The practice of brand development is now extending into the OE supplier industry. But building a global brand can be very expensive and B2B industries often have little or no experience in this area. So exactly what opportunities are there from OE supplier branding, what measures need to be taken to build that brand, and what is current best practice in the global supplier industry? Susan Brown investigates

FOR most OE suppliers the company name is the brand - whether they do any significant brand development or not. Most suppliers would say that it is important to have a good name. But to understand the benefits and what they are worth it is necessary to look closer at what branding is.

One of the most indisputable benefits is that a strong brand gains a company recognition. It means they are taken seriously in competitive bid situations, and it can open doors when trying to win new business with an OEM that the supplier does not already have a relationship with. As the number of supplier companies reduces, OEMs can more easily have a knowledge of global suppliers without ever having done any business with them. They gain an impression of that company through what they read in the press, and what they see of them at motor shows.

For Delphi, for example, its corporate image is part of a process of educating OEMs that Delphi is not just a spin-off from GM, and that it has its own character, as a lean and high-tech company. It is all a part of defining and building the company both internally and externally. "Over time brands will become more important because ultimately they are what people paint as a mental picture of your company," said Bill LaFontaine, global director of marketing at Delphi.

According to marketing textbooks, the brand value is the difference between what customers will pay for a branded product versus a non-branded product. A recent survey by JD Power found that consumers are willing to pay $800 for a branded digital premium sound package, $400 more compared with an unbranded system. While this kind of comparison does not necessarily translate into the OE market, OEMs will pay a higher price to work with a brand they can trust. They will not take a risk to work with a new supplier on price alone, when they can pay a bit more to work with a supplier they have a good experience of and can trust. Another way of looking at this, once again referring to the textbooks, is that a brand is a promise of trust.

What the branding experts say "Strong branding is how every great organization defines its purpose, is known and remembered. It delivers top of mind and emotional connection. In fact, great branding does something that defies logic. It gives you personality.

It pushes them [the customer] to commit to you long-term because they understand you, can relate to you, even like you. Not merely because you communicate and act relevantly, but because you deliver them what they're actually looking for and have been asking for.

No other growth strategy does this. No other aspect of business forges this level of relationship, recognition, understanding successfully." Grenville Main, Managing Director of DNA Design, on his company's website,undated

Asset value
Benefits from branding can be more tangible still. Strong brands can be viewed as an asset and valued as such on a company's balance sheet; this can help raise finance for investment, which is a major issue for the automotive industry today. Proponents of branding strategies also argue that brand is a valuable growth strategy. While some companies focus on efficiency and cost cutting, this does not add value. "Efficiency-hunting contributes to a better, leaner, fasterto-market organisation. It adds to the bottom line because it subtracts cost. But to fund it,companies are only playing the short game and milking their cash cows dry," said one branding expert. There are many similar statements to be found on the internet and in brand management books.

Number of brands
As suppliers consolidate they are tempted to consolidate their brands to simplify and maintain the clarity of their main brand. Sometimes, however, it may be better to maintain multiple brands, both because there are benefits to be gained from an existing brand's value, and also because by keeping it separate it is easier to sell on in the future.

Honeywell Transport and Power Systems (Honeywell) supports a number of well-known brands such as Bendix, Garrett, and FRAM. In an interview in late 2002, Robert J Gillette, president and CEO of Honeywell, told us that this approach "is not transparent and maybe loses the company clout with OEMs". But he made it clear that by keeping separate brands the company has more flexibility. He went on to compare his situation with that of Dana. "Dana would have gained nothing from changing FTE's brand before it sold it 18 months ago," he said. Indeed, Honeywell has recently held talks about the possible sale of its Bendix business to Federal-Mogul, although a sale did not actually come about.

When INA acquired FAG it decided to maintain the FAG brand name and try to leverage it. "The brand name will definitely be maintained because FAG has a great customer reputation and a great image," said Jurgen Geissinger, CEO of INA. The addition of a brand name to the INA portfolio, which also includes LuK, was seen as offering an opportunity to exploit synergies. "Synergy is growth opportunities, systems capabilities, engineering power, additional products, product portfolio enlargement," he said. Similarly, when TRW acquired Lucas it decided to maintain the Lucas brand name, it was considered the leading aftermarket brand at the time, "both in terms of reputation and in terms of volume market share," according to François Augnet, European director and general manager TRW Automotive Aftermarket.

Following its takeover of Grundig in late 2003, Delphi will maintain the Grundig brand. "As Delphi continues to grow in the OE entertainment area and in consumer electronics Grundig, with the cache attached to it, offers an intriguing opportunity to bundle Grundig and Delphi together, and help grow the business," said LaFontaine.

Image survey ranks Bosch highest
A recent survey on behalf of the German Manager Magazin ranked Bosch as having the best corporate image of all automotive suppliers among German executives. Second was Michelin and third, Siemens VDO. This is the seventh time that Bosch has topped the automotive supplier rankings (the study has been conducted 12 times in all). The 'Image Profiles' study is conducted every two ears on behalf of the magazine by Emnid-Institut and the BIK-Umfrageforschung, which conducted a poll of 2,500 German executives, asking for their opinions on Germany's major corporations (171 companies in all). However, according to the study, all the suppliers below the top three had average or less than average overall scores. Nevertheless all, apart from Benteler, beat Opel (ranked 118). Overall the top brands were automotive - Porsche had the top spot, followed by BMW (2), Audi (3) and DaimlerChrysler (4).

In the pure OE sector consolidation is more likely. Mahle is one company that has consolidated brands. This is largely because it is OE-focused.

"It does not make sense for a company of our size to have different brands in different regions for different products, because all of our customers are meanwhile global companies and it does not make sense to talk to Mitsubishi in this country with the brand of, for example, Izumi Corporation, when they are developing and producing the same products as Mahle in Europe," said Prof. Dr. Heinz Junker, CEO of Mahle.

Case Study - Alpine

Premium in-car entertainment supplier - supplies direct to aftermarket and to luxury brands for OE fitment. Japanese ownership but not perceived as such, probably attributable to aftermarket brand development efforts.

Brand values at OE level?
The five stripes of excellence in the Alpine logo are carried through all of Alpine's business areas and define the internal culture. The five stripes stand for 1. Engineering, 2. Products, 3. Marketing, 4. Service, 5. Retail Sales

Examples of OEM partnerships
Only supplies prestige marques. Works closely with Jaguar - Alpine is the only other brand name on a Jaguar car.

No. of brands
One brand.

Events and activities
At OE level participates in motorsport sponsorship. Relies heavily on PR and relationships with prestige marques.

Its strategy is different for the aftermarket. It dropped the Knecht name for OE customers but still uses it in the aftermarket. "Up until four or five years ago, Knecht was only a European company, and we said it does not make sense to introduce a new brand name into Asia or into north or south America if you have already a strong brand in these regions, namely the Mahle brand," said Junker. There are exceptions. Magna, is an extremely successful OE supplier, but operates in a highly
fragmented way and maintains different brands for each of its business areas - Cosma, Decoma, Intier, Magna, Magna Donnelly, Magna Steyr and Tesma.

Product technology brands
While the industry is losing some brand names with the wave of consolidation, new brands do appear to help describe new technologies or new businesses, and associate that new technology with a particular company. Some companies are more positive about this kind of activity than others. Jeff Rose senior vice president with Collins & Aikman said: "I think we do it so that we can consistently call it the same thing in our company to our customers, but I don't know if it's a huge brand. The brand recognition tends to be the company, not necessarily our sub-products."

Michelin's PAX System, for example, is used to describe a package of innovative tire technologies and features. It does so succinctly, and thereby, once Michelin has educated its target audience, the use of the term can aid communication. However, in this case the terminology, and use of Michelin's name is carried over into product literature for the cars they are featured on. Audi for example, cites the Michelin PAX System as a feature in its product literature.

But product brand names rarely filter through to the consumer level. For example Delphi has trademarked the MagneRide name, but when it is fitted on the Cadillac Seville it is renamed Magnetic Ride Control, and Magnetic Selective Ride Control on the Corvette.

This could be changing, however. "Where there is significant brand differentiation there has been some excellent cooperation between Delphi and the OEs to continue to utilize these brands," said LaFontaine. An example of this is GMC and Chevrolet marketing Quadrasteer as a feature and naming Delphi as the supplier on their product literature.

Nevertheless, "we are taking a hard look at our overall brand portfolio. It is our strategy to build the Delphi brand," said LaFontaine, adding that it is important to be careful not to dilute any master brand strategy by naming new technologies just for the sake of naming them and potentially creating confusion in the marketplace. "We want to focus on the brand names where we think there is an opportunity to build them into consumer brands."

Leveraging supplier brands
One of the major opportunities for OEMs to leverage a supplier's brand is through in-car entertainment and sound systems. For example the only other brand name on a Jaguar car is Alpine, and the two brands are promoted jointly to the benefit of both parties. The Alpine sound system is used as a feature of Jaguar cars and helps sell Jaguar cars. Alpine benefits from the association with Jaguar, because it enhances Alpine's prestige image, explained David Sheen, OEM sales and marketing director with Alpine.

Case Study - Michelin

Like other tire companies the brand name is well-known because of its aftermarket business. A particularly old brand, its symbol is the Michelin man called Bibendum, it is one of the most recognized corporate images worldwide.

Brand values at OE level
Premium product, premium price.

Examples of OEM partnerships
Works with all major OEMs on advanced technology and product development.

No. of brands
Supports a number of local brands, largely through acquisition eg BF Goodrich, Kleber, Uniroyal, Riken, Kormoran. Also has product brands, such as Energy and Pilot. Has recently launched EnTire, its joint venture with TRW for tire pressure monitoring systems. PAX System is trademarked and although fitted by OEMs (not an aftermarket product) it is being used by Audi, for example, as a selling feature.

Events and activities
Advance technology development with all OEMs - concept cars, prototypes Very actively involved in motorsport. Tires are a significant contributing factor to performance of cars and push technical boundaries. Engineers who work on OEM product development often have experience in motorsport. Organizes the Challenge Bibendum event as a showcase for new environmental technologies. Currently involved in extending Michelin brand to motoring and cycling accessories, and Bibendum brand to clothing and office equipment.

There are other examples of OEMs using supplier brands to enhance their own brand. In ride control, Volvo promotes the Monroe brand name, which belongs to Tenneco Automotive as part of its vehicle content. For example Monroe shock absorbers are a selling feature on Volvo's RSeries performance cars. Citroën promotes Kinetic on its World Rally Championship WRC Xsara, Mitsubishi promotes Tenneco Automotive's Kinetic suspension system on its Paris-Dakar Pajero
and Toyota on its Lexus GX 470 SUV.

There are other examples of 'sport trim names', such as BBS for alloy wheels, Brembo for brakes and Recaro for seats. Here the OEM leverages the supplier's brand to help give it credibility in the sports car market, where the OEM itself may not have much credibility.

Where there is a complex product, such as phones, or audio, or possibly navigation, the carmaker may enlist the supplier to give support to their efforts to educate their point-of-sale dealer network, as these are products where the supplier has an interest in the product being well understood at the retail level. This has occurred in a program between BMW and Motorola, whereby Motorola supplied a BMW branded mobile (cell) phone fitted as standard on the 7 Series.

OEMs restrict brand use
There are other supplier brands on the car. The most notable are tires and glass. Headlamp suppliers still have their names or logos on the headlamp casing. Seat belt suppliers have a reference on the base of the belt and some under the hood component suppliers have their names on parts. But incidental use of brand names around a car is disappearing. The number being represented on cars in Europe appears to have fallen, and in the US it has gone further still - particularly in very visible positions such as the instrumentation.

The reason for this is partly that OEMs do not want too many brand names appearing on a car, and thereby diminishing the impact of their own brand. Also it does not add any particular value, and may even add a cost, which OEMs will not bear.

Another reason for restricting brand use is that OEMs often want to keep a close control of the aftermarket, and sell components as original parts coming from the OEM, rather than from the supplier. If the supplier's name were on a component it would be easier for garages to source the same parts directly from the supplier.

Brand development measures - PR
Building a global brand is much easier at the OE level than in the aftermarket because there are fewer potential customers. Nevertheless, individuals within OEMs will still be influenced by what they perceive in their own consumer world, and in their local business experience. PR is a major opportunity for suppliers to influence the way they are perceived by OEMs.

At the OE level the other main way to develop the brand is through direct selling situations, nurturing existing contacts, and ensuring that the experience of working with the supplier lives up to and even exceeds the OEM's expectations.

Delphi has even conducted television advertising campaigns, and sought coverage in Wired magazine to help build the brand beyond the OE market and among automotive shareholders, for example. "It has been part of our strategy to turn Delphi into a well-known brand, not just in the automotive space, but in the technological space," said LaFontaine. Still, examples of suppliers conducting this kind of activity are rare. This advertising will help Delphi when it expands into
areas where it is not so well-known, such as commercial vehicles, medical equipment and computer peripherals.

But companies should not rely too heavily on PR alone. "Technology companies tend to see brand development in terms of a communications tool, rather than a marketing tool, whereas you cannot achieve a powerful brand, without really understanding your marketing in the classical sense," said Richard Gotch, a marketing consultant representing Delphi in the UK. "You have to be able to segment your market and know who you are trying to reach."

Brand development measures - OEM relationships
The Michelin brand is extremely well-known, and no doubt this awareness is aided by its aftermarket and travel guide activities, but Michelin still maintains that it promotes itself with the OEMs by working with them on concept cars and advanced technology projects. "Michelin is probably the biggest partner with all motor manufacturers. We spend more time and money working with engineers at motor manufacturers than any other brand. We are very proud of that," said Stuart McCrudden, a spokesperson for Michelin.

Michelin and TRW have recently launched EnTire, a joint-venture tire pressure monitoring system, and to develop that brand all they have had to do is generate customer awareness - and this was easily done by using a sales team to present the products to existing customer contacts, using sales staff that already have relationships with the OEMs. Combine this with a little good PR in the trade and industry press and the company is already able to say that within the OE
market it has a strong brand name.

Delphi agrees that face-to-face contact is critical in brand development. "Suppliers can position themselves as a premium brand, or as the customer's favourite supplier. In that way they will be welcomed as part of the team," said LaFontaine.

Case Study - Delphi

Delphi is successfully reshaping its business from the myriad of disparate companies that were spun off from GM. Developing Delphi as a high tech brand is central to how it is defined both internally and externally.

Brand values
Innovation, technology leadership, being able to deliver on what is promised.

Examples of OEM partnerships
As its major customer GM does offer Delphi brand development opportunities. Delphi has showcased technologies at press launch events, for example.

No. of brands
Has developed a couple of OE product brands eg Quadrasteer, MagneRide, but only focuses on developing product names that will filter through to the consumer. In the aftermarket is having a lot of success with its satellite radio systems, known as XM SKYFi.

Events and activities
Advertising, including TV advertising, PR, motorsport, but mostly 'walking the talk'.

Brand development measures - Motorsport
Motorsport sponsorship is an important activity for many aftermarket suppliers for reaching their consumer markets, but it can also have brand-development benefits for OE suppliers. On the one hand it can engage suppliers with OEMs in a relationship-building activity, where product development engineers are working together, for example.

Delphi sees motorsport involvement as an opportunity for engaging with OEMs on a subject they have in common and in an environment that is outside the offer.

Many suppliers conduct corporate entertainment at motorsport events, and this has the biggest impact if the supplier has participated in the engineering. "We host customers at practically all of our motorsport events," said LaFontaine.

Mahle supplies six out of ten Formula 1 teams with engine components but has become more closely involved with Ferrari, and the Mahle logo is carried on Ferrari Formula 1 cars. This was a way of securing a long-term contract with the OEM. The fact that Ferrari has done so well has been an added bonus, "but it was not part of our overall plan to use motorsport to strengthen our brand name," said Junker.

Junker sees motorsport as a major learning opportunity for young engineers, "you cannot do your normal 40-hours a week job, you have to work overtime all the time, and it is a good learning situation for young people and it is creating motivation for the people involved in this area." Furthermore, Mahle benefits from technology developments through motorsport. The use of alloys in engines was pioneered on Formula 1, for example.

Technology development is often cited as a key reason for participating in motorsport, but the benefits to a company's corporate image are an undeniable spin-off. In reality brand image is built up by a combination of factors - not all of which have a dollar cost attached to them. "Our brand is not just built up by traditional marketing activities, it is built up by all our employees, our PR activities, our corporate reputation. Every Delphi employee is a brand ambassador," said LaFontaine.

There is virtually no risk to having a strong brand, but if you have a weak brand it can be easily destroyed. "What makes a good brand is a company that ifferentiates itself well, that lives the values of the brand and then communicates them well," said Gotch. "Whatever you tell people about your brand you had better be able to back it up," said LaFontaine. So having a weak brand is a risk, having a strong brand is not.

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