Automotive Supplier shy away from Ingredient Branding - but 41% of consumers say it is important to them!
In the 1980's and 1990's we have seen a lot of Ingredient Branding in the Automotive Industry. Recaro car seats, Blaupunkt radio systems, BBS rims, VDO instruments, Alcantara upholsteries or Pininfarina design lines helped automobile brands to upgrade their offering and to attract buyers. But while in other industries such as Textile or E-Mobility the usage of Ingredient Branding is constantly increasing, it almost disappeared in the car industry.
- Car production is a highly complex process where hundreds, if not thousands of suppliers are involved. It is hard to imagine to see all of them having a label or a sticker inside or outside the car.
- In addition, many car brands have evolved over the past 20 years into premium and luxury brands and the car interior and exterior became a "holy grail". Their Brand Management does the utmost in order to prevent any co-branding and to keep the car a "brand-free"zone.
- Automotive supply is organized in tiers and the buying power of the car brands is so strong that suppliers have surrendered to the "Lopez-effect" and accepting all business terms imposed on them by the car makers. The dependance is too high and so is the fear to break-out of that pattern.
- The result is that the few successful Ingredient Brand or Co-Branding examples we see today are achieved by "out-of-the-category" suppliers who are not depending on a regular relationship with the car makers or which are not captivated by long-term supply contracts.
It is not about all components going into a car anyway. The innovation of yesterday becomes the commodity of today. But it is about what we call the "relevant components", where the opportunities of Ingredient Branding also for car makers lie. Components which are positively influencing the buying decision.
- Would car manufacturers sell more cars, potentially for higher price points or at better margins?
- Would car manufacturers be able to increase customer loyalty and repurchase rates, if consumers would know the source of relevant components?
A research from November 2018, done by the German market research company Puls as part of the regular automotive monitoring, provides some surprising results.
- 41% of all participants considered it important to know that certain car parts or components are coming from a well-known supplier
- For premium car brands such as BMW or AUDI that number increased to 57% for BMW and 56% for AUDI
- More than half said, knowing that well-known suppliers provide key components, increases the quality andthe value of a car
- For 39% this would also increase the innovation perception of a car
- And 34% of respondents would be willing to pay more for a car, if they would know that well-known suppliers are standing behind key components
As we at BRAIND predict a shift from performance driven Ingredient Branding towards a more purpose-driven next generation Ingredient Branding, we were particularly interested in the results of components related to sustainability, autonomous driving and e-mobility. And despite the fact that such technologies are at a very early stage of market penetration, we found the following results of the research remarkable:
- Already 25% of the recipients responded that knowing the provider of alternative propulsion systems would add value to the car brand
- 24% gave the same response related to autonomous driving systems
- And 19%, so every 5th. person, mentioned that the usage of particular environmentally friendly materials indicated by a well-known supplier adds value to the car brand
It is to be mentioned that all the above mentioned results are the average score. Looking at male participants only or higher-income participants, the results indicating a higher value for branded components are even stronger!
There is a real business opportunity for car makers as well as for component suppliers revitalizing Ingredient Branding in the Automotive Industry. But not in the old way as it was done in the 1980's and also not in the old power play car brand versus supplier. If car makers and selected suppliers of relevant components work collaboratively together, they can create win-win situations by creating meaningful offers that can increase the value perception of automobiles.
For more information about BRAIND and our Next Generation Ingredient Brand Model, visit www.braind.co or contact us at firstname.lastname@example.org.
For more information about the market study conducted by Puls Market Research visit https://www.puls-marktforschung.de/en/.