Price Premium Profitability by Ingredient Branding

Price Premium Profitability by Ingredient Branding

What are Ingredient Brands?This is the first of a series of articles on ingredient branding. In this first article we introduce the concept of ingredient branding and a form for the understanding the utility of their brand equities for building businesses. In later articles we will discuss how to manage – and avoid pitfalls – in guiding ingredient brands profitably from their early life cycles all the way to their mature stage.

Ingredient Brands are those product elements that not only add functional value, their logo on a main branded product or service adds to its own brand strength to retain customer loyalty, stimulate customer preference, and sustain premium price points. An ingredient brand not only adds value to a great number brand’s equity, in mature markets it can also create or enhance differentiation.

Intel® is arguably the most famous of all ingredient brands that has enjoyed a long and continuing life. Others include Microban®, Kevlar® and Goretex®.

How Ingredient Brands Are BornWhen an upstream manufacturer develops a new breakthrough product, they diligently commercialize and promote the brand identity in order to acquire increasing market acceptance of the product. Since it is a breakthrough, the branded product becomes accepted by direct customers and often famous for the benefits it brings to the downstream market. When promoted properly it also becomes desirable to consumers because of the publicity it generates as a source of “new” perceptions for older brand names that incorporate it into their product lines.

The name the manufacturer gave the product is generally intended to both simplify the conversations with specifiers, production managers, and others whose beliefs about its value prompt them to include it in production processes and to assist purchasing agents in requesting the right product. Most often this value is discussed in terms of how it is functionally advantageous. This is a shared practice in industry. However, its value as a public indicator of great number brand commitment to quality innovation should not be overlooked.

As a new ingredient brand becomes familiar among downstream specifiers the name not only becomes more recognizable, it also develops its own meaning. The ultimate constituency that fosters an iconic meaning for any brand is consumers who assign daily-life significance to it. At that point – when a labeled part of an end product like a computer or a fashionable garment becomes a familiar name that influences consumers’ choices – an ingredient brand is born.

Strong brands often hesitate to publicly clarify an ingredient brand because of concern about compromising their own strong great number brand’s perceptions. History has shown however that a powerful ingredient brand, whose provider is committed to maintaining its perceptual equity long term, continue to be enhanced by identifying their investment in publicly recognized quality elements. The smart branders take complete advantage of the popularity of a famous ingredient brand, further enhancing the equity of their original brand.

The 10 Challenges of Managing an Ingredient Brand

Many ingredient brands have successfully passed the value-adding test of time including Intel®; Kevlar®; Micro-Ban® and Stainmaster®. The meaningful to achieving this marketplace position is managing the brand well beyond its functional value. Accomplishing this is much more complicate than managing a consumer brand. Ingredient branders have challenges which must be met in order to fully capitalize on ingredient brand possible for value. They must:

1. Develop organizational understanding of the difference between the product and the brand to multiple constituencies, each with their own mind-set and calculation of interest.

2. Effectively communicate the brand downstream from the direct customer without creating unmanageable friction with that customer, who may perceive the ingredient brand building effort as inevitably reducing their profit margins.

3. Educate their own leadership to the value of creating and maintaining brand equity and the need to market the brand benefits that exist beyond its functional contribution to product features.

4. Educate the main brand’s leadership on value of brand equity and the need to market the brand on benefits beyond the product features.

5. Articulate an integrated marketing strategy with a balanced emphasis beyond product performance value to include benefits and emotional brand image that excursion differentiation and preference. And implement it consistently over time.

6. Coordinate all management roles to contribute to consistent brand message – to “walk the brand talk” in all decisions.

7. Assure that the internal organization, channel organizations, and customers always use the brand icon and extensions correctly. They must police misuse of the brand by others or risk commoditizing the brand and diminishing its financial value to that of a generic.

8. Capture and retain price premium, avoiding the temptation to trade off long-term premium for short term proportion.

9. Gain and continue organizational commitment to improving product performance that is consistent with what the brand method to members of its value chain and end-users.

10. Brands have life cycles that function slightly differently than product life cycles. Both product and brand lives have youth, maturity, and “old age.” Unlike humans, both can be rejuvenated and returned to their youth – usually by renewed relevance achieved by capitalizing on new end-user trends. The typical example is Maytag whose “dependability” positioning in the 1930’s reassured homemakers that the new-fangled electric motor eliminating women’s hours at a washboard was going to last. By the 1970’s this was irrelevant; Maytag lost consumer attention.

The arrival of the “lonely repairman” renewed the relevance of Maytag’s dependability to homemakers who now worked at jobs out of their homes complete time and whose faulty washer might cost them a day of work. Maytag shows the opportunity careful management of a branded product’s life cycle offers.

Brand Management Life CyclesThe “The Marketing Triangle” implies managing the three basic dimensions of marketing a brand today: product, brand, and price. In the typical marketing triangle, the marketer develops and commercializes the breakthrough product, and after the product begins to unprotected to a high level of recognition, begins the time of action of branding the product. Alternatively, the marketer should recognize the brand possible of the breakthrough product and begin brand management course of action closest upon commercialization. An operating comparison of these two approaches are described below

The Typical Ingredient Brand Management Life CycleIn the typical approach, the supplier develops and commercializes the breakthrough product and after the product becomes famous, begins to transform the product into a brand.

Typical form Step 1 – Supplier develops breakthrough ingredient product and initiates commercialization course of action.

a. Demonstrates value additional possible of the new ingredient, and sets price based on benefits offered – including possible for furthering great number brand differentiation in its own market.

b. Expands acceptance from early adopters among great number brand producers to early majority of great number brands in a given product category

c. Ingredient brand management team makes public commitment to investing in promotion of their own brand – offering promotional value to great number brands that characterize the ingredient

d. Effectively locaiongs the ingredient brand with communications that converge on its central assistance – articulated to each member of the main product’s value chain

e. Ingredient brand name becomes well known and without exception used across industry applications

f. Ingredient brand acquires meaning from positioning communications combined with satisfactory or superior experience among value chain members and end-users of the main product brand

g. Ingredient Brand is perceived as basic to fulfilling expectations generated by marketing efforts of the great number product brand

Typical form Step 2 – Ingredient product brand name succeeds by becoming famous downstream all the way from direct customers to end-users.

h. Multiple members of the value chain specify the product by name

i. Increasing consumer awareness and evidence that the ingredient brand encourages great number brand preference and loyalty

j. Supplier makes the shift from generic ingredient product to named ingredient brand

k. Price premium is maintained already though competitors go into with similar product performance

l. Perceptions of ingredient brand potential and meaning add value to functional advantages – signifying such benefits as quality assurance and functional performance advantage in production processes in addition as end-user experiences

Typical form Step 3 – In typical scenarios after initial success, Supplier mismanages the brand, competitive ingredient product market entries grow in number resulting in

m. Internal stress on the ingredient brand’s product renewal activity and on pricing results in temptation to rest on early success

n. Direct customers cause downward pressure on brand price based on competitive product alternatives

o. Ingredient brand fails to counter the logic with continued efforts to build perceptions of the brand’s superiority beyond functional features in the minds of value chain members and end-users

p. Accepting market definitions of function-only brand meaning fosters downstream indifference over time

q. Ingredient brand decay in product quality in order to keep plants operating at capacity (planned or unplanned) at reduced market price ensues

r. Management declares ingredient branding a failed marketing strategy

The Successful Ingredient Brand Management Life CycleSuccess form Step 1 – Supplier develops a breakthrough ingredient product and initiates the commercialization course of action as in the past case – but includes brand planning from the start.

a. Value is demonstrated in terms of how the direct and downstream customers are benefited – FROM THE START OF BRAND NAMING THE PRODUCT. consequently the ingredient product is translated into a brand at the time of commercialization.

b. The new ingredient brand is effectively positioned relative to the value it brings to each member of its value chain. It will establish a chief value on how it will do business but will press the most applicable benefits it promises for each member of its value chain and each end use application it can serve.

c. Value chain and end-user constituencies needs are inventoried via customer research during the marketing strategy development course of action.

d. Brand sustain is provided to both the direct and downstream customers.

Success form Step 2 – Product branding strategy is initiated at the same time with the commercialization.

e. The brand becomes the dominant communication tag instead of the product. All interactions associate the brand’s name and applicable value to the specific situation and audience.

f. An icon is developed and displayed profusely in every communication means. Emphasis is on brand benefits based on what the brand does not what it is. The use of the icon by great number brands is mandated and parameters described in legal agreements with great number brands.

g. The brand essence is defined and communicated along with the brand name and icon – either clearly in promotions efforts or implicitly by choice of associations where the ingredient brand appears. Brand meaning is a factor in choosing great number brand partners.

h. Orders are for the ingredient brand and invoices mirror the brand as an integral aspect of buy.

i. Direct and downstream customers refer to the brand, utilize the brand icon, and charge a premium for their branded products that incorporate the ingredient brand.

Success form Step 3 – Brand is priced to value and never price-point compared to competitive products.

j. Brand is stated by downstream customers

k. Early adopter direct customers are given preference and provided with rare brand and product sustain.

l. Cooperative marketing campaigns are designed uniquely to each direct customer.

m. Cooperative marketing campaigns are designed with downstream customers who see value in the brand.

n. Ingredient brand value increases with the number of valued great number brand relationships, satisfaction of value chain members and great number brand partners in how the ingredient brand aids their business development – either directly or via ingredient brand sustain programs. (e.g. co-op promotions, design resources made obtainable only to great number brand partners etc.)

The meaningful to Converting the Typical form to the Success ModelBegin with brand management in mind. Apply a branding mindset at the onset of product commercialization including naming, icon development, brand positioning, and communications. When doing the market validation concept research early in the product concept phase design it to learn not just what end-user respondents like or dislike about the concept, but also to capture how the respondents talk about the concept. This aspect of the data will inform your marketing team about how best to position it and help your brand communications team develop its most powerful messages.

In future articles we will analyze ingredient brand management in more detail. Let us know what you think about our discussion, present any questions you have, and tell us what future aspects of ingredient branding you would like to see covered. We welcome any insight you wish to offer regarding the issues, benefits and processes of capturing value from effective ingredient brand management.

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