I have been invited to participate in the early stages of a hot topic called ingredient branding. The topic comes about because of the effective marketing of such brands as ‘Intel Inside®’, Dolby®, Teflon® and Stainmaster®. Each of these brands is purely a component or ingredient combined with many others to deliver a final consumer or business product. This field of study is just starting up and should lead us to some interesting marketing applications as we determine the value of the ingredient brand.
The Choice Model
Consumers make choices along three dimensions:
- The utility derived due to the preferences for the attributes
- The utility derived due to the preferences for the brand
- The disutility of price
With ingredient brands the preference for the brand bifurcates into two sub-dimensions: The preference for the brand of the product and the preference for the inclusion of the ingredient brand. How many consumers (or businesses) would pay more to have the same capabilities in a Dell® laptop with Intel Inside® or with AMD® inside? In this case we are looking at understanding a two by two matrix, where the choice is between Dell and some other brand each with either Intel or AMD inside.
The Channel Choice
In a similar way consumers make choices of a channel based on the expected value of a brand purchased in one channel versus another. I used to work with an upscale marketing professional that would brag that he bought such and such brand in such and such store. When I asked ‘why didn’t you buy the same product in Wal-Mart and save 25%’ the answer was typically ‘I don’t shop at Wal-Mart’, or ‘they don’t provide the same level of service’ and so on.
So in some respects the product and the brand have different values based on the ingredients and based on the channel where it is offered.
I will keep you up to date as we learn more on this fascinating topic. If you have any specific questions or comments about ingredient branding, please let me know. I look forward to hearing from you.
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