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Ingredient Branding
The document discusses the concept of ingredient branding. It begins by defining ingredient branding and understanding its implementation and management. Some key points made include that ingredient branding can enhance the differentiation and competitiveness of host brands. Examples are given of well-known ingredient brands like Intel, GoreTex, and Dolby. The document also discusses conditions that make ingredients suitable for branding and challenges in managing ingredient brands. It concludes by discussing new applications and open research questions around ingredient branding.
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Ingredient Branding
- 1. The Inside on IngredientBranding Waldemar Pfoertsch 2006
- 2. Agenda • Defining IngredientBranding • Understanding Ingredient Branding • Implementing and Managing • New Application and Future Research • Brand Management at CEIBS
- 3. The most famousexample of the “Brand in the Brand” Jackson, Tim (1997) Using the concept of Ingredient Branding or short: “InBranding”
- 4. Other Ingredient BrandingExamples • Microban • Makrolon • GoreTex • Dolby Stereo • Nirosta Pfoertsch/Mueller (2005)
- 5. Brand Extension Examplesof Ingredient Branding • Beechnut baby foods with Chiquita banana • Ben and Jerry's Heath Bar Crunch ice cream, and Fat Free Cranberry Newtons with Ocean Spray cranberries • Kellogg’s Pop-Tarts with Smucker’s jam (Rao, Qu, and Ruekert 1999; Shocker, Srivastava, and Ruekert 1994)
- 6. Company Owned Ingredient Brands DavidAaker, 2003
- 7. Basic Motivation forUsing Ingredient Branding • Enhances the differentiation of the host brand from competition • Improves competitiveness • Enhances equity of host brand and “self- brand”. Desai/Keller (2002)David Aaker, 2003 McCarthy/Norris (1999)
- 8. Effects of BrandedIngredients Norris/McCarthy (1999)
- 9. Change of Competitiveness throughBranded Ingredients Norris/McCarthy (1999)
- 10. Ingredient Branding Executesa Multilevel Marketing Policy Third Level Marketing Multi Level Marketing Ingredient- Supplier First Level Marketing Selling Original Equipment Mfg Sourcing End user Selling Souring Second Level Marketing Distribution sourcing Selling Baumgarth (2001)
- 11. Push und Pullby InBranding Ingredient- Producer Final Product Producer OEM Final User Sales-promotion to the B2B Customer Supply Supply-push Incentives to demand creation at the B2B customer Supply-push Incentives for demand creation at the final customer Supply Push Sales-promoting from the Ingredient supplier to the final customer Demand pull Incentives for the demand creation of a certain ingredient in the final product Demand Demand Pull Kotler/Pfoertsch (2006)
- 12. Distinction between InBrandingand CoBranding Final products Final products & Ingredients Ingredients singular in cooperation Classic branded finished product Not possible CoBranding Ingredient Branding Intel Microban Makrolon Lycra & Woolmark Branding Approach self branded ingredient cobranded ingredient cobranded product branded product Baumgarth (2001) Tide & Downy VISA & Citibank Intel & Dell NutraSweet & Coca Cola Makrolon & Uvex
- 13. Implementation Steps forInBranding Ingredient brand is present anywhere and could not be used as a differentiator and is pushing former supporters into price wars Fiesco1-Effect4 Known ingredient brand is helping ist supporter and other are benefiting from it Repayment of credit, synergy 3 Unknown ingredient brand becomes known and famous Break-through and market proof 2 Unknown ingredient brand profits on the back of well-known brands Raising of credit, exploitation of reputation 1 DescriptionSteps 1) Named after „The conspiracy of Fiesco “, 1783 written by Friedrich Schiller: „Er hat seine Schuldigkeit getan, er kann gehen“. „He paid his tribute, now it is time for him to go". Bugdahl (1996)
- 14. Raising of credit, exploitationof reputation Start of the "Intel Inside" campaign. The unknown ingredient brand profits on the back of the PC manufacturers (OEMs) by co-operation advertisement 1 Fiesco-Effect Intel processors are used by majority of all PC manufacturers, thus a differentiation is no longer possible. While Intel determines the market prices, the PC manufacturers must enter into a price war again. Repayment of credit The acceptance of Intel helps the co-operation partners (OEMs) win more customes. 3 2Break through The acceptance of Intel rises one year after start of the "Intel Inside" campaign of 60% to over 80%, it develops a demand pull (Pull Through effect) 22 34 Kleinaltenkamp (2001)
- 15. Situation of ComponentSupplier for InBranding Increase of dependency against quality problems from the OEMs Higher cost and time Increase need for quality assurance Visible target for competitive attacks Negative Image of OEM brands Resistance of industrial customers Become known by the public Create chances for competitive differentiation Establish entry barrier for competitors Increase of customer loyalty and demand pull Establish means against replaceability Positive image of OEM brands Price-/Volume premium Pull-creation Creation of Brand Equity Increase of market power versus OEMs RisksOpportunities
- 16. Risks and Opportunitiesfor Suppliers and OEM Supplier Increased demand Better prices Chances for growth Lesser risk for substitution Creation of entry barriers Potential conflicts with OEM Higher financial burden on enduser communication Higher risk of image damages through product failure OEM Positive Image creation Differentiation Less marketing cost Increased product value Image risks Weakening of own products Increase of branding around or in the core product Risks . Possible win-win strategy Increased risk and conflict potential Opportunities
- 17. Application Conditions of InBranding High Low Schiesser& Ariel Deutsche Bahn AG & Citibank Complexity of components in relation to final product High Low Example: Micro processors (Intel) ABS, ESP (Bosch) Textile coding (Teflon) Laminate (GoreTex) Bicycle gears (Shimano) Unsuitable for Ingredient Branding Suitable for Ingredient Branding Important for functionality of final product Pfoertsch/Mueller (2005)
- 18. More Insids onConditions of InBranding High Low Schiesser & Ariel Deutsche Bahn AG & Citibank Number of OEMs Number of supplier High Low Example: Micro processors (Intel) ABS, ESP (Bosch) Textile coding (Teflon) Laminate (GoreTex) Bicycle gears (Shimano) Unsuitable for Ingredient Branding Suitable for Ingredient Branding Pfoertsch/Mueller (2005)
- 19. Success Stories ofInBrands Intel Inside Firma: Intel Corporation Branche: Halbleiterindustrie Produkte: Mikroprozessoren Umsatz: 38,82 Mrd. US $(2005) NutraSweet Firma: NutraSweet Company Branche: Lebensmittelindustrie Produkte: Süßstoffe Umsatz: 0,25 Mrd. US $ (2002) Gore-Tex Firma: W.L. Gore & Associates Branche: Bekleidungsindustrie Produkte: Textillaminate Umsatz: 1,35 Mrd. US $ (2003) Lycra Firma: INVISTA Branche: Textilindustrie Produkte: Elastikfasern Umsatz: 6,9 Mrd. US $ (2003) Teflon Firma: DuPont Branche: Chemieindustrie Produkte: Antihaftbeschichtung Umsatz: 26,99 Mrd. US $ (2003) Shimano Firma: Shimano Branche: Sportartikelindustrie Produkte: Fahrradkomponenten Umsatz: 1,6 Mrd. US $ (2004) Tetra Pak Firma: Tetra Pak Branche: Verpackungsindustrie Produkte: Verpackungssysteme Umsatz: 7,3 Mrd. US $ (2003) Makrolon Firma: Bayer MaterialScience Branche: chemische Industrie Produkte: Kunststoffe Umsatz: 10,7 Mrd. € (2005)
- 20. New Applications areon the Horizon Z-Trim all-natural fat replacement products soy protein
- 21. Open Research Questions •Better understand how competitive advantage can be achieved through the use of ingredient branding . • Establish brand metrics for multi-level branding. • Track and predict ingredient branding success.
- 22. = Guild brands =Service brands = OEM brands (industrial) = OEM brands (consumer) = Retail brands (consumer) = Ingredient brands time Importance of branding Increase of importance of new branding concepts Industrial Revolution Relative decrease in importance of consumer brands 1300 1850 1900 1950 1970 1990 2000 2050 Future of Ingredient Branding Havenstein (2004):
- 23. The Future ofBrand Management at CEIBS • Offer a series of dedicated Brand Management Courses and Seminar • Initiate and Supervise Research Work • Establish a Center for Business Brand Management (CBBM) at CEIBS and • Organize the first Business Brand Management Conference in 2008
- 24. Literature • David Aaker,The Power of the Branded Differentiator, MIT Sloan Management Review 45 no1 83-7 Fall 2003 • Baumgarth, C Freter, H.;. (2001): Ingredient Branding . Begriff und theoretische Begründung, in Esch, F.-R. (Hrsg.): Moderne Markenführung, 3. Auflage, Wiesbaden 2001, S. 317 - 343. • Bugdahl, Volker (1996): Ingredient Branding – eine Markenstrategie für mehrere Nutznießer, in: Markenartikel, Nr. 3/1996, S. 110-113 • Havenstein, Moritz (2004): Ingredient Branding. Die Wirkung der Markierung von Produktbestandteilen bei konsumtiven Gebrauchsgütern. Gabler Edition Wissenschaft, Wiesbaden • Kalpesh Kaushik Desai & Kevin Lane Keller (2002), The Effects of Ingredient Branding Strategies on Host Brand Extendibility, Journal of Marketing Vol. 66 (January 2002), 73- 93 • Kleinaltenkamp, Michael (2001): Ingredient Branding: Markenpolitik im Business-to- Business-Geschäft, in: Köhler, R./Majer, W./Wiezorek, H. (Hrsg.): Erfolgsfaktor Marke, München 2001, S. 261 . 270. • Kotler, Philip and Pfoertsch, Waldemar (2006) B2B Brand Management Springer 2006 • Levin, A.J., Davis, C. and Levin, I. (1996), ``Theoretical and empirical linkages between consumers' responses to different branding strategies'', Advances in Consumer Research, Vol. 23, pp. 296-300. • McCarthy Michael S., Norris Donald G. (1999) Improving competitive position using branded ingredients, JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 8 NO. 4 1999, pp. 267-285 • Narasimhan, C. (1999), ``The new appeal of private brands'', Harvard Business Review, May/June, p. 41. • Norris, Donald G. (1992), "Ingredient Branding: A Strategy Option with Multiple Beneficiaries," Journal of Consumer Marketing, 9(3), 19-31.
- 25. Literature • Osselaer van,Stijn M.J. (2004) Of Rats and Brands: A Learning-and-Memory Perspective on Consumer Decisions, Journal of Economic M:Business Administration and Business Economics, Oct 2004 • Jackson, Tim (1997): Inside Intel: Andy Grove and the Rise of the World's Most Powerful Chip Company. New York: Dutton (Penguin Books), 1997 • JANISZEWSKI, CHRIS and OSSELAER VAN Stiin M.J. ' (2000), A Connectionist Model of Brand-Quality Associations, Vol. XXXVll (August 2000). JOURNAL OF MARKETING RESEARCH. AUGUST 2000 • Pfoertsch, Waldemar and Mueller Intrajanto (2005) Marke in der Marke Ingredient branding, Springer 2005 • Rao, Akshay R., Lu Ciu, and Robert W. Ruekert (1999), "Signalling Unobservable Product Quality through a Brand Ally," Journal of Marketing Research, 37 (May), 258-68. • Shocker, Allan D., Rajendra K. Srivastava, and Robert W. Ruekert (1994), "Challenges and Opportunities Facing Brand Management: An Introduction to the Special Issue." Journal of Marketing Research, 31 (May), 149-58. • Simonin, B.L. and Ruth, J.A. (1998), ``Is a company known by the company it keeps? Assessing the spill-over effects of brand alliances on consumer brand attitudes'', Journal of Marketing Research, Vol. 35, February, pp. 30-42. • Spethmann, B. and Benezra, K. (1994), ``Co-brand or be damned'', Brandweek, Vol. 35, No. 45, pp. 20-5. • Vaidyanathan, R., Aggarwal, R. and Brown, M.G. (1999), ``Intel inside, generic outside: implications of ingredient branding for national and private label brands'', working paper, University of Minnesota-Duluth. • Vaidyanathan, Rajiv Aggarwal, Praveen (2000) Strategic brand alliances: implications of ingredient branding for national and private label brands, JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 9 NO. 4 2000, pp. 214-228
- 26. 谢谢！ Prof. Dr. Waldemar A.Pfoertsch International Business Pforzheim University +49-171-536 8998 +1-224-388 2702 waldemar@pfoertsch.com www.pfoertsch.com