Why do we pay more for an orange with a Sunkist sticker? Because inspecting the outside of the orange doesn't guarantee the quality of what's inside. We need the assurance of the Sunkist brand. A variant on this theme is ingredient branding: putting the brand of an ingredient on the outside of a product to increase its appeal.
When is the provider of the final product or service willing to compromise its own brand-building to add the ingredient brand on the package as well as in advertising? There are 4 conditions:
1. The ingredient is highly differentiated, usually supported by patent protection, and so adds an aura of quality to the overall product. Think Gore-tex for water resistant rainwear.
2. The ingredient is central to the functional performance of the final product. Think Shimano gear systems on performance bicycles or Monsanto's Nutrasweet, added to Equal sweetener.
3. The final products are not well-branded themselves, either because the category is relatively new, because customers buy infrequently or because there is low perceived differentiation among the options. Think about all of Dupont's ingredient brands for clothing, from Rayon through Lycra.
4. The final products are complex, assembled from components supplied by multiple firms who may sell the "ingredients" separately in an aftermarket. Think cars with Michelin tires, Dolby stereo systems and Champion spark plugs.
Today, the most impressive—and unlikely—ingredient brand promises to be the Boeing 787. On July 8, 2007, Boeing unveiled the 787 to the public. Over 650 orders have already been placed by more than 40 airlines with the first test flight not even scheduled until May 2008. In addition to being built from composite materials rather than aluminum and, therefore, more fuel efficient, the plane's design includes many in-cabin innovations—including superior humidity and climate control and lower cabin pressure that will make air travel more pleasurable.
For the first time, Boeing has branded a new product, naming the 787 the Dreamliner. And All Nippon Airways, the archrival of Japan Airlines, which placed the first 50 orders is already touting the plane as a differentiating "ingredient" in its advertising. Boeing is betting that passengers will seek out (and pay more for) tickets on airlines that offer Dreamliner service, especially when they are taking long-haul flights where cabin comforts are especially important. And you can bet that the "Dreamliner" ingredient brand will appear as prominently on 787 fuselages as "Intel Inside"—perhaps the most famous of the ingredient brand campaigns of the last decade—appeared on PCs.
Are you seeing more examples of ingredient branding in the marketplace today?
Join the discussion on Harvard Business Online.
