Ingredient Branding
One of the best examples of how a brand is born is the DuPont Companies’ Lycra® Spandex fiber. When made into a fabric, the fiber provides both stretch and recovery to the garments produced. It was quickly commercialized into women’s swimsuits, hosiery, and lingerie, and then over time into a variety of “fit” garments, including women’s tops, jeans, and leggings. A whole new market for Lycra emerged, but was not fulfilled in the higher performance areas for sports and exercise activities. We selected Lycra as an example of a brand that has gradually faded in recognition over time.
Intel® is the most famous of all ingredient brands that has enjoyed a long life. We will look at what Intel has done to maintain success throughout its ups and downs.
How Ingredient Brands Are Born
...and How to Capitalize on Them
When an upstream manufacturer develops a new breakthrough product, they diligently commercialize to increase market acceptance of the product. Since the product is a breakthrough, over time, it is accepted by direct customers and often becomes famous for the benefits it brings to the downstream market. Sometimes, it is also accepted by consumers because of the publicity generated by the product. The name the manufacturer gives the product is generally intended to both simplify the conversation and assist purchasing in requesting the right product—a common practice in industry.
As the product becomes famous, especially downstream and with consumers, its name not only becomes more recognizable, but also develops its own meaning. It becomes an ingredient brand. Sometimes, the ingredient brand is even used to describe the final product, especially when final product brands are weak. Many weak product brands will actually incorporate the ingredient brand onto their label.
Strong product brands are more reluctant to use the ingredient brand, out of concern about compromising their strong brands. However, smart branders take full advantage of the popularity of the famous ingredient brand.
Managing an ingredient brand is not easy. It is often much more complex than managing a consumer brand. Ingredient branders face several challenges:
- Organizational understanding of the difference between the (final) product and the brand
- Effectively communicating the brand downstream of the direct customer, without creating friction with the direct customer
- Educating leadership on the value of brand equity and the need to market the brand, in addition to marketing the product features
- Building an integrated marketing strategy with a balanced emphasis on product performance, application value, and emotional brand image—consistent brand messaging
- Assuring that the organization, channel, and customer always use the brand icon and extensions correctly—policing misuse of the brand by others or risk genericizing the brand
- Capturing and retaining price premium—trade-off of premium vs. share
Ingredient Brand Life Cycle
Ingredient Brand Evolution and Deterioration
This model represents the typical stress between managing brand, product, and price.
1. Supplier develops a breakthrough product and initiates commercialization process
- Demonstrates value add and sets price based on benefits obtained
- Expands acceptance from early adopters to early majority
- Effective positioning of the product with balanced communications
- Product name becomes well known and universally used across industry applications
2. Product name becomes famous downstream of direct customers
- Downstream specifies the product by name
- Increased consumer awareness
- Supplier makes the shift from product to brand
- Price premium is maintained, even though competitors enter with similarly performing products
3. Supplier mismanages the brand; competitive product intensity increases
- Internal stress on brand maintenance, product renewal, and pricing
- Direct customer pressure on brand price based on competitive entry
- Downstream indifference over time
- Brand decay to keep plants operating at capacity (planned or unplanned)
Ingredient Branding Strategy Simultaneous with Product Commercialization
This model demonstrates the importance of building the brand value from the very genesis of the product commercialization. Although some price pressure arises, the brand has taken on greater downstream importance.
1. Supplier develops a breakthrough product and initiates the commercialization process (as in the previous example)
- Value is demonstrated in terms of how the direct and downstream customers are benefited
- Product is effectively positioned relative to the value it brings, It may take on different positions in different endues applications
- Product is translated into a brand at the time of commercialization
- Brand support is provided to both the direct and downstream customers
2. Product is branded, and a branding strategy is initiated along with the commercialization
- The brand, rather than the product, becomes the primary communication tag. All interactions associate the brand
- An icon is developed and displayed profusely in every communication vehicle. Emphasis is on brand benefits based on what the brand does, not what it is
- Brand essence is defined and communicated along with the brand
- Orders are for the brand and invoices reflect the brand purchase
- Direct and downstream customers refer to the brand, utilize the brand icon, and charge a premium for their products
3. Brand is priced to value and never compared to competitive products
- Brand is specified by downstream customers
- Early adopter direct customers are given preference and provided with unique brand and product support
- Cooperative marketing campaigns are designed uniquely to each customer
- Cooperative marketing campaigns are designed with downstream customers who see value in the brand
