ingredient branding

The Inside onIngredient Branding

Waldemar Pfoertsch 2006

Agenda

• Defining Ingredient Branding

• Understanding Ingredient Branding

• Implementing and Managing

• New Application and Future Research

• Brand Management at CEIBS

The most famous example of the “Brand in the Brand”

Jackson, Tim (1997)

Using the concept of Ingredient Branding or short: “InBranding”

Other Ingredient Branding Examples

• Microban

• Makrolon

• GoreTex

• Dolby Stereo

• Nirosta

Pfoertsch/Mueller (2005)

Brand Extension Examples of 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)

Company Owned IngredientBrands

David Aaker, 2003

Basic Motivation for Using 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)

Effects of Branded Ingredients

Norris/McCarthy (1999)

Change of Competitiveness through Branded Ingredients

Norris/McCarthy (1999)

Ingredient Branding Executes a Multilevel Marketing Policy

ThirdLevel Marketing

Multi Level Marketing

Ingredient-Supplier

First LevelMarketing

Selling

Original Equipment Mfg

Sourcing

End user

SellingSouring

Second Level Marketing

Distribution

sourcingSelling

Baumgarth (2001)

Push und Pull by InBranding

Ingredient-Producer

Final ProductProducer OEM

Final User

Sales-promotion to theB2B Customer

SupplySupply-push

Incentives todemand creation

at the B2B customer

Supply-pushIncentives for

demand creationat the final customer

Supply

Push

Sales-promoting from theIngredient 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)

Distinction between InBranding and CoBranding

Finalproducts

Final products & Ingredients

Ingredients

singular

in cooperation

Classic brandedfinished product

Notpossible

CoBranding

Ingredient Branding

Intel

Microban

Makrolon

Lycra&

Woolmark

BrandingApproach

self brandedingredient

cobrandedingredient

cobrandedproduct

brandedproduct

Baumgarth (2001)

Tide & Downy

VISA & Citibank

Intel & DellNutraSweet& Coca ColaMakrolon &

Uvex

Implementation Steps for InBranding

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 istsupporter and other are benefiting from it

Repayment of credit, synergy3

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)

Raising of credit, exploitation of reputation

Start of the "Intel Inside" campaign. The unknowningredient 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 longerpossible. While Intel determines the market prices, the PC manufacturers mustenter into a price war again.

Repayment of credit

The acceptance of Intel helps the co-operationpartners (OEMs) win morecustomes.

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)

Situation of Component Supplier 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 publicCreate chances for competitive differentiationEstablish entry barrier for competitorsIncrease of customer loyalty and demand pullEstablish means against replaceabilityPositive image of OEM brands Price-/Volume premiumPull-creationCreation of Brand EquityIncrease of market power versus OEMs

RisksOpportunities

Risks and Opportunities for Suppliers and OEM

Supplier

Increased demandBetter pricesChances for growthLesser risk for substitutionCreation of entry barriers

Potential conflicts with OEMHigher financial burden on enduser communicationHigher risk of image damages through product failure

OEM

Positive Image creationDifferentiationLess marketing costIncreased product value

Image risksWeakening of own productsIncrease of branding around or in the core product

Ris

ks

.

Possiblewin-winstrategy

Increasedrisk andconflictpotential

Opp

ortu

nitie

s

Application Conditions of InBranding

High

Low

Schiesser & ArielDeutsche

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 forfunctionality of finalproduct

Pfoertsch/Mueller (2005)

More Insids on Conditions of InBranding

High

Low

Schiesser & ArielDeutsche

Bahn AG&

Citibank

Number of OEMs

Number of supplierHigh 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)

Success Stories of InBrands

Intel InsideFirma: Intel CorporationBranche: HalbleiterindustrieProdukte: MikroprozessorenUmsatz: 38,82 Mrd. US $(2005)

NutraSweetFirma: NutraSweet CompanyBranche: LebensmittelindustrieProdukte: SüßstoffeUmsatz: 0,25 Mrd. US $ (2002)

Gore-TexFirma: W.L. Gore & AssociatesBranche: BekleidungsindustrieProdukte: TextillaminateUmsatz: 1,35 Mrd. US $ (2003)LycraFirma: INVISTABranche: TextilindustrieProdukte: ElastikfasernUmsatz: 6,9 Mrd. US $ (2003)

TeflonFirma: DuPontBranche: ChemieindustrieProdukte: AntihaftbeschichtungUmsatz: 26,99 Mrd. US $ (2003)ShimanoFirma: ShimanoBranche: SportartikelindustrieProdukte: FahrradkomponentenUmsatz: 1,6 Mrd. US $ (2004)Tetra PakFirma: Tetra PakBranche: VerpackungsindustrieProdukte: VerpackungssystemeUmsatz: 7,3 Mrd. US $ (2003)

MakrolonFirma: Bayer MaterialScienceBranche: chemische IndustrieProdukte: Kunststoffe Umsatz: 10,7 Mrd. € (2005)

New Applications are on the Horizon

Z-Trim all-natural fat replacement products

soy protein

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.

= Guild brands= Service brands = OEM brands (industrial)

= OEM brands (consumer) = Retail brands (consumer) = Ingredient brands

time

Importanceof

branding

Increase of importanceof new brandingconcepts

IndustrialRevolution

Relative decrease in importance of consumer brands

1300 1850 1900 1950 1970 1990 2000 2050

Future of Ingredient Branding

Havenstein (2004):

The Future of Brand 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

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.

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

谢谢！

Prof. Dr. Waldemar A. PfoertschInternational BusinessPforzheim University+49-171-536 8998+1-224-388 2702waldemar@pfoertsch.comwww.pfoertsch.com