The Marketing Evolution of Ingredient Co-branding -- June 2007
Glucosamine, largely found in supplements but seldom promoted on food or beverage labels, has made in-roads onto package fronts.
Today’s marketplace is intensely competitive. As brands in any given channel become less differentiated, traditional marketing strategies such as developing value proposition and cultivating intellectual property (IP) become increasingly important. As Jack Trout testifies in his latest book, Differentiate or Die, successful brands find a way to set themselves apart from the competition in a way that is relevant and important to their target customer. As most marketers have learned through long experience, successful differentiation is all about determining a value proposition for the brand that has both rational and emotional elements, since customers buy with both the head and the heart.
If you have noticed an increase over the past decade in co-branding activity behind proprietary, patented, or in some cases, even commodity ingredients, it is no accident. A cutthroat marketplace is certainly a factor. Eroding consumer confidence has definitely created some urgency, and intellectual property violations have fueled the fire. The result is that manufacturers are increasingly looking for categories or segments they can own. That pressure is shared with their raw material suppliers and partners, who are trying to meet that demand with patented, proprietary or at least unique raw ingredients that have been branded to facilitate awareness and encourage differentiation. As a result, the market has been flooded with a wide range of branded ingredients incorporated into both supplements and foods, and the list is growing.
While it may be a popular strategy, is it also a smart one? The answer is a qualified “yes.” In other words, it certainly can be a wise marketing approach, if it is executed well. However, it involves more than merely slapping a name and logo on the ingredient. The most successful programs are integrated to provide a 360-degree approach to marketing communication.
The assumption here is that by partnering in the promotion of a branded ingredient, a manufacturer and supplier can share the cost of developing and introducing differentiated products into the marketplace and generate incremental sales. The supplier gains a committed customer that will continue to purchase raw material exclusively from them, as long as the branded ingredient or logo is in the product and on the label. The manufacturer gains a value-added product which can be sold at an above-parity price. Plus, the promotional dollars that each is willing to spend work together to build brand awareness and encourage trial.
Omega-3s—chiefly either docosahexaenoic acid (DHA) or eicosapentaenoic acid (EPA), though others are emerging in various formulas—are finding their way onto the front labels of foods and beverages.
Selecting the Right Co-branding Approach
There are numerous ways to attack this, but the key issues are the number of partners and the channels of distribution.
Generally, channel exclusivity is the right choice when the potential manufacturer is large and has a strong and broad market presence and can move enough units to make it financially worthwhile for the supplier. After all, if a supplier is tying up the product with one partner, that partner should be willing to commit to order minimums. This is particularly appropriate in niche channels such as Internet, multi-level or direct mail catalogs. It often makes sense to negotiate a one-year contract which is renewable upon mutual agreement for a second and third year. Market conditions change rapidly and so might the perspective on a particular co-branding partner.
Channel saturation may make sense if the ingredient is not patented or proprietary and can easily be knocked off. In that scenario, it becomes important to get into the market quickly and establish a foothold before the onslaught of competition arrives. That said, the most common model is something in between, where a supplier partners with a small number of moderately-sized manufacturers in a large channel such as retail, but allows exclusivity in smaller niche channels. While each program should be customized to the needs of both partners, there are several key elements which should be at least considered, if not included.
Brand Name and Identity
No element of your ingredient branding campaign will receive more scrutiny and attention than the company’s ingredient name and graphic identity. Spend the time and the money to get it right. The name should be short and memorable and descriptive of the ingredient or its function. When considering potential graphic design approaches, these important points should be kept top of mind:
Trade Advertising Campaign
There are numerous ways to reach out and connect with potential manufacturing partners, but trade advertising can be a very effective tool to stimulate interest and inquiries. The key message strategy here should be to tell the manufacturer how your company’s ingredient can assist in building a proprietary brand franchise that encourages customer loyalty. Manufacturers rely increasingly on higher-end, value-added suppliers to step up to the plate and partner with them in building awareness among retailers and in actively educating the consumer. Trade advertising should be focused on communicating how a partnership will help build a manufacturer’s business.Relationship Marketing Tools
Develop a plan to stay in contact with current and potential customers to remind them about the benefits of the branded ingredient. Tools to consider developing to assist in that effort include:
From pharmacists to retail store managers, consumers look to professionals for assistance or recommendations in purchasing healthy products. The products which are top of mind are the ones that professionals most often recommend. Smart suppliers will offer to assist manufacturers in creating loyal and informed retail partners that proactively suggest and recommend their products. That assistance might take the form of co-branded informational brochures, a retailer version of the above-mentioned trade newsletter, an education module program where retailers can certify as specialists in a particular ingredient category or an offer to provide a spokesperson or medical professional for a retailer education seminar at a trade show.
Consumer Awareness and Education Tools
The most significant task at hand is building consumer awareness of the branded ingredient. Consumer advertising is expensive, but it is always critical to the success of a branded ingredient. Again, manufacturers will often expect a supplier to assist in this process, since the resulting sales will generate increased purchases of branded raw materials and, in effect, lock a manufacturer into an extended relationship with the supplier. Consumer tools to consider include:
In recent years, beverages have begun to frequently tout various artificial sweeteners on the front of the package—a far cry from years ago, when they would be hidden among the ingredients legend.
The Power of Public Relations
It is hard to over-estimate the value of PR as a tool to help drive consumer demand for a new branded ingredient. In the early stages, trade PR can help suppliers link up with manufacturing partners by creating a positive “buzz” about the ingredient—particularly if it has valid scientific support. In the later stages, once adequate finished product distribution is achieved, consumer PR can help “birth” a product by stimulating consumer demand. We have all witnessed firsthand the positive groundswell as well as the destructive effects of press coverage. Specific tools to consider include:
This author often is asked about the cost of a successful branding effort. That is roughly equivalent to asking the cost of a new car. Depending upon the make and model, the budget can fluctuate widely. That said, the most important lesson learned in working with clients over the years is that if the effort cannot be adequately funded, it may not be worth attempting to brand an ingredient, particularly in the present environment and economy.
There is no question that ingredient branding can be a successful strategy for growth, even in this challenging marketplace. It takes R&D innovation, scientific support and marketing commitment. It also requires partnership between companies with compatible resources. When the right elements come together, the results can be very powerful. The future of co-branding activity is bright and full of rich opportunities for those who dare to dream and then make their dreams a reality. NS
On the Web: Co-branding
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