走进中国工业品牌管理与竞争的新常态

Entering into the “IB and HB branding management Era”

                               by Dr. Yang XiaoTong

 Edited by Eric and authorized for release

WHAT WE KNOW ? -001

As many scholars like Ziethaml pointed out after research, brand often works as an external signal when a customer is making comprehensive assessment or evaluation of the quality of the products which are offered and it is much more powerful than price in this sense. In terms of consumer markets, brand management has turned into a kind of core competence that is extremely critical to a company’s future success. In industrial markets, however, it is still not the case and much research work needs to be done on what and how much impact brand management has on industrial markets. It is still unclear among many that, how to take advantage of ingredient brands to implement marketing their products.

As far as the consumer markets are concerned, Co-Branding has become an increasingly indispensable strategy that is adopted by many of the brand managers. It relates to not only the B2C consumer markets, but also to the B2B markets where durable goods and industrial services are concerned. In terms of marketing management, vertical co-branding is often known as Ingredient Branding (Desai & Keller, 2002), on which much less study has ever been done (Park et al.’ 1996; Simon & Ruth, 1998; Rao et al., 1999; Desai & Keller, 2002; Helmig et al., 2008). With B2B market in particular, we still havn’t seen much empirical study being made on the influences Ingredient Branding and OEM Host Branding have imposed on how marketing is carried out in practice.

In order to maintain their competitive advantages over others, an increasing number of companies nowadays are starting to adopt combined brands that are already reflected in current marketing strategies including Co-Branding, Composite Branding and Ingredient Branding etc. Such a flexible combination of individual brands had been successfully applied in many advanced economies consequently triggering a 40% economic growth annually (Spethmann & Benezra， 1994). In recent years, however, no one has ever put more efforts into deepening such a research on what type of brand combination or equally what ingredient brands can be used to increase their competitiveness in a sustainable way. Concerning the current B2B markets in China, ingredient products and the brand strategies associated with them are attracting more attention as a common part of marketing OEM products. It has long been a crucial competitive edge enjoyed by the key components of OEM host products to benefit from those ingredient brands with or without self developed technologies by many host brand owners. In many cases, ingredient brand manufacturers and suppliers are often overpowered by OEM host brand owners on the market where Ingredient Branding can be the chance of them breaking the dominance (Pfoertsch & Kotler, 2010). As suggested by some relevant brand research, ingredient brands can be helpful to improve people’s brand recognition of the finished products that are of low value in brand (McCarthy & Norris, 1999). Back in China, home industrial development for decades long has reflected a fact that these ingredient brand centered marketing theories are evolving to a point that the theories are extensively proved to be powerful in practice and is gaining increased popularity in China. One example is by taking advantage of the positive images of the finished products to increase their popularity among end users and meanwhile to create invisible barriers to other potential competitors from entering the market, with both customer loyalty and brand premium raised as a result (Rao and Rue kert, 1999). It is also revealed in another study by McCarthy and Norris in 1999 that, ingredient brands are by contrast playing a limited role in raising the image of high-end host brands. What worth noting is, the risks posed to OEM host brand owners by such a state of stiff market competition are also showing up during the course. Concerning the Chinese OEM host brands, it is still far from certain whether or not developing OEM host brands under industrial environment will be of positive impact as it is possible of ingredient brand products suppliers to hinder them from upgrading or lifting their brands through competitive cooperation. As pointed out by Leuthesser, Kohli and others in 2003, the customer base owned by a host brand tends to be undermined by the growing ingredient brands with gradual market penetration to the end users during the course of its development, which can result in the host brand losing its competitive advantage gained by cooperation with ingredient brand manufacturers or suppliers. For this reason, OEM host brand manufacturers are often strongly willing to invest in acquiring these competing resources through corporate actions, such as merger and acquisition for instance, to further have absolute control of what marketing strategy to be implemented with these ingredient brands for long-term competitiveness in the market (defined as self-owned ingredient brands in this study). Unfortunately, not so much study has been found to be made with regard to this subcategorized strategy of Ingredient Branding. Now the situation is, to many of domestic OEM host brand enterprises, such a study could be extremely meaningful to them in determining a long-term strategy of sustainable development, or even can dictate whether or not they will survive the fierce market competition and further develop.

Currently, the reality facing many Chinese OEM manufacturers is, the traditional market influence they have on their customers has been weakened and lost due to a portion of their key products being manipulated by many other high-end ingredient brands from foreign markets. What makes it even worse is, the Chinese OEM manufacturers in reverse are influenced by an expanding end user base when the market grows. In this case, OEM host brands are gradually marginalized thus posing threat to itself as to its sustainable development since most Chinese OEM host brand enterprises can not enter into an exclusive agreement or the equivalent with those mature high-end ingredient brands. With respect to the industrial host machineries, market competition is always concentrated on how those key components is evaluated and selected from a customer’s perspective, as a result of which competition among different ingredient brands has already dictated OEM host brands competing against each other. In this sense, developing self-owned ingredient brands can be a possible way to get out of what we have commonly seen on the market, like brand combination with multiple independent ingredient brands, and may also have profound meanings to how the market and the customers will be influenced. For this reason, a comprehensive and systematic study on what impact self-owned Ingredient Branding strategy implemented by industrial host machinery manufacturers will have on their host brand and related marketing effects can be instructive, to our medium-and-large-sized domestic industrial machinery manufacturers who are envisioned to upgrade their products (See the 12^th 5-year national plan for imported and exported electrical machineries and high-tech products, 2012). Additionally, it can also pave the way for further innovation of the brand marketing strategy to obtain sustainable competitive advantage on the market.

Particularly, the indigenous researches and managerial practitioners in China are stepping into a real new era in upcoming new normal environment which market-driven development will play a decisive role in the foreseeable future.  

Waiting for next release…..

For contact with the author, please email to shanshan@towermind.com;

For contact with the editor, please email to yangls@skiplifting.com