Fueling Growth Through Ingredient Branding

By Ray George
Raw dough and other ingredients for pizza on white background, top view

How Ingredient Brands Fuel Growth?

Achieving loyalty is a critical brand goal, as customers develop affinity to the experience of their most cherished brands. Yet in highly competitive categories where brand distinctiveness can be more difficult, focusing attention on the ingredients that contribute to your brand can help capture share of mind and wallets.

Ingredient branding, as the name suggests, is the strategy of both borrowing from and lending to the cachet of an end product by positioning your brand as one of the essential components that makes it worth purchasing.
Ingredient brands can protect or grow market share, particularly during uncertain economic times, by enhancing the emotional bond between the brand and consumers, opening up growth opportunities in new products, channels, and markets.

It can also create a win/win situation with end-product manufacturers. In the near-term, communicating the unique benefits the ingredient offers will differentiate the end product and help both businesses grab market share. And long-term, creating customer understanding of the value the ingredient adds can help companies command a premium price for the end product.

One of the best-known examples of ingredient branding is the “Intel Inside” campaign, launched in 1991. It helped fuel a 12-fold increase in net income, making the microprocessor a key decision-driver in the PC purchase process. The campaign involved an $800 million in investment in 1999 alone. But the strategy went way beyond just spending marketing dollars to drive awareness.

Three key principals guide the implementation of successful ingredient branding programs. Education and awareness are just a portion of the considerations behind them.

Principal #1: It’s a Lot Like Building a Brand from Scratch

The same tenets guiding initial brand strategy are applicable to building an ingredient brand. This is particularly true when the ingredient brand is reaching a new audience, whether consumer or business, where the ingredient is not currently part of the customer purchase decision. Companies interested in ingredient branding must consider the following:

1) Relevant Benefit: The ingredient brand must communicate a compelling benefit that leverages brand strengths. Back when making purchases over the internet was a more uncertain endeavor, where consumers felt nervous about sharing their credit card information online (and perhaps they still do), PayPal ensured banking information was secure, enhancing the credibility of online sellers. In addition, it also took steps out of the online purchasing process, making the experience easier.

2) Clear Understanding: The end-customer must understand the functional benefits of the brand before deeper, more emotional associations are created. The functional benefit should be clear, credible and easily identifiable, leveraging the ingredient to simplify a complex purchase process. Gore-Tex is a great example where the brands functional benefits associated with rain protection and breathability are immediately imparted on the end garments reaching customers. As a result, over time Gore-Tex has become synonymous with the quality of the end product, moving from a feature to more of an emotional benefit.

3) Deliver in Deeds as well as Words: The ingredient brand promise must be delivered consistently across all brand touchpoints, which can be difficult since the ingredient brand does not necessarily control key end-customer touchpoints. A good working partnership with the end-product brand can ensure its touchpoints reflect, or at least do not hurt, the ingredient brand’s equity.

Principal #2: Cultivate the Middleman

The idea behind ingredient branding efforts is to leverage the equities of the ingredient brand and the finished product manufacturer to create compelling associations for the combined entity. Ideally, these efforts are based on a mutually beneficial relationship, where market share and growth potential stand to be expanded for both ingredient and end product brands. Here are two ways to get the most out of such relationships:

1) Incentives: Provide a monetary incentive for the finished product manufacturer to adopt your logo and/or company name. One incentive is to provide an advertising subsidy based on purchase of your component. Intel, for example, offered a 3% advertising subsidy to PC manufacturers as a percentage of funds spent on Intel processors. Discounts on the ingredient product can also be offered to the manufacturer.

2) Brand Alignment: Offering the end product brand the opportunity to build desired and/or complementary brand associations is another approach to encourage ingredient brand-building. Swarovski, in addition to providing communications support as part of its ingredient branding program, is also synonymous with fine crystal, imparting a sense of quality and glamour to the end-products of which it’s a part. In addition, Swarovski provides research proving the premium that customers are willing to pay.

Principal #3: Ensure End-Customers Can Interact With and Recognize Your Brand

The last step is arguably the most critical – ensuring the ingredient brand is recognized as part of the end product. In order to ensure recognition of the ingredient brand, companies have found creative ways not only to create visibility of their brand but also to generate interactions with their brand.

1) Visibility: Successful ingredient brands have used a symbol to expose end consumers to their brand. Examples include the Nutrasweet swirl, the Dolby double-D, or the Intel check mark. The visual not only uses the symbol to convey the associated benefits of the brand, but also can provide reassurance and comfort. For example, The Good Housekeeping Seal of Approval has long been represented as brand standing for quality, or the Crystals from Swarovski circle conveying a quality and excellence.

2) Interaction: Encourage or underscore interaction with the brand. For example, PayPal offers a simpler experience when going through the online payment process, which benefits associations not only for PayPal but also the end customer brand.

Smart businesses understand that brands are valuable assets that require active management and investment, and ingredient branding represents another avenue to gain leverage from that asset by partnering with end product brands to extend a brands equity to new audiences and markets.

A prior version of this article was originally published in Sales, Advertising & Marketing magazine