Measuring the Value of Ingredient Brand Equity at Multiple Stages in the Supply Chain: A Component Supplier's Persepctive

INTRODUCTION in today's fast-changing markets, ingredient Branding is becoming a major marketing strategy as demonstrated by the increasing number of products sold with embedded branded components (Prince and Davies 2002; Cooke and Ryan 2000; Washburn, Till, and Priluck 2004). Despite its success in generating positive effects on participants in the value chain (for examples see Kotler and Pfoertsch 2006), the effects of ingredient Branding in business markets has been generally overlooked in terms of brand equity (Desai and Keller 2002; McCarthy and Norris 1999; Norris 1992; Rao, Qu, and Ruekert 1999; Venkatesh and Mahajan 1997; Havenstein 2004; Pfoertsch and Mueller 2006; Kotler and Pfoertsch 2006). This work aims to shed light on understanding ingredient Branding strategies, and suggests valuation tools for assessing brand equity from the component supplier's perspective. The purpose of this paper is to introduce measurement instruments that enable managers to determine that value of ingredient Brand equity at various stages of the value chain, a practice that should be beneficial for both B2B and B2C managers and scholars (Mudambi 2002; Gregory and Sexton 2007; Beverland, Napoli and Lindgreen 2007; Webster and Keller 2004; Lynch and de Chernatony 2004; Anderson and Narus 2004; Kotler and Keller 2006). The benefits of understanding and measuring value derived from ingredient Brand equity at various stages of the value stems from the ability of high equity brands to generate opportunities for successful extensions, resilience against competitors' promotional pressures, and barriers to competitive entry (Aaker 1991, 1992; Kotler and Keller 2006; Farquhar 1989). it is not known however whether companies that rank high in brand equity--such as intel, Tetra Park, Shimano or Dolby--(interbrand 2006) derive value from brand equity at the original equipment manufacturer (OEM) stage, at the consumer stage, or at both stages. Traditional measures and values of brand equity focus only on next-down dyadic stages in the value creation process. In this study, we build on the notion that component suppliers are typically Business-to-Business (B2B) companies with an OEM as a consumer brand extension. We assert that ingredient Branding is a much more complex strategy than the strategy that most would think a B2B branding should be. This complexity requires component suppliers, as well as other firms in the value chain, to gather in-depth information from the various participants of the value chain as well as from the final customer for managing and responding to this strategy appropriately. To address these managerial needs, we extend existing marketing theory by demonstrating the need for a more complex measurement tool that accounts for brand equity as it affects interactions across multiple stages in a value chain. The remainder of this paper proceeds as follows: First, an overview of existing ingredient Branding research is presented. Then, stages that are important to an ingredient Branding strategy are defined and described. Next, measurement instruments are proposed to evaluate success at each of these stages. This leads to the assertion that fruitful stages for ingredient Branding strategies include the B2B dyadic relationships between the component supplier and the OEM, the B2C stage between the OEM and the end user, and the B2B2C stage representing traditional communications for ingredient Branding between component supplier and end user. We outline conclusions and provide an outlook for further research. INGREDIENT BRANDING Ingredient Branding is a particular type of alliance between two products, based on both firms' cooperation in designing and delivering the product, with particular emphasis on consumer recognition and identification of components in the final product (Pfoertsch and Mueller 2006). in other words, ingredient Branding can be conceptualized as a B2B branding strategy between a manufacturer and a supplier in which the end product of the supplier becomes one of the aspects of the manufacturer's strategic concept (Ervelles et al. …