Professional Documents
Culture Documents
n Topic Page
o number
2 Is Co-branding new? 2
a Promotional/sponsorship co-branding 7
b Ingredient co-branding 8
c Alliance co-branding 10
d Innovation-based co-branding 10
6 Focusing on Process 11
7 Dilution 11
8 Devaluation 12
9 Measuring co branding 17
11 Co branding in India 23
12 Brand Flavoring 25
Introduction
The rise of co- branding is symptomatic of our era, with its culture of networking
and partnerships. It is also the result of a desire to remain within the company’s
key competences, to the point of looking elsewhere for those competences that
are missing. It therefore merits an in- depth discussion.
Is co-branding new?
No. There are early classics- detergents endorsed by white goods brands, and oil
brands endorsed by car manufacturers. Later, in the 1960’s Kellogg’s Betty
Crocket added Sunkist lemon cake as a line extension. Finally, Grand Marnier
flavored ice creams are well known.
What is new is today’s corporate awareness that strategic alliances are essential to
acquiring and maintaining a competitive edge. Coopetition, a new word coined by
Brandenburger and Nalebuff (1996), illustrates this new attitude. The idea:
sometimes corporations may have to cooperate with and compete against the
same company. From this standpoint, co-branding is an alliance made visible;
furthermore, co branding involves recognizing that the public’s knowledge of an
alliance is added value.
Even though co branding has become fashionable, not all alliances should be made
visible.
- In the photocopy market, many products sold by, say, Canon are actually made
by Ricoh.
- In the car industry, although the rover company is now owned by BMW, at the
product level Rover cars show no BMW insignia. Mercedes and Swatch have
created a joint venture to produce and market a revolutionary new car, called
Smart, to which each company will add its specific expertise. However, Mercedes is
unlikely to put its trademark on the smart!
- To conquer the iced tea market (despite late entry), Nestle and coca Cola decided
to unite against Unilever’s Lipton range. Nestle would create and market the
product, and Coca Cola would distribute it. The product, called Nestea, is not co-
branded, though the Coca Cola Company gets only a small mention on the back of
the packaging.
Why there is rise in co- branding?
In west, the brand is the name for a specific expertise or state of mind (in Asia, the
brand is far less specialized). When trying to grow, the brand can reach the limits
of its own identity and its specificity: it therefore has need of an ally to fill the gaps
where it is not competent but not legitimate. When this ally is competent but not
legitimate, the partnership does not give rise to co- branding.
We can see therefore several strategic questions arise on the subject of co-
branding:
➢ Will the visible alliance of two brands create a favorable impression among
customers?
➢ Is there a high degree of complementarities between two brand images that
will create value?
➢ Is there a good ’fit’ between these two brands, given the perceived status of
each?
As with any successful marriage, of course there must be complementarities,
but also a common vision and shared values.
➢ Will the innovation be attributed to both partners, or only to one of them?
- To maximize their brand extension success rates, many companies seek help
from other companies’ brands, whose established reputation in the new market
might price decisive. Hence Kellogg’s co branded its cereals for health-oriented
adults with Healthy choice.
- Co-branding may help usage extension. In Europe, for instance, Bacardi and coke
advertise together. This helps Bacardi’s market penetration strategy because the
ads demonstrate another way to drink Bacardi. Moreover, Bacardi’s status is a
powerful endorsement for Coke as the ideal mixer. Thus the pairing also benefits
Coke, which wants to remain the number one adult soft drink.
Types of Co-branding
The uncomplicated type of co-branding can create significant value for companies and their customers,
the potential of more durable and innovative co-branding approaches—those that focus on combining
the real capabilities of partner companies to create new customer-perceived value—is far greater. And in
the current economic environment, with its burdensome spending constraints, co-branding is an
increasingly important tool for generating additional value.
Besides reducing costs—including many R&D and marketing expenses—co-branding is attractive for its
ability to quickly transfer the stature, imagery and approbation of one brand to another. In short, it can
rapidly improve almost every aspect of the marketing funnel, from creating initial awareness to building
loyalty.
Most companies have explored co-branding at one time or another. But few have realized its full
potential. While there are many forms of co-branding, before a company can decide which option makes
the most sense for its situation, it must fully explore four main types of co-branding.
Each is differentiated by its level of customer value creation, by its expected duration and, perhaps most
important, by the risks it poses to the company. These risks include the loss of investment, the
diminution of brand equity and the value lost by failing to focus on a more rewarding strategy
✔ Promotional/Sponsorship Co-Branding
✔ Ingredient Co-Branding
✔ Value Chain Co-Branding
• Product Service Co-Branding,
• Supplier-retailer, and
• Alliance Co-Branding.
✔ Innovation-Based Co-Branding
Let’s take a small example: Consider that there is a manufacturer who is into
apparel and fashion accessories for the young, urban working class segment.
In such a case, we can certainly identify some items that he/she might be
interested in:
Latest cellphones
MP3 Players
Cars / bikes
Branded clothing
Fashion accessories
Personal Grooming products
Restaurants
Non-traditional cuisine
Non- traditional recreational places
Travel
So it becomes easy for a marketer to select products which help him shape
his target group. This is basically the first step for any co-branding exercise
where the marketer identifies the products/benefits which when clubbed
would provide the consumer more advantages than the both of them put
together.
Need for a strategic fit
Whenever brands go in for co branding, they must ensure that there is a strategic fit,
especially in the consumer's mind. The above model shows the options a particular co
branding exercise can result in. Needless to say the best option is when there is a positive
change in attitude for both the products. Successful co-branding occurs when both brands
add value to a partnership. The value-added potential should be assessed by examining
both the complementarily between the two brands and the potential customer base for the
co-brand. A great deal of attention has been given to the potential for interbrand effects in
co-branding, that is, the potential for enhancement or diminishment of the brand equity of
either partner. Much of this attention has been directed to effects on brand attitudes. In
general, research suggests that consumers tend to respond favorably to co-brands in which
each partner appears to have a legitimate fit with the product category, and the attitudes
towards the parent brands will be reinforced, or at least maintained, as a result of the
partnership.
E.g. consider an alliance between brand Amitabh and Dabur. After they get together, it is
important for the manufacturer to realise whether the perceived brand value of either of the
two brands has increased. In case there is a genuine fit between the two, it will be accepted
by the consumers.
Retail Co-Branding: The future ahead
In India, retail is poised to be the next big thing. Apart from the growth prospects, it gives
retailers a lot of opportunities to create alliances to strengthen their marketing offers. With
a lot of companies entering the retail scenario, it becomes imperative they resort to co
branding and/or strategic alliances in order to strengthen their consumer base. E.g. when a
giant like Wal-Mart enters India, for the Indian retailers to fight back, they will have to go
the co branding way to increase or maintain their customers.
* Outsource to experts
* Introduce a new culture change through a new organization
* Learn a new trade
* Improve consumer trust
* Increase market penetration
Threats
* Changing Consumer
* New entrants from overseas or different market sectors
* Consumer confusion
* Safety scares and product recalls
➢ Benefits of Co branding
According to an article written by Juliette Boone about co-branding, at least five reasons
exist for forming an alliance:
- If a brand has too many Brand Liabilities this can be detrimental to the
other brand.
- Customer dissatisfaction
- Environmental problems
- Product or service failures
- Lawsuits and boycotts
- Questionable business practices
- Devaluation
- If one partner files for bankruptcy – an unexpected challenge
- Bad press re criminal activity – if made public this can be detrimental
- Threats to operation – the partnering organizations may not be able to work
well together
- Conflict of interest if two organizations are looking to attract the same
customer, this can be detrimental to sales of one or both partners
- Believing the partner brand is omnipotent
➢ Economic viability for Co -Branding
The economic viability of a co branded venture is the most important task as for any
company to know the economic aspect and impact of the co branding is very important and
if a correct valuation of the economic specifications are made then it would be possible to
answer these questions:
Whether or not to enter the co- branded venture?
How to select the most appropriate partner brand?
How to allocate profits between the co branded brands?
How to split the initial marketing investments?
According to Interbrand the value of the brand is reflected not only in the amount of
earnings it is capable of generating in the future but also in the likelihood of those earnings
actually being realised. The brand evaluation therefore comprises of three elements
1) Preparation of a forecast of the expected net sales and economic earnings of the co –
branded business.
2) Identification of the importance of the role that each brand plays in driving demand for
the co branded business in order to determine brand earnings for the co branded offer as
well as for each of the co brands.
3) Assessment of the risk profile of expected brand earnings to determine the appropriate
discount rate for the calculating the net present value of the brand earnings of the co –
branded business.
An economic model example to gauge the economic viability of co branding
This model depicts various attributes that could affect the brand can be numerically mapped
and then each factor contributing to the extent can be measured and also the strength of
the same factor for co branded product can also be numerically measured and thus the
total brand strength score can be calculated . For ex : let us suppose there are two brands
Brand A and Brand B and the co branded Brand as Brand C . If the total brand strength
score for Brand A is 69 and Brand B is 59 and that of co branded brand C is 82 then this
suggests that the co branding is economically viable and is mutually beneficial also because
brand strength score of the co branded product is greater than both the brand strength
score of brand A as well as Brand B.
For each parameter the brands are given a numerical score and similarly the co branded
product is also given a numerical score.
The outermost circle represents Brand A which has a total score of
69 ( 7+6+10+8+5+14+6+13)
The second circle represents Brand B which has a total score of
59( 6+8+12+3+3+12+4+11)
The innermost circle is the co branded offer which has a score of
82(8+9+13+9+6+15+8+14)
➢ Co-Branding in India
Co-branding is now increasingly featuring in the marketing strategies of
many Indian companies. Companies have realized that smart co-branding
can help them boost their brand image, improve sales through sharing of
distribution networks, enhance customer loyalty, increase customer base,
enter new segments and garner a host of such advantages with little extra
expenses.
Co-Branding - Marry & Make Merry
Aggressive marketing companies have sparked off a new trend of
purchasing, by issuing co-branded credit cards with banks and financial
institutions. Co-branded credit cards from LG and SBI, ICICI and HPCL, Air-
Sahara and Standard-Chartered Bank, HSBC and Star India Bazaar, show that
these have spread across to all possible business sectors in India.
Bibliography
1 "The Power of Partnership", Utpal Bhaskar, "The Brand Reporter", Oct 16-
31 2005.
2 http://www.indiantelevision.com/headline/y2k4/feb/feb150.htm.
11. Leuthesser L, Chiranjeev Kohli and Rajneesh Suri (2003) '2+2=5? a framework for
using co-branding to leverage a brand' brand management vol. 11, no. 1, 35–47
Paul F. Nunes, Stephen F. Dull and Patrick D. Lynch 'When two Brands are better than
one', Outlook 2003
12. Park, C. W., Jun, S. Y. and Shocker, A. D. (1996) 'Composite branding alliances: An
investigation of extension and feedback effects', Journal of Marketing Research, Vol.33,
November, pp. 453–466.
13. Washburn, J. H., Till, B. D. and Priluck, R. (2000) 'Co-branding: Brand equity and trial
effects', Journal of Consumer Marketing
Website References
(1) http://www.cobranding.com
(2) http://www.interbrand.com
(3) http://www.poolonline.com/archive/issue24/iss24fea2.pdf