Manufacturers Need Marketing to Become a Brand
Today, contract manufacturers are starting to create consumer brands of their own. This idea is attractive, especially when you consider the potential profit margins. Many manufacturers, however, are not structured for creating a brand. The biggest challenge these companies face is a lack of a marketing-centric outlook due to adhering to a superannuated sales-centric mentality.
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Manufacturers that want to create a brand need to be “Marketing-Centric”
“Marketing is as different from selling as chemistry is from alchemy, astronomy is from astrology, chess from checkers.”
Contract manufacturers that create their own brand can increase the potential for larger profit margins on products sold.
Most brands do not manufacture the products they sell in the marketplace. In most cases, the branded company does not own any manufacturing facilities and instead purchases their finished goods from a manufacturing supplier through what is typically called Contract Manufacturing. This reality is especially evident in consumer products such as electronics and apparel. For example, a separate company called Hon Hai Precision Industry Co., LTD (more commonly known as Foxconn), produces Apple's iPhone. Interestingly, this company also makes smartphones for Apple's competitors as well, which is not uncommon for many contract manufacturers. The fact is that many contract manufacturers are behind the scenes. In several cases, they are also responsible for the innovations that many brands tout as their own. I, too, worked for a contract manufacturer in the outdoor industry. Recognized as a leading innovator in hosiery manufacturing, we made products for many established brands as well as numerous private label retailers.
Today, contract manufacturers are starting to create consumer brands of their own. For example, Foxconn created a brand of smartphones. This idea is attractive, especially when you consider the potential profit margins. A manufacturer can realize a healthy gross margin on its own branded products compared to ones it manufactures for other brands. Many manufacturers, however, are not structured for creating a brand. The biggest challenge these companies face is a lack of a marketing-centric outlook due to adhering to a superannuated sales-centric mentality.
In my experience, profitable and growing contract manufacturers were successful by focusing on two critical tenets: 1) Quality Products and 2) Competitive Prices. This emphasis made sense. Their customers – Brands – were concerned about the same thing. The main difference is the role marketing plays in the relationship between manufacturer and brand compared to that of brand and consumer. It’s this difference that eludes manufacturers who wish to become a consumer brand. In their current customer relationship paradigm, a sales-centric strategy worked with marketing only seen as a support function to the sales organization.
David Kurtz’s four eras of marketing history from “Contemporary Marketing.”
This perspective has its roots in what author David Kurtz refers to as the “Sales Era.” In the book “Contemporary Marketing,” Kurtz discusses the four eras of marketing history. His evaluation identifies the “Sales Era” as a shift in the business/customer dynamics that occurred in the early 20th century as manufacturing output increased. Companies began to shift their focus on growing a sales force to find and retain customers. According to Kurtz, “Companies with a sales orientation assume that customers will resist purchasing nonessential goods and services and that the task of personal selling and advertising is to persuade them to buy. Kurtz further notes that “although marketing departments began to emerge, they tended to remain subordinate” to sales. The discussion of marketing history notes, however, that this era seemed to have faded in the middle of the last century – giving way to the Marketing Era and the Relationship Era. Yet today, many manufacturers still seem to remain in the Sales Era – perhaps because it works for them or maybe because they don’t know any different. Their reluctance to shift to marketing-centric orientation will hinder their ability to create and grow a brand. As Theodore Levitt said in “Marketing Myopia,” “The difference between marketing and selling is more than semantic. Selling focuses on the needs of the seller; marketing on the needs of the buyer.” Marketing emphasizes fulfilling consumer needs. Branding is one of the most powerful tools that can influence a customer’s product perceptions. Stated, you cannot become a brand without marketing. It is not a smooth transition from actively selling your products and manufacturing capability to the effort of marketing a brand to consumers. The same techniques used to achieve sales success previously will no longer work.
“Selling focuses on the needs of the seller; marketing on the needs of the buyer.”
So how does a manufacturer overcome its "Sales Era" paradigm to become a brand?
The most crucial step is to enter the 21st century and embrace the tenets of what Kurtz calls the "Relationship Era." This transformation involves developing long-term relationships with the entire value chain from suppliers to customers and other strategic partners. Coupled with this shift is recognizing the importance of marketing to building and sustaining these relationships. The marketing team can no longer be subordinate to sales. They need to be leading the brand's development efforts to include everything from branding to directing the marketing mix. Still, it's essential to recognize that the sales team's function doesn't change in this new orientation. Depending on the sales channels, a sales force will now need to promote and sell the branded product to retailers or distributors. Yet now, they are acting as part of the marketing mix – one of several effective promotion methods necessary to build brand awareness and growth. Although they are still selling a product, they are now also responsible for developing new relationships by promoting a brand.
Consider the contract manufacturer – Cabot Hosiery, located in Vermont. A multi-generational hosiery mill that began making socks in 1978 for apparel brands. But in the early 2000s, after many customers ended contracts with Cabot, the owners had to make a decision. They either had to close the mill or change their business model. The owner's son, Ric Cabot, proposed creating a brand. Instead of manufacturing for other companies, Cabot Hosiery became "Darn Tough." Instead of earning minimal profits from contracts, Darn Tough saw an opportunity to gain a significant gross margin by selling its socks at a premium price within a niche market. Their future success was rooted in their commitment to using marketing to develop and grow the brand, starting with the effective use of promotion to introduce the brand in 2004 when they gave away 3500 pairs of socks at the Vermont City Marathon. Word quickly spread about the sock's durability and the brand's game-changing value proposition of a "Lifetime Guarantee." By the 2010s, their distribution was nationwide, and the brand saw a 60% growth in annual sales. Today, they are a leading outdoor sock brand – second only to Smartwool according to most industry reports.
From Darn Tough Website
Companies that remain in the "Sales Era" are no longer relevant in today's "Relationship Era." They have to evolve. No longer can companies allow marketing to be subordinate to sales. A manufacturer that wants to create and grow a successful brand must be committed to establishing a marketing-centric organization. On the other hand, if a business chooses to retain its sales mentality, they may see short-term revenue, but they will fail to realize long-term brand growth.
Branding and the Marketing Mix
Most companies understand how promotion and branding are related, but what about the other 3 P’s in the Marketing Mix?
Most companies understand how promotion and branding are related, but what about the other 3 P’s in the Marketing Mix?
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Anyone that has ever taken a marketing class will remember learning the marketing four P's, Product, Price, Place, and Promotion. These four pillars of the marketing mix are the foundations for any marketing degree. They are at the root of what any marketer should consider when creating a marketing strategy.
It seems, however, that when companies get into the nuts and bolts of their marketing, many marketers lose sight of the basics. Companies perhaps too heavily focused on Promotion, lose sight, or even relinquish control of the remaining three P's to other parts of the organization. This oversight is extremely myopic for any company, but especially counterproductive when trying to build a brand.
The consumer establishes a brand’s value in the market. Consequently, a brand’s effectiveness directly determines the success of its promotional efforts. The importance of Promotion, therefore, rarely eludes most companies when it comes to brand development. What is less obvious, is the role that the other 3P's play in creating brand value. Influencing consumer brand perception relies on the strategic decisions made regarding Product, Price, and Place.
Below are three strategic insights that marketers should consider when creating a brand.
Beyond the Core Product
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While teaching a Principles of Marketing course, I discovered fresh insight into Phillip Kotler's three levels of product. Unlike Kotler’s viewpoint, this new strategy perspective describes product offerings as follows:
Core Product: represents the solution for sale—the form/function utility that creates the set of benefits that allow it to fill a need.
Expanded Product: includes the mix of tangible attributes and intangible product support.
Product Concept: describes the product in terms of the market niche to be served, the life cycle it will experience in the marketplace, and the impact of manufacturing and selling it on the company itself.
(Source: Principles of Marketing and Personal Selling – edited by Miguel Sahagun)
Most, if not all, companies understand the core product concept. Beyond that is this idea of the expanded product: what does the product include that allows it to stand out or differentiate itself from other products in the same category? These factors could be anything that adds either tangible or intangible value, such as the type of packaging used to warranties or even just the ease of possession by the consumer (e.g., payment plans and delivery options). Again, many companies understand this aspect and apply it to their product marketing strategy. Even more broadly, however, is the product concept perspective. This strategic choice is where brands truly start to differentiate themselves in the branding process. It can be especially powerful if the brand can create a new product classification as a result - think Apple iPhone's creation of the smartphone category. Another great example is how Smartwool created the performance merino wool outdoor sock category.
By applying the Product Concept, Smartwool created a new category: Technical Performance Outdoor Socks
Image: Smartwool Socks on display at Great Outdoor Provisions Co in Winston Salem, NC (Credit: David Petri)
Smartwool started back in the early 1990s - founded by a couple of ski instructors. They wanted to make better ski and hiking socks (Core Product). To differentiate, they chose New Zealand Merino wool. Merino wool offered not only the traditional properties of wool (insulating even when wet), but unlike coarser wool, it was not itchy. Additionally, they used shrink-treated yarn, which allowed consumers to dry their socks in a dryer (Expanded Product). What ultimately set them apart was the premium price they charged. At $20/pair, Smartwool challenged the conventional wisdom at the time - the idea that consumers would not spend that much on a pair of wool socks. Indeed, the outdoor industry scoffed at this when the brand introduced itself at the Outdoor Retailer trade show in 1995. Yet after retailers discovered the value that consumers would receive with Smartwool, the brand took off. As a result, Smartwool had created a new outdoor sock category - Premium Technical Performance Socks (Product Concept). Twenty-five years later, the brand maintains a greater than 50% market share for socks in the outdoor specialty retail channel. Today, multiple premium outdoor sock brands are competing in this category, including brands like Darn Tough, Point6, Fox River, and Farm to Feet.
(Source: Company Week: Smartwool by Chris Meehan)
Make Sure the Price is Right
Perhaps the easiest way for many companies to determine price is by marking up product costs with a target profit margin. Most marketing professionals, however, will state that's not how you create a pricing strategy. A detailed discussion on pricing strategy is a separate topic itself with countless articles on pricing that demonstrate how this approach risks leaving money on the table. Marketers must recognize that Price impacts branding. As a result, they need to consider three primary issues: Reference Pricing, Strategic Objective, and Pricing Strategy.
All consumers maintain a reference price for most goods and services. This comparison typically manifests itself as a range of acceptable prices. Brands entering an existing category need to be sensitive to this and ensure that their offering falls within that range. Consumers may draw premature conclusions about the brand if the offering price is at the extremes. If too low, then quality and value may be questioned. In contrast, if too high, consumers may not even consider the offering. Perhaps the rare exception to this is if the brand can create a new category as Smartwool did with socks and Apple did with the iPhone.
Next, brands need to determine their strategic objective regarding pricing decisions. Most marketing literature details two specific pricing strategic objectives:
Profit Maximization - the aim is to generate the highest net income over time. All sales need to ensure that acceptable profit margins are maintained.
Volume Maximization - the primary objective is to generate as much sales volume (and revenue) as possible. This objective creates cash flow at the risk of lowering profits or operating at a loss.
(Source: Principles of Marketing and Personal Selling – edited by Miguel Sahagun)
Volume maximization may be appropriate for commodity offerings in which narrow profit margins are the norm for the category. Yet, I would argue that most brands are seeking long-term growth, which requires investment to increase brand awareness, market penetration, and growing brand loyalty. The best strategic pricing objective, therefore, is maximizing profits.
There are multiple pricing strategies out there. Some brands employ skim pricing, charging a high price to attract a particular consumer or to exhibit a specific value to consumers. This approach primarily works for luxury or premium brands. Other brands go with a price penetration strategy, which is employed to generate sales. In this situation, the company is more likely seeking volume maximization. A new brand looking to compete in an existing category, though, should consider neutral pricing - aligning your price with the competition. Brands using this approach are less likely to turn away potential consumers by being too expensive or leave money on the table at a lower price.
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Beyond matching competitors' prices, neutral pricing requires two critical steps before implementation. The first is that the brand’s differentiation has to be crystal clear. Next, brands need to research the market and determine its positioning among the competition. These two steps, coupled with price parity, allows brands to offer a unique selling proposition to consumers. This competitive differentiation provides your potential customers with more value at the same price. Without it, consumers are less likely to consider your offering.
When I was VP of Marketing for Farm to Feet, we applied a neutral pricing strategy. Our goal was to be a premium sock brand with a 100% American made value proposition. We set our prices on par with our closest competition by evaluating brands such as Smartwool and Darn Tough. Pricing our products on par with existing premium outdoor performance wool socks allowed us to leverage the current perception of these known brands. Ultimately, Farm to Feet justified its premium pricing using the brand's competitive difference, securing its place in the category.
Place is not Just a Location
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Traditionally, many people think that Place, from a marketing perspective, refers to the sales channels or specific "Retailers." And for a long time, that was probably the prevailing mindset or thought. Today, however, marketing courses are teaching that Place refers to the overarching value chain. More and more, companies are including both the product's supply chain and the distribution channel in the marketing mix. Brands seeking to be more transparent with their customers recognize the value of this approach. For some companies, the product's supply chain is an essential branding attribute. Choosing the right suppliers can be as important or, in some cases, more important than the distribution channels in creating brand value. Being aware of that can improve the brand's image.
Icebreaker made supply chain part of its brand - inviting consumers to learn about the source of the Merino Wool used in its products.
Image: Merino Wool Ranch that supplies Icebreaker located on the South Island of New Zealand (Credit: David Petri)
The brand Icebreaker provides an excellent example of employing the value chain in the company's branding. Icebreaker is a Merino New Zealand based apparel brand, now owned by VF Corp. Using New Zealand Merino wool, Icebreaker created a whole line of apparel, including everything from base layers to outerwear and accessories. For several years, they included what they called a "Baacode" - a distinct number on every product package. Using this code, customers could enter the code on the brand's website, and learn about one of the Merino wool ranches in New Zealand. Currently, their website provides a robust supply chain story. This commitment to transparency results in the product supply chain becoming an essential part of the Icebreaker brand image.
The 3P's of branding
Strategic marketing decisions regarding Product, Price, and Place play an important role in a brand’s image.
A well-executed marketing mix is essential for any company's strategy. Equally important is recognizing the role the 4P's has in branding, and to not lose sight of how they fit into a brand narrative. Consumers ultimately dictate a brand's value in the marketplace, which in turn determines how powerful its Promotion will be. To sustain this, companies need to make strategic marketing decisions regarding the other 3P's to influence their brand identity.
Successful brands understand that Product requires thinking beyond their core product. Competitive differentiation stems from also creating an expanded product perspective as well as developing a product concept. Ideally, brands that position their offering with a product concept that creates a new category can become a market leader.
Brands that effectively use Price neither turn customers away nor leave money on the table. Neutral pricing is an optimal approach for new brands to consider - especially when trying to compete in an existing category. To be effective, however, a unique selling proposition is required.
Finally, brands need to consider the entire value chain when developing its Place strategy. A transparent supply chain allows brands to be more authentic, which increases the value consumers will bestow on your brand's image.
What I Learned Creating a New Brand
In 2013, I was part of the leadership team at a sock manufacturer in North Carolina that developed and launched a new sock brand – Farm to Feet.
7 Lessons in Launching an Outdoor Brand
Farm to Feet socks on Appalachian Trail sign in Damascus, VA
In 2013, I helped lead the efforts to develop and launch Farm to Feet. It was a risky endeavor for the very saturated outdoor sock category, but one that our North Carolina sock manufacturing leadership team felt we could undertake. It did not surprise us, though, when we received skepticism from the industry media during the Outdoor Retailer trade show in January 2013, "Oh no, not another sock brand." But as they discovered more about the brand, they admired the concept and how we planned to differentiate it from other established industry brands. With a unique selling proposition — “100% American" — Farm to Feet stood apart from the existing competition because no other brand could make the same claim. Encouraged by the favorable reception during Outdoor Retailer, we moved forward with bringing the Farm to Feet to life. The consumer launch followed eight months later in the fall of 2013 with the first shipment of socks to retailers.
Looking back, I learned several lessons that I believe are necessary for new brands to be successful. These lessons ranged from the actions we did well, and I would not change to the steps we could have done better. For many marketers, these lessons may be obvious, but I would argue they can easily be overlooked — especially for a company that lacks marketing expertise. Regardless of one’s level of brand experience, it can be helpful to reinforce these ideas, so here are the seven things I learned while I directed the marketing for Farm to Feet Socks.
You can create a new brand in a crowded category
Farm to Feet Cascade Locks Technical Hiking Sock
We were sock knitting experts and were considered one of the best manufacturers in the industry. If we could make socks for other brands, why couldn't we create a brand that we could call ours? Cabot Hosiery had done it with Darn Tough. WigWam was a manufacturer and a brand that was nearly a century old as was Fox River. We discovered, however, that no existing brand of socks could claim itself to be 100% American made. This fact was our opportunity to differentiate and create something new in a crowded field of existing brands. What started with a few naysayers lamenting another sock brand, resulted in an exciting opportunity. We learned that yes, even though we were making socks, we could create a new brand that could differentiate itself from the competition. Farm to Feet's 100% American made socks allowed us to be unique within the industry.
Never underestimate the power of Public Relations
As we prepared to launch Farm to Feet, we selected Pale Morning Media — a Vermont-based public relations firm — to be our PR team. Leveraging their expertise with the outdoor industry media, Farm to Feet developed a comprehensive public relations and communication strategy. This plan maximized our promotional reach at a minimal cost. We initially started with trade media that targeted specialty outdoor stores. Through editorial content, we received free publicity, which in turn allowed potential retailers to easily discover us. The real impact was with consumer media outreach. As discussed in the next lesson, Parade Magazine featured Farm to Feet in an article, which resulted in an immediate surge of consumer interest upon launch. Within the first year of the brand, major publications such as Backpacker and Outside featured our socks in their gear guides — further strengthening the brand's reputation and increasing sales. Articles in the Wall Street Journal and Field and Stream resulted in significant online sales for the brand in the weeks that followed publication. Proactive public relations promoted the brand's story much faster and more efficiently than executing a paid advertising campaign with a lower cost per potential customer reached.
Farm to Feet socks featured in both Backpacker & Outside Summer 2014 Gear Guides
Align your distribution strategy with your marketing communications strategy
Initially, we wanted to focus on selling through independent outdoor specialty retail stores, supporting their operations by not competing with them online. We quickly discovered that this was myopic – especially for a new consumer product brand. Unless a brand has mass distribution channels and an established retailer base, your ability to reach customers is limited to only the stores willing to sell your product. Additionally, our public relations efforts started targeting consumers. Upon launch, Parade magazine featured Farm to Feet in a Made in USA article, resulting in eager sock buyers seeking Farm to Feet socks for purchase. Yet, when they searched for an authorized dealer on our website, there found none near them. Undeterred, these excited new customers then sought to purchase online, but could not. Within a week after that article and also receiving numerous requests to buy online, we created and launched an eCommerce site. In hindsight, if we were promoting nationally, then consumers needed access to the product for purchase. The easiest and quickest way to accomplish that is by including eCommerce as part of an omnichannel distribution strategy.
Farm to Feet display in Great Outdoor Provisions Company
Stay Focussed on Your Niche
Farm to Feet wanted to be an outdoor sock brand. Yet, we found ourselves developing socks for many different activities and uses. There is a logical reason for offering an extensive product assortment to consumers. What we learned, however, is that although some categories made sense, it quickly became quite challenging to focus our marketing resources. Moreover, our SKU and inventory management became unwieldy and financially untenable. We needed to adjust our efforts with a specific brand and product focus. This new adjustment began in 2017 as part of a branding update exercise. With outdoors as our primary focus, Farm to Feet created a new brand mission with an emphasis on trail-related activities. Ultimately the brand became re-energized with a new cynosure, allowing for the marketing team to prioritize its promotional efforts.
Brand Mission, Vision, and Values are Essential
We started with a "mission-like" statement that, in retrospect, was too broad. The brand needed clarity and a core purpose for existing. In early, 2018, Farm to Feet launched its new Mission and Vision rooted in the following principles:
Manufacture the best American-made socks
Improve the outdoor recreation experience
Advocate for the protection of wild places
Establishing a brand mission, vision, and values determine the north star for a brand – providing the essential focal point when making product and branding decisions. In doing this, we reflected our outdoor brand values, aligned Farm to Feet's purpose as a trail brand, and committed ourselves to the products we wanted to sell.
Farm to Feet’s Mission: Celebrating the American manufacturing tradition, Farm to Feet creates the world’s best socks for everyone to follow their own trail.
Be Authentic
Authenticity is a critical factor in the long-term success of a brand. We knew this when we started Farm to Feet. To begin our efforts, we ensured our marketing communications always emphasized our brand story, which included our supply chain. In particular, we highlighted the following taglines:
US Materials
US Manufacturing
US Workers
We brought this to life by sharing the stories from our supply chain and introducing consumers to real people and the companies engaged in the Farm to Feet story. We highlighted real Americans on our website and our packaging, such as Wyoming sheep rancher, Fred Roberts, to master knitting technician, Ken Shumate. Eventually, we produced a series of videos about our suppliers and their employees.
Another way we maintain genuineness was by promoting the brand story without co-opting the United States flag to demonstrate our "Made in the USA” credentials. In fact, including the national flag on our packaging was something I strongly opposed because it violated the US Flag Code. What's more, including old glory on packaging is not authentic. Real authenticity comes from storytelling, transparency, and commitment to purpose – not from placing a symbol on your packaging. Brands that demonstrate authenticity do so by providing consumers a glimpse into what makes them genuine while avoiding gimmicks that merely embellish.
Examples of Farm to Feet’s original packaging featuring people associated with the Brand
One of Farm to Feet’s marketing strategies was to partner with organizations like the Friends of the Mountains-to-Sea Trail in North Carolina
Be Marketing Centric – Not Sales Centric
A primary challenge for a private label manufacturer that becomes a consumer brand is shifting from a sales-centric mindset to one that is marketing focussed. This shift can be especially tricky when the manufacturing company never employed traditional marketing in its business strategy. Launching a brand was our company’s first foray into consumer marketing. Before creating Farm to Feet, we manufactured socks for other companies. Consequently, we did not need to promote these products to consumers, because our customers oversaw the marketing necessary to sell to the end-user. At the same time, we never relied on B2B marketing or had a marketing department. Instead, we focussed on leveraging our well-established reputation as a private label sock knitting mill to attract customers and generate sales. Yet with Farm to Feet, not only did we need to promote the brand to retailers, but we also had to generate consumer demand and interest in our socks. This effort would required marketing with sales as a critical element in the promotional action plan.
I discovered that it is difficult for those with a sales-centric philosophy to recognize that the sales team is part of the marketing mix – not separate from it. Sales professionals may disagree, perhaps seeing themselves as the primary contributor to the success or the failure of a brand. To be sure, they are essential in getting products on the shelves and in front of the consumers. Consider, however, that the marketing mix consists of product, price, place, and promotion. In that paradigm, the sales team becomes a significant element of the promotion plan. Brands need to recognize this distinction and ensure the sales team is as proficient in marketing the brand as well as they are in selling the product and generating orders. They need to be a walking and breathing promotion for the brand. This approach places marketing at the center of the sales team's actions, with sales being the metric that measures success. With marketing at the center of a brand's strategy, the sales team becomes a vital extension of the marketing promotional action plan vice marketing serving only as a support function to sales.
Creating a new brand can be exciting while also be daunting. Companies will endure adversity along the way, with the successful ones learning from the experience. Farm to Feet is still a nascent brand within the outdoor specialty retail market. Yet despite the odds, it realized success in the face of profoundly entrenched competition. During my tenure as VP of Marketing between 2013 and 2018, Farm to Feet experienced an average year-over-year sales growth of greater than 60% and increased the number of retail doors from 40 to over 1000. By 2018, our brand had become one of the better-known sock brands in the outdoor market. Although our largest competitors like Smartwool and Darn Tough enjoyed close to 70% combined market share, some retailers reported to us that Farm to Feet was 40% of their annual sock sales. By 2018, we had about a 5% market share for hiking socks in the outdoor specialty retail sales channel, compared to some well-established brands that had been around for decades earning less than a 2% share.
The secret of a brand’s success is a direct result of overcoming challenges and gaining insight along the way. Looking back, lessons that Farm to Feet learned can be illustrative for other companies wanting to start a brand. This insight included that creating a new brand can occur in a crowded product category and that public relations are essential to raising awareness upon launch — as long as you align the distribution strategy with it. Eventually, once you started a brand, its success requires a marketing-centric approach with an authentic commitment to the brand’s niche; guided by a clear mission and vision.
Author hiking with friends in Montana — wearing Farm to Feet socks