In-Branding: Development of a Conceptual Model

Abstract

ABSTRACT With the rapid changes in the global economy and the sophistication of the customers, industrial businesses are being forced to employ more active marketing and branding strategies, strategies that will provide them with the opportunity to be faster and more flexible in responding to the changing competitive conditions in the supplier industry and to constantly changing customer needs. The purpose of this article is to introduce and differentiate ingredient branding from other branding opportunities, specifically, distinguish co-branding from ingredient branding, then, postulate InBranding as a new term for ingredient branding with special emphasis on the component producer and clarifying the supplier versus manufacture based perspectives. Brand literature on these differentiations does not exist yet and therefore this article aims to fill the gap. INTRODUCTION Ingredient Branding is an accepted marketing concept (Norris, 1992; Dover, 1997) that only recently started to thrive (Kotier and Keller, 2006; Kotler and Pfoertsch, 2006). In today's global economy, companies have to establish and maintain competitive advantage, create commercial success in the market and provide criteria to differentiate them from the competition (Bartlett, Ghoshal and Birkinshaw, 2004, Trinquecoste, 1999). Until recently the focus was directed toward tangible resources, but now we see a consideration shift toward intangible resources, such as brands (Kapferer, 2001) and customer loyalty. Companies and organizations embrace branding efforts, which can create value for both the consumer and the company. Companies want to attract and keep customers by creating and promoting value, image, lifestyle and other values important for the understanding and use of the product. Brand identity enables companies to differentiate themselves in a continuously over crowed market. The entry of new market participants drives existing manufacturers to look for new means of exploiting existing brands, a capital which has to be managed appropriately. Strategies most used to leverage the potential of brands are brand extensions and co-branding (Rooney, 1995; Vaidyanathan and Aggarwal, 2000). In the first half of the 20th century, chemical companies started to market well-known dyestuffs and synthetic as brands to buyers of the next stage in the value chain (Kemper, 1997). Since then an increasing number of firms have considered co-branding ventures in preference to single-handedly undertaking risky and expensive brand extension, expansion or diversification plans (Boad, 1999). Other forms for enlarging the branding effects include endorsed brands and the establishment of various forms of brand portfolios (Aaker, 2003). Early research in this area has shown both positive (Norris, 1992) and negative effects (Shocker, 1995) for the brands employing an inbranding strategy, as well as an impact on consumer product evaluations (Hillyer and Tikoo, 1995). Recent research illustrates that ingredient branding offers a potential for successful brand management and increased profits for companies along with product offerings that create added value for the customer (Havenstein, 2004; McCarthy and Norris, 1999). If the customer understands and knows the function, features and benefits of a component (ingredient), he or she will pay more attentions to this offering, and if it creates a unique product offering it can lead to loyal and profitable customer relationships (Desai and Keller, 2002). This approach surpasses the limitations and dangers of a too narrow and single-sided customer-supplier relationship (Kleinaltenkamp, 2001). The traditional Business-to-Business (B2B) brand strategy of all marketing activities is geared only to the next level of the value chain of the OEM (original equipment manufacturer). The ingredient branding approach can overcome this burden. Intel corporation, the microprocessor manufacturer demonstrated the marketing possibilities that ingredient branding could provide to both component manufacturers as well as to the manufacturers of finished goods (Dover, 1997; Baumgarth, 2001). …