The Inside on Ingredient Branding - Waldemar Pfoertsch
The Inside on Ingredient Branding - Waldemar Pfoertsch
The Inside on Ingredient Branding - Waldemar Pfoertsch
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<str<strong>on</strong>g>The</str<strong>on</strong>g> <str<strong>on</strong>g>Inside</str<strong>on</strong>g> <strong>on</strong><br />
<strong>Ingredient</strong> <strong>Branding</strong><br />
<strong>Waldemar</strong> <strong>Pfoertsch</strong><br />
2006
Agenda<br />
• Defining <strong>Ingredient</strong> <strong>Branding</strong><br />
• Understanding <strong>Ingredient</strong> <strong>Branding</strong><br />
• Implementing and Managing<br />
• New Applicati<strong>on</strong> and Future Research<br />
• Brand Management at CEIBS
<str<strong>on</strong>g>The</str<strong>on</strong>g> most famous example<br />
of the “Brand in the Brand”<br />
Using the c<strong>on</strong>cept of<br />
<strong>Ingredient</strong> <strong>Branding</strong><br />
Jacks<strong>on</strong>, Tim (1997)<br />
or short: “In<strong>Branding</strong>”
Other <strong>Ingredient</strong> <strong>Branding</strong> Examples<br />
• Microban<br />
• Makrol<strong>on</strong><br />
• GoreTex<br />
• Dolby Stereo<br />
• Nirosta<br />
<strong>Pfoertsch</strong>/Mueller (2005)
Brand Extensi<strong>on</strong> Examples of<br />
<strong>Ingredient</strong> <strong>Branding</strong><br />
• Beechnut baby foods with<br />
Chiquita banana<br />
• Ben and Jerry's Heath Bar<br />
Crunch ice cream, and Fat Free<br />
Cranberry Newt<strong>on</strong>s with Ocean<br />
Spray cranberries<br />
• Kellogg’s Pop-Tarts with<br />
Smucker’s jam<br />
(Rao, Qu, and Ruekert 1999; Shocker, Srivastava, and Ruekert 1994)
Company Owned <strong>Ingredient</strong><br />
Brands<br />
David Aaker, 2003
Basic Motivati<strong>on</strong> for Using<br />
<strong>Ingredient</strong> <strong>Branding</strong><br />
• Enhances the differentiati<strong>on</strong> of the host<br />
brand from competiti<strong>on</strong><br />
• Improves competitiveness<br />
• Enhances equity of host brand and “selfbrand”.<br />
David Aaker, 2003 Desai/Keller (2002) McCarthy/Norris (1999)
Effects of Branded <strong>Ingredient</strong>s<br />
Norris/McCarthy (1999)
Change of Competitiveness<br />
through Branded <strong>Ingredient</strong>s<br />
Norris/McCarthy (1999)
<strong>Ingredient</strong> <strong>Branding</strong> Executes a<br />
Multilevel Marketing Policy<br />
<strong>Ingredient</strong>-<br />
Supplier<br />
Selling<br />
Sourcing<br />
Multi Level Marketing<br />
First Level<br />
Marketing<br />
Original<br />
Equipment Mfg<br />
Selling<br />
sourcing<br />
Baumgarth (2001)<br />
Sec<strong>on</strong>d<br />
Level Marketing<br />
Third<br />
Level Marketing<br />
Selling<br />
Distributi<strong>on</strong><br />
Souring<br />
End user
Push und Pull by In<strong>Branding</strong><br />
Sales-promoting from the<br />
<strong>Ingredient</strong> supplier to the<br />
final customer<br />
Pull<br />
Demand pull<br />
Incentives for the<br />
demand creati<strong>on</strong> of a<br />
certain ingredient in<br />
the final product<br />
Kotler/<strong>Pfoertsch</strong> (2006)<br />
Demand<br />
Demand<br />
<strong>Ingredient</strong>-<br />
Producer<br />
Final Product<br />
Producer OEM<br />
Final User<br />
Supply<br />
Supply<br />
Sales-promoti<strong>on</strong> to the<br />
B2B Customer<br />
Supply-push<br />
Incentives to<br />
demand creati<strong>on</strong><br />
at the B2B customer<br />
Push<br />
Supply-push<br />
Incentives for<br />
demand creati<strong>on</strong><br />
at the final customer
Distincti<strong>on</strong> between In<strong>Branding</strong> and<br />
Co<strong>Branding</strong><br />
<strong>Branding</strong><br />
Approach<br />
branded<br />
product<br />
singular<br />
Classic<br />
branded<br />
finished<br />
product<br />
Not<br />
possible<br />
Intel<br />
Microban<br />
Makrol<strong>on</strong><br />
self branded<br />
ingredient<br />
cobranded<br />
product<br />
in<br />
cooperati<strong>on</strong><br />
Tide &<br />
Downy<br />
VISA &<br />
Citibank<br />
Intel & Dell<br />
NutraSweet<br />
& Coca Cola<br />
Makrol<strong>on</strong> &<br />
Uvex<br />
Lycra<br />
&<br />
Woolmark<br />
cobranded<br />
ingredient<br />
<strong>Ingredient</strong><br />
<strong>Branding</strong><br />
Baumgarth (2001)<br />
Final<br />
products<br />
Final products<br />
& <strong>Ingredient</strong>s<br />
<strong>Ingredient</strong>s<br />
Co<strong>Branding</strong>
Implementati<strong>on</strong> Steps for In<strong>Branding</strong><br />
1<br />
2<br />
3<br />
4<br />
Steps<br />
Raising of credit,<br />
exploitati<strong>on</strong> of<br />
reputati<strong>on</strong><br />
Break-through<br />
and market proof<br />
Repayment of<br />
credit, synergy<br />
Fiesco 1 -Effect<br />
Descripti<strong>on</strong><br />
Unknown ingredient brand profits <strong>on</strong> the<br />
back of well-known brands<br />
Unknown ingredient brand becomes known<br />
and famous<br />
Known ingredient brand is helping ist<br />
supporter and other are benefiting from it<br />
<strong>Ingredient</strong> brand is present anywhere and<br />
could not be used as a differentiator and is<br />
pushing former supporters into price wars<br />
1) Named after „<str<strong>on</strong>g>The</str<strong>on</strong>g> c<strong>on</strong>spiracy of Fiesco “, 1783 written by Friedrich Schiller: „Er<br />
hat seine Schuldigkeit getan, er kann gehen“. „He paid his tribute, now it is time for<br />
him to go". Bugdahl (1996)
1 Raising of credit,<br />
exploitati<strong>on</strong> of reputati<strong>on</strong><br />
2<br />
2Break through<br />
Start of the "Intel <str<strong>on</strong>g>Inside</str<strong>on</strong>g>"<br />
campaign. <str<strong>on</strong>g>The</str<strong>on</strong>g> unknown<br />
ingredient brand profits <strong>on</strong><br />
the back of the PC<br />
manufacturers (OEMs) by<br />
co-operati<strong>on</strong> advertisement<br />
<str<strong>on</strong>g>The</str<strong>on</strong>g> acceptance of Intel rises<br />
<strong>on</strong>e year after start of the<br />
"Intel <str<strong>on</strong>g>Inside</str<strong>on</strong>g>" campaign of<br />
60% to over 80%, it<br />
develops a demand pull (Pull<br />
Through effect)<br />
4<br />
Fiesco-Effect<br />
3<br />
Repayment of<br />
credit<br />
Intel processors are used by<br />
majority of all PC<br />
manufacturers, thus a<br />
differentiati<strong>on</strong> is no l<strong>on</strong>ger<br />
possible. While Intel<br />
determines the market prices,<br />
the PC manufacturers must<br />
enter into a price war again.<br />
<str<strong>on</strong>g>The</str<strong>on</strong>g> acceptance of Intel<br />
helps the co-operati<strong>on</strong><br />
partners (OEMs) win more<br />
customes.<br />
Kleinaltenkamp (2001)
Situati<strong>on</strong> of Comp<strong>on</strong>ent Supplier<br />
for In<strong>Branding</strong><br />
Opportunities<br />
Become known by the public<br />
Create chances for competitive<br />
differentiati<strong>on</strong><br />
Establish entry barrier for<br />
competitors<br />
Increase of customer loyalty and<br />
demand pull<br />
Establish means against<br />
replaceability<br />
Positive image of OEM brands<br />
Price-/Volume premium<br />
Pull-creati<strong>on</strong><br />
Creati<strong>on</strong> of Brand Equity<br />
Increase of market power versus<br />
OEMs<br />
Risks<br />
Increase of dependency against<br />
quality problems from the OEMs<br />
Higher cost and time<br />
Increase need for quality<br />
assurance<br />
Visible target for competitive<br />
attacks<br />
Negative Image of OEM brands<br />
Resistance of industrial<br />
customers
Risks and Opportunities for<br />
Suppliers and OEM<br />
Supplier<br />
OEM<br />
Opportunities<br />
Increased demand<br />
Better prices<br />
Chances for growth<br />
Lesser risk for substituti<strong>on</strong><br />
Creati<strong>on</strong> of entry barriers<br />
Positive Image creati<strong>on</strong><br />
Differentiati<strong>on</strong><br />
Less marketing cost<br />
Increased product value<br />
Possible<br />
win-win<br />
strategy<br />
.<br />
Risks<br />
Potential c<strong>on</strong>flicts with OEM<br />
Higher financial burden <strong>on</strong><br />
enduser communicati<strong>on</strong><br />
Higher risk of image damages<br />
through product failure<br />
Image risks<br />
Weakening of own products<br />
Increase of branding around<br />
or in the core product<br />
Increased<br />
risk and<br />
c<strong>on</strong>flict<br />
potential
Applicati<strong>on</strong> C<strong>on</strong>diti<strong>on</strong>s of<br />
In<strong>Branding</strong><br />
Complexity of comp<strong>on</strong>ents<br />
in relati<strong>on</strong> to final product<br />
High<br />
Example:<br />
Micro processors (Intel)<br />
ABS, ESP (Bosch)<br />
Textile coding (Tefl<strong>on</strong>)<br />
Laminate (GoreTex)<br />
Bicycle gears (Shimano)<br />
Low<br />
Schiesser & Ariel<br />
Deutsche<br />
Bahn AG<br />
&<br />
Citibank<br />
Important for<br />
functi<strong>on</strong>ality of final<br />
product<br />
High<br />
Unsuitable for<br />
<strong>Ingredient</strong> <strong>Branding</strong><br />
Low<br />
Suitable for <strong>Ingredient</strong> <strong>Branding</strong><br />
<strong>Pfoertsch</strong>/Mueller (2005)
More Insids <strong>on</strong> C<strong>on</strong>diti<strong>on</strong>s of<br />
In<strong>Branding</strong><br />
Number of OEMs<br />
High<br />
Example:<br />
Micro processors (Intel)<br />
ABS, ESP (Bosch)<br />
Textile coding (Tefl<strong>on</strong>)<br />
Laminate (GoreTex)<br />
Bicycle gears (Shimano)<br />
Low<br />
Schiesser & Ariel<br />
Deutsche<br />
Bahn AG<br />
&<br />
Citibank<br />
High<br />
Low<br />
Number of supplier<br />
Unsuitable for<br />
<strong>Ingredient</strong> <strong>Branding</strong><br />
Suitable for <strong>Ingredient</strong> <strong>Branding</strong><br />
<strong>Pfoertsch</strong>/Mueller (2005)
Success Stories of InBrands<br />
Intel <str<strong>on</strong>g>Inside</str<strong>on</strong>g><br />
Firma: Intel Corporati<strong>on</strong><br />
Branche: Halbleiterindustrie<br />
Produkte: Mikroprozessoren<br />
Umsatz: 38,82 Mrd. US $(2005)<br />
Gore-Tex<br />
Firma: W.L. Gore & Associates<br />
Branche: Bekleidungsindustrie<br />
Produkte: Textillaminate<br />
Umsatz: 1,35 Mrd. US $ (2003)<br />
Lycra<br />
Firma: INVISTA<br />
Branche: Textilindustrie<br />
Produkte: Elastikfasern<br />
Umsatz: 6,9 Mrd. US $ (2003)<br />
Makrol<strong>on</strong><br />
Firma: Bayer MaterialScience<br />
Branche: chemische Industrie<br />
Produkte: Kunststoffe<br />
Umsatz: 10,7 Mrd. € (2005)<br />
NutraSweet<br />
Firma: NutraSweet Company<br />
Branche: Lebensmittelindustrie<br />
Produkte: Süßstoffe<br />
Umsatz: 0,25 Mrd. US $ (2002)<br />
Tefl<strong>on</strong><br />
Firma: DuP<strong>on</strong>t<br />
Branche: Chemieindustrie<br />
Produkte: Antihaftbeschichtung<br />
Umsatz: 26,99 Mrd. US $ (2003)<br />
Shimano<br />
Firma: Shimano<br />
Branche: Sportartikelindustrie<br />
Produkte: Fahrradkomp<strong>on</strong>enten<br />
Umsatz: 1,6 Mrd. US $ (2004)<br />
Tetra Pak<br />
Firma: Tetra Pak<br />
Branche: Verpackungsindustrie<br />
Produkte: Verpackungssysteme<br />
Umsatz: 7,3 Mrd. US $ (2003)
New Applicati<strong>on</strong>s are <strong>on</strong> the Horiz<strong>on</strong><br />
soy protein<br />
Z-Trim all-natural fat replacement products
Open Research Questi<strong>on</strong>s<br />
• Better understand how competitive<br />
advantage can be achieved through the<br />
use of ingredient branding .<br />
• Establish brand metrics for multi-level<br />
branding.<br />
• Track and predict ingredient branding<br />
success.
Future of <strong>Ingredient</strong> <strong>Branding</strong><br />
Importance<br />
of<br />
branding<br />
Relative decrease in importance of<br />
c<strong>on</strong>sumer brands<br />
Industrial<br />
Revoluti<strong>on</strong><br />
Increase of importance<br />
of new branding<br />
c<strong>on</strong>cepts<br />
1300 1850 1900 1950 1970 1990 2000 2050<br />
time<br />
= Guild brands<br />
= Service brands = OEM brands (industrial)<br />
= OEM brands (c<strong>on</strong>sumer) = Retail brands (c<strong>on</strong>sumer) = <strong>Ingredient</strong> brands<br />
Havenstein (2004):
<str<strong>on</strong>g>The</str<strong>on</strong>g> Future of Brand Management<br />
at CEIBS<br />
• Offer a series of dedicated Brand<br />
Management Courses and Seminar<br />
• Initiate and Supervise Research Work<br />
• Establish a Center for Business Brand<br />
Management (CBBM) at CEIBS and<br />
• Organize the first Business Brand<br />
Management C<strong>on</strong>ference in 2008
Literature<br />
• David Aaker, <str<strong>on</strong>g>The</str<strong>on</strong>g> Power of the Branded Differentiator, MIT Sloan Management Review<br />
45 no1 83-7 Fall 2003<br />
• Baumgarth, C Freter, H.;. (2001): <strong>Ingredient</strong> <strong>Branding</strong> . Begriff und theoretische<br />
Begründung, in Esch, F.-R. (Hrsg.): Moderne Markenführung, 3. Auflage, Wiesbaden<br />
2001, S. 317 - 343.<br />
• Bugdahl, Volker (1996): <strong>Ingredient</strong> <strong>Branding</strong> – eine Markenstrategie für mehrere<br />
Nutznießer, in: Markenartikel, Nr. 3/1996, S. 110-113<br />
• Havenstein, Moritz (2004): <strong>Ingredient</strong> <strong>Branding</strong>. Die Wirkung der Markierung v<strong>on</strong><br />
Produktbestandteilen bei k<strong>on</strong>sumtiven Gebrauchsgütern. Gabler Editi<strong>on</strong> Wissenschaft,<br />
Wiesbaden<br />
• Kalpesh Kaushik Desai & Kevin Lane Keller (2002), <str<strong>on</strong>g>The</str<strong>on</strong>g> Effects of <strong>Ingredient</strong> <strong>Branding</strong><br />
Strategies <strong>on</strong> Host Brand Extendibility, Journal of Marketing Vol. 66 (January 2002), 73-<br />
93<br />
• Kleinaltenkamp, Michael (2001): <strong>Ingredient</strong> <strong>Branding</strong>: Markenpolitik im Business-to-<br />
Business-Geschäft, in: Köhler, R./Majer, W./Wiezorek, H. (Hrsg.): Erfolgsfaktor Marke,<br />
München 2001, S. 261 . 270.<br />
• Kotler, Philip and <strong>Pfoertsch</strong>, <strong>Waldemar</strong> (2006) B2B Brand Management Springer 2006<br />
• Levin, A.J., Davis, C. and Levin, I. (1996), ``<str<strong>on</strong>g>The</str<strong>on</strong>g>oretical and empirical linkages between<br />
c<strong>on</strong>sumers' resp<strong>on</strong>ses to different branding strategies'', Advances in C<strong>on</strong>sumer<br />
Research, Vol. 23, pp. 296-300.<br />
• McCarthy Michael S., Norris D<strong>on</strong>ald G. (1999) Improving competitive positi<strong>on</strong> using<br />
branded ingredients, JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 8 NO.<br />
4 1999, pp. 267-285<br />
• Narasimhan, C. (1999), ``<str<strong>on</strong>g>The</str<strong>on</strong>g> new appeal of private brands'', Harvard Business Review,<br />
May/June, p. 41.<br />
• Norris, D<strong>on</strong>ald G. (1992), "<strong>Ingredient</strong> <strong>Branding</strong>: A Strategy Opti<strong>on</strong> with Multiple<br />
Beneficiaries," Journal of C<strong>on</strong>sumer Marketing, 9(3), 19-31.
Literature<br />
• Osselaer van, Stijn M.J. (2004) Of Rats and Brands: A Learning-and-Memory<br />
Perspective <strong>on</strong> C<strong>on</strong>sumer Decisi<strong>on</strong>s, Journal of Ec<strong>on</strong>omic M:Business Administrati<strong>on</strong> and<br />
Business Ec<strong>on</strong>omics, Oct 2004<br />
• Jacks<strong>on</strong>, Tim (1997): <str<strong>on</strong>g>Inside</str<strong>on</strong>g> Intel: Andy Grove and the Rise of the World's Most Powerful<br />
Chip Company. New York: Dutt<strong>on</strong> (Penguin Books), 1997<br />
• JANISZEWSKI, CHRIS and OSSELAER VAN Stiin M.J. ' (2000), A C<strong>on</strong>necti<strong>on</strong>ist Model<br />
of Brand-Quality Associati<strong>on</strong>s, Vol. XXXVll (August 2000). JOURNAL OF MARKETING<br />
RESEARCH. AUGUST 2000<br />
• <strong>Pfoertsch</strong>, <strong>Waldemar</strong> and Mueller Intrajanto (2005) Marke in der Marke <strong>Ingredient</strong><br />
branding, Springer 2005<br />
• Rao, Akshay R., Lu Ciu, and Robert W. Ruekert (1999), "Signalling Unobservable Product<br />
Quality through a Brand Ally," Journal of Marketing Research, 37 (May), 258-68.<br />
• Shocker, Allan D., Rajendra K. Srivastava, and Robert W. Ruekert (1994), "Challenges<br />
and Opportunities Facing Brand Management: An Introducti<strong>on</strong> to the Special Issue."<br />
Journal of Marketing Research, 31 (May), 149-58.<br />
• Sim<strong>on</strong>in, B.L. and Ruth, J.A. (1998), ``Is a company known by the company it keeps<br />
Assessing the spill-over effects of brand alliances <strong>on</strong> c<strong>on</strong>sumer brand attitudes'', Journal<br />
of Marketing Research, Vol. 35, February, pp. 30-42.<br />
• Spethmann, B. and Benezra, K. (1994), ``Co-brand or be damned'', Brandweek, Vol. 35,<br />
No. 45, pp. 20-5.<br />
• Vaidyanathan, R., Aggarwal, R. and Brown, M.G. (1999), ``Intel inside, generic outside:<br />
implicati<strong>on</strong>s of ingredient branding for nati<strong>on</strong>al and private label brands'', working paper,<br />
University of Minnesota-Duluth.<br />
• Vaidyanathan, Rajiv Aggarwal, Praveen (2000) Strategic brand alliances: implicati<strong>on</strong>s of<br />
ingredient branding for nati<strong>on</strong>al and private label brands, JOURNAL OF PRODUCT &<br />
BRAND MANAGEMENT, VOL. 9 NO. 4 2000, pp. 214-228
谢 谢 !<br />
Prof. Dr.<br />
<strong>Waldemar</strong> A. <strong>Pfoertsch</strong><br />
Internati<strong>on</strong>al Business<br />
Pforzheim University<br />
+49-171-536 8998<br />
+1-224-388 2702<br />
waldemar@pfoertsch.com<br />
www.pfoertsch.com