In reviewing issues of importance to the supplement industry, there seems to be increasing concern regarding the preservation and protection of ingredient patents as well as other intellectual property. There is also ongoing concern about the lagging consumer marketplace caused by a decline in consumer confidence and faltering brand loyalty. Although seemingly different, these issues are concretely interconnected. Truth is, one is part of the problem and the other is part of the solution.
The increase in branding activity over the past few years behind proprietary, patented, or in some cases even commodity ingredients, is no accident. A stagnant marketplace is certainly a factor as is the increasing use of borrowed science. Furthermore, eroding consumer confidence has definitely created some urgency and intellectual property violations have also fueled the fire. The result is that manufacturers are increasingly looking for categories or segments they can own. And that pressure has been transferred to their raw material suppliers and partners, who are trying to meet that demand with patented, proprietary or at least unique raw ingredients, which have been branded to facilitate awareness and differentiation.
However, while it may be a popular strategy, is it 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. But it involves more than merely slapping a name and logo on the ingredient. The most successful programs are integrated so that they provide a 360-degree approach to marketing communication.
The Co-Branding Premise
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 it 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.
In terms of selecting the right co-branding approach, there are key issues to keep in mind. These include (1) the number of partners and (2) the channels of distribution.
A channel-exclusive approach involves partnering with one major manufacturer for each distribution channel and offering them channel exclusivity in exchange for agreed-upon raw material purchases. These exclusivity agreements usually last a minimum of one year but can extend up to three or five years if mutually agreeable. A channel saturation approach involves offering the ingredient to a broad range of manufacturers in a given category, the idea being to quickly ramp up distribution and awareness and make the ingredient widely available to consumers on a national basis.
Generally, channel exclusivity is the best 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, a supplier would be tying up the product with one partner, so that partner should be willing to commit to order minimums. This is particularly appropriate in niche channels such as Internet, multi-level marketing (MLM) or direct mail catalogs. It often makes sense to negotiate a one-year contract, which is renewable upon mutual agreement for a second year. Market conditions change rapidly, and so might a company’s perspective on a particular co-branding partner.
Channel saturation may make sense if an 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 moderate sized manufacturers in a large channel such as retail.
|When IMG created the brand identity for CoraLife, a branded above sea coral calcium ingredient from BI Nutraceuticals (shown here), the company worked to create a simple and upbeat graphic approach that communicated good health.|
Core Components of an Effective Branding Program
While each program should be customized to the needs of both partners, there are several key elements, which should at least be considered if not included.
Brand Name & Identity. No element of an ingredient branding campaign will receive more scrutiny and attention than the 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, keep these important points in mind:
|•||Keep it simple. Don’t overcomplicate the design.|
|•||The logo identity must be legible at very small sizes, as it will often be featured on the back of a partner label.|
|•||The logo identity must work in color and in black and white since a partner label may not always offer the color options preferred.|
|•||Minimize the number of words and descriptive terms used because these will often not be legible at very small sizes.|
|•||Try and evaluate potential designs through the eyes of the consumer.|
|•||Less is more. The sole purpose of the logo is to readily and memorably register the name of the ingredient. (See picture 1)|
The Importance of Trade Advertising & Relationships
|The campaign which IMG developed to assist Unigen in launching Univestin (shown here) presents a compelling call-to-action for potential manufacturing partners.|
There are numerous ways to reach out and connect with potential manufacturing partners and 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 a particular ingredient can assist in building a proprietary brand franchise that encourages customer loyalty.
Manufacturers are increasingly relying on their 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. (See picture 2)
Develop a plan to stay in contact with current and potential customers to remind them about the benefits of your branded ingredient. Tools you might consider developing to assist in that effort include:
|•||Oversized postcard mailings highlighting various applications for your ingredient;|
|•||E-mail or printed newsletter updating customers on scientific research developments, co-branding program opportunities or new branded ingredients;|
|•||PowerPoint presentation for use with potential customers outlining co-branding initiatives and ideas for successful partnering; and|
|•||B-to-B trade show seminars and educational sessions.|
Whether it’s a pharmacist or a health food store manager, a majority of consumers look to professionals for assistance or recommendations in purchasing supplements. Usually products that are top of mind are the ones 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 previously mentioned trade newsletter, an educational module program where retailers can certify as specialists in a particular ingredient or an offer to provide a spokesperson or medical professional for a retailer education seminar at a major tradeshow.
|The consumer print campaign that IMG developed for OptiMSM (shown here) focused on what really matters to the consumer, specifically the dramatic health benefits of the ingredient.|
Consumer Awareness & Education Tools
The most significant task at hand is building consumer awareness of the branded ingredient. Consumer advertising is expensive, but 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:
|•||Print or radio advertising that feature the ingredient by name and tell consumers which brands include it and where they can find those brands;|
|•||Product literature, which promotes both the ingredient and the manufacturer’s specific product;|
|•||In-store signage such as posters and shelf talkers; and|
|•||Consumer seminars or product demos (See picture 3)|
The Power of PR
It’s hard to over-estimate the value of public relations (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:
|•||Development and mailing of a press kit to targeted trade and consumer media lists;|
|•||Ongoing media relations and pitching of story ideas tied to approaching editorial topics;|
|•||Matte story placements;|
|•||Development and distribution of a video news release covering a relevant product angle;|
|•||Event sponsorships; and|
|•||Booking radio interviews for a product spokesperson.|
It is often asked what will be the cost of a successful branding effort, which is a question roughly equivalent to asking about the price of a new car. Depending upon the make and model, the budget can fluctuate widely. However, when you consider the cost of marketing, creative development, printing, PR and media buying, it’s pretty easy to spend $250,000 or so before all is said and done. Most of IMG’s clients spend somewhere between that and $500,000 for a “year one launch.”
If a company cannot fund the effort adequately, it may not be worth attempting to brand an ingredient. There is no question that ingredient branding can be a successful strategy for growth, even in this difficult marketplace. However, it takes R&D innovation, scientific support and marketing commitment. Ingredient branding also requires partnerships between companies with compatible resources. In the end, when the right elements come together, the results can be very powerful. NW
About the author:
Jeff Hilton is president and co-founder of Integrated Marketing Group (IMG), Salt Lake City, UT. He can be reached at 801 538-0777; Website: www.imgbranding.com.