differentiator becomes
  support from supplier.               leveler.
+ Potential for higher margins
  & faster inventory turns.
                  “Intel Inside”:
              The Ingredient’s Story


• Late 1980’s: product naming (286,386) not protected, copied.
• Needed to become distinctive.
• Studied other examples (Teflon®, Dolby®, Nutrasweet®).
• Launched “Intel Inside®” in 1991 with 200 OEMs, including
  premium brands IBM & Compaq.
• Awareness soared from 24% to 80% in 12 months, now
  consistently over 94%.
• Today: 1000 OEM licensees, 80% customer preference for
  Intel in PCs.
                   “Intel Inside”:
                  The Host’s Story


• An initial launch OEM, but withdrew.
• Perspective: legitimized smaller brands with inferior
  products.
• Threatened by strength of ingredient brand.
BUT:
• Reluctantly returned as licensee after sales dropped.
                 “Intel Inside”:
               The Latest Chapter


• Market for PCs fast       • Failed with planned
  becoming commoditized -     extension into consumer
                              electronics.
  low margin, virtually        – “Over-association” with
  identical products.            microprocessor category a
                                 limitation.
• IBM exited market: sold
  out to China’s Lenovo.    • Launched sub-brands in
                              core microprocessor
                              market.
                            • Expect more sub-brands
                              for new bundled products
                              or “platforms”.
  Lycra®: The Ingredient’s Story
       • Synonymous with stretch.
       • Consumer profile built over decades.
       • 90%+ target consumer recognition, top-10
         Apparel brand (Interbrand study)




1959
                          1980
                                                    2004
             1974                       1997
Lycra®: Co-Branding
      Lycra®: The Latest Chapter

• Until mid-1990’s: stretch .vs. rigid.
   – DuPont drove elastification of garments, category by category.
   – Targeted market leaders first, then volume followers.
• Post 1995, alternative sources of stretch.
   – Major investments in consumer promotion to build brand
     preference.
• Present
   – Over-exposure with private-label and discount retail has
     undermined brand equity.
   – Market-leading host-brands increasingly reluctant to share
     brand equity.
• Lycra® fighting back with retail ROI evidence.
                     +

• Monsanto made it a condition of
  purchase for the Nutrasweet logo to
  appear on customers’ packaging.
• With considerable reluctance, Coca-
  Cola agreed, BUT
                     +

• Monsanto made it a condition of
  purchase for the Nutrasweet logo to
  appear on customers’ packaging.
• With considerable reluctance, Coca-
  Cola agreed, BUT
• As soon as a generic alternative was
  launched, Coca-Cola ditched
  Nutrasweet.
 Ingredient Branding Dilemma


    Host wants         Ingredient wants

• Exclusivity                • Ubiquity
• Supplier choice            • Specification
• Brand pre-eminence         • Category relevance
A Segmented Offering Approach to
      Ingredient Branding
          Host Brand Desires        Ingredient Offers


                                         Preferential
        Differentiation       Market      access
                              Leaders         &
                                            lead time on
                                             innovation


 Credibility                                     Equitable
                          Volume Followers        treatment
 by
Association                                         over
                                                     time
   Ingredient Brand Strategy

• Plan for the long term
• Segment the market.
  – Be structured in your approach
  – Avoid the temptation to do spot deals.
• Target “trendsetters” for launch.
• Distinguish between positioning & use.
• Explicit licensing for optimum control.
  Ingredient Branding: What Next?

• Increasing leverage of
  established ingredient
  brands into new categories
   – Lycra® in nail polish
• More examples of
  ingredients becoming main
  brands
   – Gore-tex® Bikewear
• Increasing development of
  in-house ingredients.
   – Many of the advantages,
     few of the disadvantages.
              Ingredient Branding:
               Markets to Watch

   Wellbeing                        Food
& Care Products      Moving      Ingredients
                    Off-Line
            Ingredient Branding:
             Markets to Watch
  Auto                              Personal
Interiors                          Protection
                  Cosmetics &
                 Neutroceuticals




                   TRIACTIGEN®
    Ingredient Branding
A win-win situation or a zero-sum
              game?




             jeff@incub8.ch
             +41 79 2446360

				
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