Not all categories carry equal weight in the eyes of the end customer. While most subcategories—like metal fabrications, castings, molded plastics, or internal wiring—go unnoticed by consumers, some carry brand significance that can greatly impact buying decisions. In these cases, manufacturers must adopt a more strategic approach to sourcing in order to align with customer expectations, preserve margins, and maintain operational flexibility.
What Are Brand-Sensitive Categories?
Brand-sensitive categories are those where the end customer has a specific preference or expectation for a known supplier brand. Common examples include tires, sensors, gas engines, infotainment systems, and batteries. In these instances, the brand’s value transcends technical performance and influences marketing, resale value, and the overall customer perception of the final product.
Unlike most categories sourced with a narrow supplier pool and forecast-based demand, brand-sensitive categories often require a broader network of suppliers to accommodate customer choice. This introduces demand variability, as category usage aligns more closely with order configurations than traditional production forecasts.
Strategic Considerations for Sourcing Brand-Sensitive Categories
At Tenet Consulting, we guide clients in developing sourcing strategies that consider both customer preferences and bottom-line performance. Key practices include:
- Customer Markup Strategy: Shift the focus from the lowest piece price to the best total value. If the company can mark up the finished product based on the customer’s brand selection, it can protect or even enhance margins. In this model, higher input costs may be justified by higher sell-through value.
- Procurement Metric Alignment: Traditional sourcing metrics, such as cost reduction targets, may need to evolve. For instance, if a premium brand costs 5% more but allows a 7% product markup, the net benefit justifies the selection. Procurement KPIs should reflect total profitability rather than just unit-level savings.
- Regional Brand Preference: Brand influence often varies by market. A globally recognized category may hold value in one country but not in another. Sourcing strategies should account for regional brand strength and customer expectations.
- Good–Better–Best Product Tiering: Implement tiered offerings incorporating a mix of low-cost and premium brands. This approach allows manufacturers to cater to all customer segments—those seeking affordability and those willing to pay more for recognized brands. Consistent margin structures across tiers ensure financial predictability regardless of brand selection.
- Leveraging Brand Competition: Utilize the presence of multiple brand options to negotiate better terms. Encourage competing suppliers to provide value-added services, like extended warranties, improved lead times, or enhanced field support, to win customer favor—without compromising your internal cost targets.
Previous Client Example – Tire Category Strategy
A Tenet client in the off-highway equipment industry faced challenges sourcing tires due to a lack of a coherent brand strategy. Contracts were limited to volume commitments, and supplier segmentation had not been standardized across regions or brands. Consequently, the client unknowingly lost over $1,000 per unit in margin when certain premium tire brands were selected by end customers.
We restructured the supply base by eliminating low-performing brands, introducing new strategic suppliers, and segmenting the offering into a Good–Better–Best model tailored to regional preferences. By aligning markup policies with actual costs and brand perception, we ensured consistent profitability regardless of the chosen brand. The outcome included simplified supplier management, improved delivery and quality through volume consolidation, and full margin recovery on brand-sensitive sales. By the end of the second wave, we delivered over $165 million in annualized savings for our client.
For more details on this success story, read about our client results in the Powersports OEM case.
Conclusion
Sourcing brand-sensitive categories requires a different lens—one that balances procurement discipline with commercial strategy. Tenet Consulting helps manufacturers develop sourcing models that respect customer preferences while protecting margins, ensuring global flexibility, and promoting long-term supplier performance. With the right strategies, brand-sensitive sourcing can become a lever for both customer satisfaction and competitive differentiation.
Take Action Today
Don’t let brand-sensitive challenges undermine your profitability and market position. Contact Tenet Consulting today to learn how we can help you implement effective sourcing strategies tailored to your unique needs.
