Ingredient branding

Teflon, NutraSlim, Dolby Digital, Gore-tex, Lycra, Shimano, Woolmark and Intel… What do they have in common? Yep. They are all ingredient brands that made millions of dollars. Previously, we studied the brand hierarchy of Mervin Manufacturing and stated that MTX and BTX are actually ingredient brands. Today, we will look at the secrets of creating a successful ingredient brand.

Ingredient brands are extremely useful when there is little to no “perceived” differentiation among brands (the word “perceived” is key here.) Think about banana. Unless you are an expert, you cannot tell if the fruit is tasty by simply inspecting the outside of the banana. That’s when the Dole seal of approval becomes handy. Same logic applies to computers. Dell, IBM, HP laptops might look different, but when it comes to performance we don’t know how to rate them. That’s why the Intel Inside marketing program was widely successful. Likewise, consider you will buy a snowboard glove. You might like certain brands and design, but to be 100% sure about performance, you would look for the “Gore-tex” seal of approval.

There you have it, an ingredient brand gives you peace of mind when you are buying a product that has little perceived differentiation. So, leave everything you are doing and create an ingredient brand. Right? Nope. Ingredient brands are particularly useful if your brand is weak, undifferentiated or average quality in a fairly commoditized category. If your brand does not fall under this category, then be very careful, because ingredient brands are dangerous!

Ingredient brands need “partners.” Ideally the partnership should be an equal one, where both the ingredient and the host get enough equity. However, powerful ingredient brands are like cancer for host brands: they suck most of the equity (thus the Spiderman alien Symbiote analogy.) Think about Teflon. Let’s say you are going to buy a non-stick pan and you already have a favourite brand. But what if your preferred brand does not have Teflon, and other brands have it? Which pan would you buy? Who has the equity? Where does the loyalty lie? Who makes more money?

Consider ingredient branding as “outsourcing.” Business strategists say that “core competencies” should not be outsourced. By the same logic, you should not accept an ingredient brand takes away your core competency. If you are in bicycle business and use Shimano gears, how will you differentiate your bicycles? Gear is where the “performance” lies. If you use Shimano gears like your competitors do, how different can you be? Instead try to find an ingredient brand that “compliments” your brand. Service? Connectivity? Guarantee?

Today’s actionable tip: When considering an ingredient brand “offering added value outside of your core competency” should be your mantra.

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