« New market entry in electronics: iLo | Main | Retail trends »

Controlling distribution channels

Often the branded final product is the only identity a customer is aware of, let alone remembers.  This is a problem for those products that are components -- they are invisible to the general marketplace and the product they fit into begins to control their access to markets.  The only way these component parts can get distributed, if they truly are invisible to the marketplace, is inside another product, and that product now has a lot of leverage when negotiating new contracts.

There have been numerous innovations to get around this control of distribution channels:  Intel made the processor that is inside a lot of computers and began requiring end users to put the "Intel inside" logo on their product so that the public recognized Intel and might even learn to prefer their product; NutraSweet required, as long as they had the patent on aspartame, that any product that used their sweetner as an ingredient must display the NutraSweet logo where ever the name of the product appeared (like on a can of Coke, if the Coke name was there, the NutraSweet logo had to be there); pharmaceuticals have tried advertising directly to customers so that they go to their medical-care providers and request brands by name -- brands that were invisible to the customer before.

Nokia_battery_1This fight has come to the battery market.  NEC makes it so the customer can't use other batteries in their products.  Nokia, not quite so agressive, is starting to brand their batteries:

Nokia has announced that they will begin branding their batteries with a holographic logo and a hidden serial number that customers can verify either online or via a text message. (At least they’re still letting consumers use third-party batteries, unlike NEC, which actually locks them out.) Low-quality aftermarket batteries have been blamed for calamities from poor power levels to exploding phones. But the real issue for companies like Nokia may just be that third-party batteries are a lot cheaper than branded ones.

Chemical companies who manufacture chemicals that are in the batteries aren't in the picture yet, apparently.  It might not be long, though, before we see "lithium mixed metal oxides in this fine product provided by Acme Chemical."  They may have to start making batteries larger just to get the logos to fit.

Posted by Dan Brooks on December 16, 2004 at 11:32 AM | Permalink

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d83455a6ed69e200d8350c194053ef

Listed below are links to weblogs that reference Controlling distribution channels: