Branding can be the key to a successful product.
Our Guest Blogger, Ashton Udall, is a partner at Global Sourcing Specialists, a product development and sourcing firm that assists businesses, inventors, and start-ups tap overseas resources to succeed in the global economy.
Recently, he wrote an article on the importance branding which we thought the readers of InventorSpot.com may enjoy. Here's his article:
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Gilroy, California, the "Garlic Capital of the World". This town holds an annual garlic festival and delivers the bulk of the garlic eaten in the United States. But, this garlic isn't grown here in Gilroy anymore. It's imported from China.
The overfarming and commoditization of garlic in Gilroy led to a decrease of Gilroy's garlic value in the market by over $70 million. Chinese garlic sales are up 5000%. But, while Gilroy's own garlic has gone downhill in dramatic fashion, garlic farming is still thriving in the United States: just in New York rather than Gilroy. In New York, it is much more difficult to farm garlic than it is in Gilroy. Regardless, chefs and garlic connoisseurs (if there is such a thing), believe that the taste of New York garlic is worth paying a premium for--whereas Gilroy garlic, not so much.
Seth Godin, in his book The Big Moo: Stop Trying to be Perfect, and Start Trying to be Remarkable, explains the above story and the importance of brand. Godin points out that as soon as Gilroy sold their garlic far and wide, by making it a cheap and boring commodity, they set themselves up for new entrants to come in and create a tough price competition. To try and fend these new competitors off, they began over-planting.
Godin explains: "Once you make the standard, you've created a commodity. Customers will seek out stuff that is the same as your's, but cheaper. That is why China won." New York farmers, who run garlic farms that are but a fraction of the size of California mega-farms, are profiting from and ecstatic about the prices at which they sell their garlic. These farmers are thriving because they've protected their brand and product from becoming average and differentiated from competitor garlic by price only. Unlike the price of garlic, the brand of garlic is not something that new companies from around the world could come into the market and compete on easily.
Why is this so difficult to do?
Gordon Graham writes the blog, Broken Bulbs: Innovation. Graham is currently in Taiwan performing post graduate research on the innovation strategies of Taiwanese firms active in multiple country markets.
In a post entitled "Brand Innovation in Taiwan", Graham writes:
Here in Taiwan many of the high-profile OEM/ODM firms are having a go at developing their own brands as a way out of the price game and its teeny-weeny margins. Though many firms are attracted to the idea of selling their own-branded products, they are finding that moving from OEM/ODM is not as easy as it looks. Many have given up -- retracting back into what they do best: manufacturing complex, mass-produced electronic products in low-wage locations for other firms. Why is the move forward into brands so difficult for these Taiwan-based firms?
Some of the interesting reasons he cites?
- It requires patience. It can take years to get a return on the investment.
- It requires a deep interest in and understanding of country-markets in far away lands.
- It requires an interest in and understanding of other cultures.
- It requires a change in attitude: you can't treat your staff as if they still work in a factory.
- It requires a loyal and committed staff that buy into the brand idea.
- It requires moving directly into the media spotlight -- something many Taiwan-owned businesses prefer not to do.
- A brand requires an authentic story -- not anonymous, behind-the-scenes PR.
- A brand is often linked to a country of origin and this needs to be actively articulated.
As the Taiwanese are finding out, branding is a challenge. Branding is about creating and spreading ideas, messages, and experiences. Cooking and eating garlic is pretty standard, unless it's $9 a pound garlic from NY. That's an experience. Talking on a cellphone is pretty standard, no matter the phone--unless it's an IPhone. Branding takes time, resources, and care. So does manufacturing high-quality products. But branding is altogether quite different than what's required to manufacture 100,000 units of a cell phone. Those that make the investment in brand, can sell a bottle of water for up to 1000x the price of tap water. They can sell garlic up to $9 per pound. A cell phone for $600. And maybe...$300 socks someday?
In branding, the sky is the limit. In manufacturing, you can hit the floor pretty fast and before you know it, your product is produced as cheaply as possible in a given location and there is no way to accomplish this task more cheaply except by picking up and moving to a new destination.
It's no secret that fantastic profits being made now and in the future are and will be made by companies that are the most adept at managing their brands in the minds of consumers while producing their products cost-effectively in offshore destinations--thus maximizing both ends. Both activities require competency to be successful, and companies are generally better in one of these activities. To be successful in the other, they either acquire the talent or outsource the task.
What are you good at? Should/Can you acquire or outsource the other?
Global Sourcing Specialists