Component makers can become customer's preferred value-adder with focus on brand building
It is quite trendy for businesses to draw management lessons from disciplines as varied as spirituality to sports these days. Why shouldn’t the spectacle that was the London 2012 Games provide that inspiration beyond all that sporting glory of the past two weeks?
So let’s take the brand Olympics. The many sporting events that take place during the Olympics may then be considered as its ‘sub brands’. All the athletes and sportsmen and women from around the world would be the ‘ingredients’ that give shape to the final brand. They are the ones who sway your decision as ‘consumers’ (read: viewers) to ‘consume’ (read: watch) a particular sub brand (read: event).
It may be argued that the national spirit is a key factor in deciding whether we want to watch an event or not. The next question would then be why would you watch events that do not feature representatives from your nation? For instance, the final swimming event that Michael Phelps participated in, the one that was supposed to be a career last, would not have been missed by any Olympics enthusiast. The ‘ingredient’ Michael Phelps, guided your consumption decision in this case, possibly because he is a brand in himself, of equal, if not greater repute than the host brand, the Olympics itself.
|WHEN DOES INGREDIENT BRANDING COME HANDY FOR END PRODUCTS|
Apply this to business now. When a consumer buys a brand, several factors determine his purchase decision. Sometimes, a part of the whole that is your brand—an ingredient—may be the single biggest determinant. Take the example of Tetra Pak, a packaging material manufacturer. Why would a consumer want to buy milk in Tetra Pak packaging when it drives up the price point for a single transaction? Of course, for the benefits that that packaging offers; but then the consumer has to know of these benefits first.
Ingredient makers have also recognised this, which explains their desire to carve out a separate identity for themselves in the minds of their consumers—an identity distinct from their ‘host’ brands, that is, the end product brand they are a part of.
First among equals
By branding itself the ingredient maker ceases being the metaphorical nut and bolt provider, and starts being perceived as something that adds serious value to the final product. Talking about the company’s recent advertising, Jaideep Gokhale, communications and environment director, Tetra Pak South Asia markets, says, “We’ve noticed that there is very little awareness among the consumers as well as their influencers about the packaging material used. They also harbour several misconceptions about the freshness or quality of ‘carton’ products at large. Our attempt is to dispel these notions.” The campaign therefore aimed to highlight how the usage of Tetra Pak packaging protected the products.
A similar and classic example of ingredient branding would be Intel with its Intel Inside campaign launched in the early nineties. Explaining how the branding initiatives were undertaken, Sandeep Aurora, director of marketing, Intel South Asia, says, “In order to correctly communicate the benefits of new processors to personal computer buyers it became important that Intel transfer any brand equity from the ambiguous and unprotected processor numbers to the company itself. Although the company was widely recognised among computer manufacturers, the brand had little name recognition among end users, despite the fact that Intel microprocessors were the ‘brains’ inside their PCs.” Television was used extensively to reach out to consumers and the five-tone melody that became the Intel signature came into existence.
Highlighting the benefits and building consumer connect is the starting point. But the aim of any ingredient branding really is to enable the component maker to become indispensable to the product manufacturer. And if one has the first mover advantage as well, it can help build long lasting monopolies.
Sample this: as per industry estimates, currently only 17 per cent of the total milk consumed in India is sold in a packaged format. Carton milk or milk sold in Tetra Paks is just a fraction of this. With urbanisation and income levels on the rise and an increasing inclination towards adopting the western lifestyles, this segment is expected to boom. Host brands will continue to add to the product repertoire in the space to capitalise on this demand. And consumers, who have already started identifying with Tetra Pak, will look for a continued association, in turn pushing the brands to choose Tetra Pak packaging material.
However, ingredient branding is not a genie granting you the boon of a lifelong monopoly. In Tetra Pak’s case it is not its branding initiatives but the absence of a serious competitor that is believed to feed its dominance. “Remember price is a big factor here. If another player offering the same quality at a lower pricing comes along and if there is no big difference between the two in terms of quality the discerning consumer will not bother,” says an analyst tracking the sector.
The idea then would be to stay a step ahead — be it technology or in pricing. This not only helps the ingredient maker retain an edge over competition but also fuel some among its clients. Again, take Intel’s case. Even with the same component, the reaction time from different players will be different for any new launch. So when ultrathins were introduced, similar Intel processors may have been used by all players. But there was a variation in launch timing. As S Rajendran, chief marketing officer, Acer India, says, “Competition will eventually catch up. But for players, being first to the market helps capture a consumer’s attention and eventually scale up.”
And for the host brands, cashing in on the brand equity of a component maker coupled with timing is surely one way of staying ahead of the pack. Consider Acer’s tie up with Dolby. The company first tied up with Dolby to provide the latter’s sound technology via its products in 2007. Since then the company has steadily built up its portfolio in liaison with Dolby, recently launching 25 models, across price bands, with different Dolby technologies. The move reflects the changed consumption patterns; functional aspects, though important, are secondary to personal technology products that serve as tools for media consumption.
Says Rajendran, “The tie up gives the brand that extra gloss. Laptops/computers are commodities at the end of the day. If they stay on the shelves too long their value gets corroded. Such tie ups will help the product fly off the shelf faster.” Since Dolby is an experiential feature, the company is focusing on retail level promotions for consumers. This is something of a marketing merry-go-round. Acer cashing in on Dolby’s reputation and in turn being the medium that provides Dolby with some, if you will, free publicity.
Unlike Intel and Tetra Pak that used the mainstream media to reach out to the consumers directly, Dolby has banked on its partners. “We’ve never done direct advertising, instead worked with actual device makers, known as the playback side and the content creators to build our brand, putting the Dolby logo upfront,” says Pankaj Kedia, country manager, Dolby India.
The merry-go-round would then come full circle when, as Kedia says, the technology (ingredient) that started off as a differentiator, enters the consumer’s expectation set over time. In some situations even worming its way into a consumer’s consciousness to an extent that the ingredient becomes a generic brand.
This may be a double edged sword though. With time, consumers may simply use the brand name to identify with a particular category without actually staying loyal. Like Lycra. Few consumers may actually know that it is one particular brand of spandex material and not the generic name for the material itself. In such cases, consumers must constantly be reminded of the brand, giving it an overriding positioning over competition. Extending the brand to finished products can also ensure top of mind recall.
Ingredient branding can potentially work wonders not just for itself but also for the host brands. Especially if the latter are not well known or new entrants. A well established component could help them gain consumer acceptance more easily through unwritten assurances of quality.
The new rules
Ihe rules have changed however. As Aurora of Intel says “Today the consumer is inundated with several choices and brands in every walk of life. He is well connected via his social networks and the proliferation of the world wide web has ensured that not only is the consumer well read but he’s also well informed about the choices he makes.” The need to distinguish oneself from competition has never been more pronounced. Host brands can play a key role in providing the requisite push by playing the influencers. In this ingredient brands can take a leaf out of the low involvement categories’ (such as adhesives and paints) branding Bibles.
Adhesives as a category is dominated by Fevicol in India. Its advertising enjoys a cult status and everyone remembers zor lagake haisha. “Over the years, we’ve established the functional differentiation of our products as well built a strong emotional connect with consumers. In fact, we don’t think it is low involvement anymore, as the stakeholders like carpenters, contractors and interior designers pay close attention to adhesive usage in their line of work,” says Anil Jayaraj, CMO, Pidilite.
Even newbie category like decorative paints rely heavily on influencers. “Applicators play a key role in pushing our products. Consumers are less knowledgeable about the differences among various types and brands of paints. Sufficient knowledge has to reside at the point of sale to educate the consumer and demonstrate product benefits to them,” says Pushkar Jain, digital head and marketing manager, exteriors, Dulux, Akzo Nobel India.
There you have it. Concerted brand building and a judicious use of influencers have helped these categories move from the low involvement end to the high involvement one. Ingredient brands can use the same tools to make the journey from being component makers to being the cog that drives the wheel.
When Manish Agarwal joined Reliance Entertainment Digital (part of the Reliance Anil Dhirubhai Ambani Group), in March 2011, he was responsible for ...