The InBranding Strategy- Valutrics

A brand strategy can be generally defined as the choice of common and distinctive brand elements a company applies across the various products and services it sells and the company itself. It reflects the number and nature of new and existing brand elements while at the same time guiding decisions on how to brand new products.
The brand strategy lays out a future image for the company to aim for, providing a plan of action and criteria against which to judge it. It is based on certain future goals. Among others the most common goals related to the customers are to increase brand awareness, create a positive brand image, and to establish brand preferences and brand loyalty. The brand strategy also aims at increasing the appeal and attraction of the company in the eyes of the stakeholders, who underpin the management of the company, and to give the employees criteria with which to judge the value of their own actions.

The strategic branding options in B2B markets are generally the same as those in their consumer markets. The branding strategy in general can be defined as the choice of common and distinctive brand elements a company applies across its various products and services it sells and the company itself. It reflects the number and nature of new and existing brand elements, guiding decisions on how to brand new products. To structure and manage their portfolio of brands is one of the biggest challenges businesses face nowadays.
Brand strategy decisions generally come up when a company is about to develop or buy a new product or service that should be branded or if already established brand portfolios are being restructured.

Targeting and Positioning B2B Brands
The development of a positioning strategy is sometimes referred to as the most important discipline in brand management. Brand positioning literally means to “position” your brand in customers’ minds in order to create certain desired associations in relation to competitive brands. Ideally, strong brands have a clear and unique position in the target markets.
The major goal of marketing is undoubtedly to satisfy the customers’ needs and make a profit along the way. Unfortunately, the needs of customers can differ tremendously from industry to industry. Therefore, different approaches are required to meet all the different needs. Positioning brands is about finding the right spot in customers’ minds in order to create the desired associations. It is therefore absolutely crucial to know who your customers are and where to find them. Positioning always comes after clarifying and segmenting the target market; you just cannot position any product or service without knowing who you are targeting. To clarify and segment the target market is usually much easier in B2B than in B2C markets. Quite often, B2B companies only have a handful of important key accounts that make up for the greater part of their turnover and profit. At the same time, it is also more important to clearly segment your target markets because the possibilities to differentiate one product from another are more restricted in B2B. An effective segmentation strategy can also create a competitive advantage in B2B markets.

Many business marketers neglect or poorly perform positioning concepts. Despite of calls for a clear brand positioning, it is often quite difficult to find a common denominator of largely diversified and very complex businesses.

The principle of providing a consistent picture also means not changing or diluting the positioning. A brand can only have one true position. An effectively positioned brand communicates its core values to all stakeholders, internally and externally. It is crucial to keep a strategic perspective since positioning a brand is not a tactical activity but rather a strategic process aimed at creating a sustainable competitive advantage.

The positioning statement draws on the strongest assets of the brand’s equity and clarifies what the brand is all about. It shows the uniqueness and thus the point of difference. It explains why customers should buy and use the company’s products and services and not the ones of a competitor. It also defines why the company addresses their needs better than competition. The questions to be answered are:

•   Who are you going to give this positioning to?

•   Who are you going to market your product to?

•   What do they want and need?

•   What customer insight is your positioning based on?

The ultimate task for brand positioning is to create the most powerful position you can own and feel passionate about and to direct the passion to the most profitable customer targets.

InBranding
Ingredient branding – or short InBranding – is one of the most promising branding strategies for B2B companies. Generally, it is exactly what the name implies: an essential ingredient or component of a product that has its own brand identity.
Ingredient branding is a special form of co-branding – the joint presence of at least two or more brands on a single product or service. The scope of possible co-branding approaches can range from a mere joint promotional effort up to the organizational linked development of completely new and innovative products. The regular co-branding approach is mainly used for consumer products and services; application in B2B tends to be quite restricted.

Examples of popular ingredient branding range from clothing (Gore-Tex, Lycra), carpets (Stainmaster), diet soft drinks (NutraSweet), and cooking utensils (Teflon) to bicycle gears (Shimano) and sound systems (Dolby) as well as gasoline and chemicals (Techron, Microban) promoting the inclusion of a value-enhancing, branded ingredient. Of course, we cannot leave out the ultimate, widely quoted best practice example of ingredient branding which we will consider in detail at the end of this chapter: Intel. In the following we will provide you with the basic information on how InBranding works and how to position it in the overall marketing concept.
While Ingredient Branding is a form of multi-stage branding, most companies only use single-stage marketing approaches. They direct their marketing efforts only to the next stage in the value chain, to their direct customers. Multi-stage or Ingredient Branding is directed at two or more downstream stages of the value channel.

The basic underlying principle that makes ingredient branding work is the pull principle. According to the pull principle, the manufacturers of the ingredient brand direct their communication efforts directly to the final consumers, thereby bypassing the manufacturers of the finished product. The main idea is to create consumer demand for the ingredient at the retail level, so that they pull the product through the distribution channel, forcing middle stages to use this ingredient. In some very successful cases, the ingredient brand may even become the standard in the product category.

A push strategy means that an ingredient manufacturer concentrates his marketing efforts on promoting his products to the manufacturers of the finished goods. In order to support the branded ingredient effectively, a manufacturer should always use a coordinated push and pull program. The pull strategy helps consumers to understand the importance and advantages of the InBrand while the push strategy aims to strive for full support by all channel members. Without the support of the following stages of the value chain, an ingredient branding strategy can rarely be successful.

General targets of ingredient branding approaches are materials or parts that enter into final branded products, but lose their individual identity on the way. In order to step out of such an anonymous position, manufacturers attempt to establish ingredient brands that increase awareness and preference for their products.

Not every ingredient can be successfully pushed or pulled. Does anybody really care about what kinds of lubes his favorite car brand uses in its manufacturing process? Not really. So it is obvious that there are certain requirements and restrictions that have to be taken into consideration when thinking about implementing an ingredient branding strategy. The most important aspect is that the “ingredient” should capture an essential part of the end product.
Intel processors, for instance, are regarded as the “heart” of every personal computer. The ingredient should be perceived as important and relevant by consumers and thus, contribute to the performance and success of the end product. The InBrand has to be clearly marked with a distinctive symbol or logo on the end product. Consumers need to be aware that the respective product contains this ingredient.

In addition brand alliances provide companies with a large number of potential advantages. By capturing two sources of brand equity, brand alliances can tremendously enhance the value proposition and points of differentiation of all products and services involved.
With equally strong and complementary brand associations the impact of co-branding can be even greater than expected. Such beneficial synergy effects of combined brand power might also allow greater freedom to stretch.

Quite often companies are confused about the difference of cobranding and ingredient branding. Many marketers even believe that there is no difference at all. The example of Infineon Technologies exemplifies this confusion. Until recently they used the term “co-branding” to ask their business partners “…to put the Infineon Technologies trademark onto a product and/or its package and user manuals to signalize that this product contents semiconductor solutions of Infineon Technologies.” Such a presentation does leave the impression that co-branding and ingredient branding were identical. Today, you will still find quite different approaches to defining these strategies in the American and European marketing literature.

Intel Inside
The Intel Corporation was not the first company that decided to brand the “essential ingredient” of an end product, nonetheless it is the most often quoted best practice example because of its huge and yet unparalleled success. The company is best known and most successful at Branding Inside. Today, the Intel Inside® logo is used by some 2700 PC manufacturers around the world, and consumer awareness is about 90 percent. Their story describes the journey from being an anonymous supplier of computer parts to becoming an omnipotent top ten known-brands in the world, in a class with Coca Cola, Disney and McDonald’s, according to various rankings.
Prior to the 1990s, before Intel started to brand their products, only the most sophisticated computer users knew what kind of micro processing chip their machines contained, let alone who made it. In Europe only 24 percent of PC buyers were familiar with the Intel brand. The company has spent hundreds of millions in the past 10 years to achieve their respective leadership positions. Within only a few years, Intel went from a completely unknown component manufacturer to one of the most recognized and valuable brands in the world. In undifferentiated markets the first-mover advantage can be even more powerful for Ingredient Brands than for regular brands. The ingredient branding strategy by AMD, for instance, Intel’s main competitor met with dramatically less success.

In 1989, Intel launched their first program aimed at marketing a microprocessor, the 386SX, to the Information Technology (IT) managers who purchased PCs for business. Although the program was very successful, several challenges quickly emerged, such as legal issues. Intel asserted that its 386 and 486 processors were protected trademarks and was fighting in court to protect them so that no other company could use them. Unfortunately, the courts decided otherwise, which opened the door for their competitors to use the well-known numeric at will.
Unimpressed by this set-back, the company immediately started to work on a new, improved and legally protectable branding strategy – a branding campaign that created history. At that time it was clearly an absolute novelty for a semiconductor company to market directly to the end user.

As leading strategy the company studied successful consumer marketing techniques and examined tactics used by well-known companies supplying a component or ingredient of a finished product, like NutraSweet™, Teflon™ and Dolby™.
After a variety of marketing experiments the branded ingredient program in the computer industry slowly took shape. The successful Intel Inside® program was finally launched in 1991. Of course, there can be no great brand without a great product. Intel clearly demonstrated this by investing billions of dollars in developing their cutting edge technology and billions more in assuring its performance and reliability. The main purpose of the Intel Inside program was to gain consumer confidence in Intel as a brand and to highlight the value of buying a microprocessor from the industry’s leading company. It clearly wanted to differentiate itself from the pack of competitors’ products that copied their numeric names for processors but failed to meet their implied performance requirements.

The original tagline for the Intel Inside program was Intel. The computer inside which was shortened to Intel Inside later on. The tagline was aimed at underlining the important role of the microprocessor in the performance of the personal computer, while at the same time pushing desired associations of the Intel brand with respect to “safety”, “leading technology”, and “reliability.” Besides, one of the main objectives of the campaign was to become the preferred choice, the number one among IT managers. But it also aimed at creating a pull from the consumers to deliberately demand Intel when purchasing a PC.

A good communications program though is by far not enough to build a successful ingredient brand. InBranding, more than most other branding strategies, is contingent upon the cooperation of other stages in the value chain, especially the manufacturers of the end products. If they disapprove and counter the initiative, there is only very little chance to succeed. Intel was well aware of this and therefore integrated a cooperative marketing program in the Intel Inside campaign. This was basically an incentive-based cooperative advertising program. The benefits for the OEM’s were clear. Not only could they reduce advertising costs for adding the Intel logo; it also acted as a sign of quality that their systems were powered by the latest technology.
The program was very successful. By the end of 1991, over 300 OEM’s had signed cooperative agreements to support the program by using the promotional materials of the Intel Inside program. Approximately one third of these companies also agreed to feature the Intel Inside logo in their advertisements. The incentive of covering 50 percent of the advertising costs obviously worked out well. To finance these incentives, Intel created matching funds up to the maximum of 3 percent of its sales.

The innovative marketing program of Intel clearly helped boosting the awareness of the personal computer, thereby fueling consumer demand. By the late 1990s the vast success of the program was widely recognized and Intel had captured the place of a world-class player in the public consciousness. Today, the Intel Inside program is one of the world’s largest co-operative marketing programs, supported by thousands of PC makers who are licensed to use the Intel Inside logos.
Between 1990 and 1993, Intel invested over US$500 million in advertising and promotional programs designed to build its brand equity. Toward the end of that decade the marketing budget escalated to more than US$700 million annually. As we know, the investment did pay off, so let’s take a look at some actual numbers: Intel in creased its revenues six fold by 2000 (to US$33.7 billion) while its earnings almost doubled that rate of increase (to US$10.5 billion).
The launch year of the program is the base year for this account. According to Interbrand, Intel is ranked number five of the world’s most valuable brands in 2005, with an estimated brand value of US$35.6 billion.
The new way of the company is to target opportunities outside its traditional PC revenue stream. This means a move from Intel Inside to literally Intel Everywhere – every type of digital device possible shall be equipped with Intel chips. For that reason, Apple and its iMac computers were added to the list of Intel customers recently.
Besides computers, Intel’s target market now encompasses cell phones, flat-panel TVs, portable music and video players, wireless home networks, and even medical diagnostic gear. All in one, the company is targeting ten new product areas for its chips.

Crystallized with Swarovski®
Swarovski, established more than 100 years ago, is the world’s leading manufacturer and supplier of cut crystal. The company saga began in 1892, when founder Daniel Swarovski invented a revolutionary machine, which made it possible to industrially cut crystal jewelry stones to a superior level of perfection and precision than achieved before by traditional manual methods. Three years later, he founded the Swarovski Company in Wattens, Austria, which has remained fully independent ever since. The company is currently run by the fourth and fifth generation descendants of founder Daniel Swarovski. In 2004, 16,000 people worldwide contributed to a consolidated group turnover of €1.83 billion.

Swarovski is a globally recognized brand that has made innovation, trend research, creative products and product perfection its hallmarks. These are all perpetuated elements of the philosophy of the company’s founder, Daniel Swarovski. His motto “to constantly improve what is good” and vision to “use crystal to bring joy to man” still form the core philosophy that drives the company today. Swarovski stands for exacting workmanship, quality and creativity all over the world.

Their product range comprises almost everything related to cut crystal: Crystal jewelry stones and crystal components as well as crystal objects, crystal jewelry, and crystal accessories. With the brands Tyrolit (grinding, cutting, sawing, drilling and dressing tools and machines), Swareflex (reflectors for road safety), Signity (genuine or synthetic gemstones), and Swarovski Optik (High-quality precision optical equipment) the company has also obtained leading market positions in related areas.
Swarovski covers both consumer and business customers with one brand. The corporate division of crystal components is one of the major B2B areas. Swarovski supplies crystal components and semi- finished products to the fashion, jewelry, interior design, and lighting industries. With a collection of more than 100,000 stones and a wide range of pre-fabricates, it is a competent partner for businesses that use cut crystal in their products.

In 2004, the company introduced their ingredient branding strategy A Brilliant Choice in order to counter the increasing trend of selling anything that glitters and glimmers on clothing and accessories under the name Swarovski. This was the first time that the department of crystal components directed any marketing activity directly at the end user. The company thus created the label Crystallized with
Swarovski in response to the demand for a visible proof of quality and origin. The quality label clearly represents a guarantee of the highest quality and perfection in the manufacture of crystalline products.

In the complex shopping environment of today consumers are confronted with an explosion of choices where strong brands can provide clear direction of what they stand for. Brands therefore can give consumers the important assurance that they have made the right decision. Since the label Crystallized with Swarovski is a symbol of quality and prestige for both Swarovski’s business partners and for its consumers, it makes Swarovski products even more attractive and provides further arguments for the added value. Furthermore, the traditional and approved core competencies of Swarovski – innovation and diversity, product and service quality – are emphasized which further differentiates the brand from its competition.

Due to of the limited physical branding possibilities, the company decided to go its own way and designed special tags. Depending on the end product of fashion items, jewelry, accessories, and home décor the label can be a high-class silver metal, a silver-colored paper tag or sticker that testifies the authenticity of the Swarovski crystals.
The Crystallized with Swarovski label is the customer’s assurance that only Swarovski crystal products have been used in the production of the end product. To officially certify this assurance, each label carries a specific number certified by Swarovski.
The ingredient brand was launched with a global advertising campaign at the end of 2004. Print ads in key fashion magazines such as ELLE, InStyle, MarieClaire, Cosmopolitan, 24Ans, and TeenVogue as well as promotional material, posters, and postcards displayed in stores were used to promote the new InBrand.