Brand Management for Manufacturing

Abstract

In last month’s article we looked at the supply chain-brand connection for retailers. This month we take the manufacturer’s perspective.

Article

In last month’s article we looked at the supply chain-brand connection for retailers. This month we take the manufacturer’s perspective. It’s hard to overstate the importance of brand for your success (even survival) and you’ve got to make great supply chain capabilities a key piece of your brand building strategy…even if you’re just making components for an end product.

Manufacturers’ Brands Under Siege

Manufacturers are currently locked in a fierce battle with many of their own retail channels, fighting for the consumer’s brand loyalty. Private labels are stealing share-unit sales of store-brand goods grew 8.6% during the last two years vs. 1.5% for national brands. 20% of retail sales in the U.S. and 40% in Europe are now store branded. Manufacturers are going to have to really hustle if they want to avoid the dismal fate of becoming merely marginless contract manufacturers for the retailers. Part of the answer lies in making your brand more appealing to the retailer and then innovating like never before.

Appealing to the Retailer

In our survey of 140 leading retailers and manufacturers, the retailers rated “Brand Strength” and “Supply Chain Execution” as the second and third most important criteria (just behind “Trust”) in their selecting a manufacturer to be category manager (see Figure 1, which shows responses of both retailers and suppliers). In addition, when retailers were asked what determines shelf space allocation, the top criteria were brand leadership, sales volume, and product’s profitability (for the retailer). If retailers are offered a strong manufacturer’s brand that pulls in people, and whose total cost makes it profitable for them, they are less likely to look to store brands for margins and revenue.


FIGURE 1

But that’s not enough. To maintain a strong brand, manufacturers are going to have to accelerate their cycle of innovation even more, to keep ahead of the fast followers (both retailers and competitors). New Product Introduction speed and execution excellence becomes increasingly critical to preserving strong brands and the higher profits available during the period before imitators catch up. The link with suppliers, in particular their integration early in the design process, is a key part of achieving ever faster time-to-market and more innovative products (many of the best ideas come from suppliers). And must be innovative in how you deliver and brand, such as unique events that create buzz.

Component Branding

The issues are different for upstream manufacturers who build components of the end product. Some of them may do “end run” branding directly to the end consumer. “Intel Inside” is a famous example, and occurrences in other industries abound (see sidebar). Any pull with the end consumer yields big dividends for the component manufacturer.

Component branding, done right, allows the component manufacturer and the end product manufacturer to pool marketing dollars, create perceived differentiation, and sustain higher margins; case in point being PCs with Intel chips selling for substantially more than the equivalent with AMD chips. The benefits to the end consumer have to be made crystal clear and easy to understand. A punchy and memorable component brand name/logo, “certification” for end products, and end user education are key elements. This game is not easy-you need to enlist good partners, show what’s in it for them, and make massive PR investments. But it pays to stop thinking like a supplier and get your components noticed and wanted by the end consumer to stay ahead of the commoditization rat race.

Your Supply Chain is Your Brand

For their immediate downstream customer, you could say that a manufacture’s supply chain is their brand. What is it that their customer (the buyer at the next downstream manufacturer or the retailer) cares about? Not “emotional fulfillment” or a “cool image,” but can you keep my lines running or shelves filled at a lower cost – quarter after quarter. Quality and availability are really table stakes for the continued existence of a brand. No brand survives long without quality. And each time a product is not available, brand loyalty becomes highly vulnerable as the consumer (or downstream manufacturer) seeks alternatives.

Manufacturers need to intimately understand the Enterprise Optimization needs of their customer. Reliability in delivery, flexibility in capacity, low total cost, flawless quality… those brand images must be driven home to your customer through every avenue, in every way, and especially by the results you deliver.

Corporate Citizenship

An often overlooked supply chain-brand connection for manufacturers is good corporate citizenship; i.e. your environmental record, use of child labor and sweatshops, etc. Think boycott. Just ask Nike, ExxonMobil, Levis, or McDonalds. As companies virtualize and outsource manufacturing and component design, they tend to shrug off responsibility for what upstream suppliers do. More than ever, consumers perceive the whole supply chain as one continuum-a single interconnected entity, for which the brand owner is responsible. Screening suppliers and their suppliers, low pollution manufacturing, green designs, etc. can enhance your brand image, not to mention make your employees proud to work at your firm.

Total Solutions / Supply Chain Innovations

Manufacturer needs to think outside of the box in what they deliver. Supply chain innovation can be a part of your total solution to the customer. StorageTek, one of our featured case studies this month, is evolving from a hardware vendor to offering total solutions-like managing the data centers in which their storage systems sit. This improves their brand (commodity hardware vs. total solution) and can only be enabled by equally dramatic changes in their supply chain, for example, being able to deliver spare parts for competitor’s equipment.

Business has never been more competitive for manufacturers getting squeezed from all sides. Strong Brands are hard to build, but that is really just one of the only effective weapons against commoditization and margin pressure. Complacency is death. Manufacturers must use supply chain innovation and bold PR to win the hearts and minds of the end consumer and their direct downstream customer.



Logos, tradamarks, and corporate images used are copyright their respective companies and brands

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