This action might not be possible to undo. Are you sure you want to continue?
n o 1 2 3 4 5 a b c d 6 7 8 9 10 11 12 13
Page number 2 2 3 4 6 7 8 10 10 11 11 12 17 20 23 25 27
Introduction to Co- branding Is Co-branding new? Why there is rise in co- branding? Objectives of co- branding Sources and type of co branding Promotional/sponsorship co-branding Ingredient co-branding Alliance co-branding Innovation-based co-branding Focusing on Process Dilution Devaluation Measuring co branding Benefits and disadvantages of co branding Co branding in India Brand Flavoring Conclusion of Co branding in India
-By Pinky Dulera RN: 19 Sec A1 S-S/09-11 Submission date: 6th Nov ‘09
Introduction Companies competing for attention in a noisy marketplace cluttered with electronic and print messages increasingly are turning to another weapon in their marketing arsenal: co-branding. From credit cards to cereal to cars, more and more companies in the past decade have cooperated in their marketing to leverage each other’s products so they can speak more loudly in their markets. The 1980’s marked a turning point in the conception of brands. Management came to realize that the principal asset of a company was in fact its brand names. For decades the value of a company was measured in terms of its buildings and land, and then in tangible assets. It is only recently that we have realized that its real value lies outside the business itself, in the minds of potential buyers. In July 1990, the buyer of Adidas summarized his reasons in one sentence, after coca cola and Marlboro; adidas was the best known brand in the world.
When does 1+1=3? When two synergistic companies create a joint marketing juggernaut. We’ve all seen the big brands combine their stengths—think of Martha Stewart and K-Mart, or Dell computers with those Intel Inside stickers on every box. In todays world products have two creators, and advertise the fact on double branding are on increase: for example Inneov by Nestle’ and L’Oreal, the first nutritional pill to prevent hair loss, launched in
pharmacies in November 2006. Philips created a revolution with its cool skin razor, with a moisturizing cream, entrusted to Nivea world wide- a fact that appears on all the razors packaging and in advertising. Similar logic goes for ‘Intel Inside’ signature that appears on all computers that use Intel, and in their advertising. Co-branding is a brand management tactic that brings together two or more brands, creating a stronger brand presence than can be provided by either brand alone. 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 cobranded, though the Coca Cola Company gets only a small mention on the back of the packaging.
Why there is rise in co- branding? Co-branding is fundamentally a response to the need for continual growth. However, whereas yesterday companies would have sought at any prices to acquire the new competences that were missing and restricting their ability to innovate, today they seek to find a partner with which to co-create. This is the era of alliances, partnerships and networked economy, where each party retains its specialization and its key competence, and utilizes those others to the fullest extent. In the pursuit of growth, it is not long before we encounter the difficulty in reconciling this with maintaining the brand’s specificity and company’s expertise. 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 cobranding: 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?
The Logic of Co- Branding (Objectives) With increasing frequency, companies today are undertaking joint marketing projects. That is, two different companies pair their respective brands in a collaborative marketing effort: - New product launches clearly identify the brands that cooperated to create and market them. Thus Danone and Motta introduced ‘Yolka’, a yogurt ice cream with packaging that uses both brands to endorse it. Similarly, M&Ms and Pilsbury invented a new cookie concept, and Compaq and Mattel combined their respective expertise to bring out a line of hi-tech, interactive toys.
- Many line extensions capitalize on a partner brand’s equity. Haagen Dazs, for example, launched a Bailey’s flavored ice cream. In the same vein, delicious brand cookies now includes a Chiquita banana taste in its line, Yoplait sells a Cote d’Or chocolate cream and new Doritos ads tout ‘the great taste of Taco Bell’ or ‘Pizza Hut’. - 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. - Ingredient co-branding has now become commonplace. NutraSweet, for example, wanted to bolster its image, so it encouraged and co-financed advertising campaigns by its client brands. In turn, these client brands endorsed NutraSweet and endowed it with connotations of pleasure and affective values, until now sugar’s exclusive domain. The same holds true for Lycra, Wool mark and Intel, these ingredient brands are eager to promote co-branding, both on the product itself and in advertising and promotion. - Image reinforcement may also be an objective of co-branding. In the detergent industry, for instance, famous white goods brands endorse particular detergents, and vice versa. Thus, in India, Ariel and Whirlpool recently launched a co-branded advertising campaign, whose claim is the “The art of washing’ illustrated by a famous 1914 Renoir painting. By these means, Ariel seeks to reinforce its market leader status and gain a more affective image. - Co-branding appears in sales promotions too. Whirlpool, for instance, includes Findus or Bird’s Eye coupons in its refrigerator owner’s manuals. Similarly, companies find that prizes, such as club Med vacations, work better than cash awards in promotional consumer contests or sweepstakes. - Loyalty programmes, increasingly, include co-branding arrangements. Although co-branded loyalty programmes are not new (GM initiated the concept, with co branded credit cards), a new twist has appeared. That is, corporations are sharing the cost of loyalty programmes between their own brands, for example, Nestle issued a collector’s booklet that includes all of its brands (from Kit Kat to Buitoni, Perrier and Findus).
- Co-branding may signal a trade marketing operation. For instance, the product may be designed specifically for a distributor and signed by both manufacturer and retailer. Thus Danone created a special yogurt for Quick, the European fast food chain that competes against McDonald’s. Yoplait did the same for McDonalds. - Capitalizing on synergies among a number of brands is another co-branding objective. Nestle is a case in point, and it has a number of brands that could gain from a joint marketing action (eg Nestle’s Yoghurts, Nescafe, Nesquik Herta’s pork and bacon). To compete against Kellogg’s and increase its market shares in the breakfast market, therefore. Nestle launched joint advertising campaigns, showcasing all these brands around a healthy breakfast’ theme. In strategic terms, an alliance is an alternative to acquisition and fusion. Later is common type of company growth, buying out key competences or market shares through sacrosanct critical mass. All of the following companies are result of fusions or acquisitions: Novartis, Aventis, Vinci, Vivendi, Aviva, Arcelor, Entenial and Sony Ericsson. As for the alliance it preserves the cultures, identities and legal forms of companies that come together in a common large scale project.
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 ‘One of the most successful and well-known innovators of co-branding is VISA card. With selective partnering, VISA has gained worldwide recognition with over a billion cards in use today spanning across more than 130 countries!’
I. Promotional/sponsorship co-branding: At the most basic level, a company co-brands by participating in activities that link its image to particular events in consumers’ minds—ExxonMobil Masterpiece Theatre, for example; Qualcomm Stadium; Conseco, “the official financial services provider of NASCAR"; or, in the case of this company, the Accenture Match Play Championship round of the World Golf Championships. Endorsements are where co-branding got its start, and they can be a natural place for many organizations to begin a co-branding campaign. Whether it’s with celebrities, like Tiger Woods and GM’s Buick line, or with trusted institutions, like the American Dental Association and Crest toothpaste, the approach keeps the relationship simple. It remains at the level of fees and marketing activities, yet it can result in significant brand enhancement. Sponsorship sometimes leads to unplanned opportunity. Motorola’s sponsorship of the National Football League in the United States led to a request to create a more effective and comfortable set of headphones for
coaches to wear on the sidelines. The new headphones, with a prominent logo placement, increased Motorola’s visibility as a company capable of solving communications problems.
Ingredient co-branding: When many executives think co-branding, they think ingredient. This is partly because the partners in ingredient co-branding tend to be distinct, and partly because the logical partners for this type of co-branding are readily apparent: the company’s current suppliers or largest buyers. Easy access to offerings and well-established relationships keep the level of investment required lower than for other types of more creative co-branding. This kind of co-branding can be critical to the enduring success of certain ingredients. Intel’s partnership with computer makers is a classic example, particularly the company’s Intel Inside campaign. Many people are familiar with it, but fewer know that before 1989, the chipmaker marketed its product directly to computer manufacturers and design engineers, not to consumers. Noticing that chips were increasingly playing a defining role in personal computing, Intel marketing executive Dennis Carter decided that the company needed a better way to communicate with end users. But Carter’s efforts to find and bring to market an approach that really met this objective were stymied for two years while the company attempted traditional umbrella branding approaches across its line of processors. After failing to secure trademark protection for its 386 and 486 processors, Carter went back to the drawing board and, in a single weekend in 1991, came up with “Intel Inside." This ingredient co-branding approach garnered quick support—first from the company, then from customers. Partners such as Dell and Compaq reaped the benefits of newly generated consumer awareness and demand for Intel components by taking advantage of the chipmaker’s offer of co-marketing dollars for companies that included the Intel Inside logo in their advertising. To date, more than $7 billion has been spent on this advertising program by the more than 2,700 computer makers licensed to use the Intel Inside logo. The success of an ingredient brand relies on being distinct, either through patent protection, like NutraSweet or LYCRA, or by being a dominant brand, like Ocean Spray in the cranberry market. NutraSweet has been so successful as an ingredient in other products that it has retained consumer demand long after its label has come off most packaging. In undifferentiated markets, however, being first mover can be a big advantage. An attempt at ingredient co-
branding by a second leading chip company—which focused on the videogame market, as well as on personal computers—met with dramatically less success than the Intel campaign.
Value chain co-branding: A third kind of co-branding opportunity can come from other players in the value chain, both horizontally across links and vertically within a link. These players often combine to create new experiences for the customer—as opposed to simply new flavors of product—generating a level of customer value and differentiation not possible with promotional or ingredient cobranding. Among the many possibilities, three forms of value chain cobranding are important for companies to consider: product-service, supplierretailer and alliance co-branding Product-service co-branding. Product-service co-branding allows partners to share industry-specific competencies, while at the same time opening previously inaccessible customer bases. Yahoo! and SBC Communications are combining their brands to make their shared value chain shorter and stronger. The deal combines Yahoo’s brand name and high-speed Internet portal service with SBC’s phone lines and know-how in running data networks. This fits Yahoo’s new strategy of diversifying its revenue base and reducing its dependence on advertising sales. Yahoo! plans to grow its number of paying customers in the coming years 20-fold—from 500,000 to 10 million—with co-brand customers from partners like SBC promising to be a significant portion of these. •
Supplier-retailer co-branding. Some co-branding partnerships seem so natural that executives might wonder why they didn’t initiate those years earlier. The US retailer Target had established itself as a purveyor of attractive, good-quality products, but it wasn’t until a few years ago that Target asked designer and architect Michael Graves to create a new line of co-branded products with the store. The Target-Graves co-brand has been a significant revenue generator for both partners, and Target’s association with a world-class design talent has enhanced its brand. Other value-chain co-branding partnerships might be less obvious. Espresso and high-speed wireless Internet access may seem like an odd couple. But Starbucks has recently partnered with wireless provider T-Mobile and Hewlett-Packard to offer customers cable-free broadband Internet connection in its participating stores. T-Mobile and HP now get exposure in
upscale coffee shops on Main Streets around the world, while Starbucks gets publicity for being on the cutting edge of technology. What does this have to do with selling coffee, which is, of course, Starbuck’s core business? The company believes wireless Internet access will bring in additional revenue by attracting more paying customers outside the morning hours, when Starbucks does the bulk of its business. Co-branding can even bring traditional rivals together to meet important strategic objectives—like gaining a new position within the value chain or leading a financial turnaround. Offline bookselling giant Borders recently teamed with its online competitor, Amazon.com, to create a co-branded website. Before partnering with Amazon.com, the Borders Online website had lost more than $18 million. After the launch, however, the co-branded site, called Borders teamed with Amazon.com, quickly became profitable. Though the two companies are still fierce competitors, the deal helped both advance toward their strategic goals. Borders gained an online presence that serves its customers well and drops profits, not losses, to its bottom line. Amazon, for its part, gained an additional revenue source, and also took a valuable step toward establishing itself as a viable supplier of outsourced online retailing capability. And both companies have ended up better positioned against common entrenched rivals.
Alliance co-branding.: Another potential source of value chain co-branding is vertical co-branding— forming alliances with similar companies. Airline alliances one world and Star Alliance are examples, as is FTD in flower delivery. Companies must ask themselves whether globalization, or simply the chance to create a better, broader offering through cooperation, is making this a critical time to consider co-branding opportunities in their industry. This is almost certainly the case in rapidly consolidating industries like health care and financial services.
Innovation-based co-branding. In this approach to co-branding, partners co-create entirely new offerings to provide substantial increases in customer and corporate value. More than other approaches, it offers the potential to grow existing markets and create entirely new ones. Because both partners are seeking a higher level of value creation, the rewards and risks are often an order of magnitude larger than those created by other co-branding approaches. For that reason, innovationbased co-branding requires a higher level of senior executive attention and organizational collaboration.
Virgin Mobile USA and high-tech conglomerate Kyocera Wireless recently sought to capture a new market by co-creating and co-branding a wireless phone aimed at the 15-to-30-year-old customer segment, which analysts have described as the last un penetrated wireless market in the United States. The phones are tailored to the target market’s entertainment and social interests through innovative functionality. For example, the phones include “rescue rings," an automated feature that calls a customer’s phone at a selected time to provide an easy excuse for exiting a disappointing date or party. The phone partnership was also designed to enable additional partners to piggyback onto the offering to create subsequent co-branding partnerships. For example, since the UK-based Virgin Group didn’t own a telephone network, an additional partnership with Sprint positioned the company to enter the US market as the first virtual network operator—a business model already highly successful in Europe. Because co-branding enables partners to gain competencies rapidly, it is particularly well suited for targeting the mercurial, fashion-conscious under20 market segment. For example, research conducted by boating-shoe manufacturer Sperry Top-Sider revealed that an increasing number of younger boaters were wearing sneakers instead of the company’s classic boat shoes. Sperry knew it had little in-house capability to come up with the innovation its customers demanded, so it quickly turned to New Balance, the athletic-shoe maker, as a co-branding partner. The result? A co-created athletic boat shoe that was quick to market. ➢ Focusing on Process As Peter Drucker has pointed out, innovation is hard work. Whether it is sought by a lone inventor in a garage, by an R&D organization in a large pharmaceutical company or through a co-branding partnership, potential innovators need to focus on process, not just results. While even the most auspicious partnerships cannot guarantee innovation, they can build upsides into processes before deals are inked. In an effort to capture a larger share of Japan’s youth market, Toyota and several partners, including consumer-products giant Kao and Japan’s largest brewer, Asahi Breweries, co-created the WiLL marketing program. WiLL brought a range of Japanese lifestyle products, from candy to cars to beer, under a single brand name. Since its launch in 1999, however, the concept has yet to achieve the expected level of attention and cross-product tie-ins. But while two of the original partners are now opting out of WiLL for this reason, both proclaim that the program achieved another valuable strategic objective. Significant partner collaboration—a process goal programmed into the initial deal—
enabled departing Asahi “to learn marketing targeted at the younger generation, horizontally," according to a spokesperson. Although upfront investments are often small for co-branding activities, the associated risks can be much greater. Celebrity endorsements, for example, which sometimes require no more than a quantity of free product, can quickly become a liability if the celebrity, trimmed from headband to sweat socks in the sponsor’s logo, behaves badly on camera. Co-branding creates at least two other, more significant types of brand risk: dilution and devaluation. ➢ Dilution Dilution occurs when a brand loses its meaning to customers. This was the risk the Cleveland Clinic recognized and mitigated when it merged with 10 local community hospitals in the 1990s to create the Cleveland Clinic Health System. Concerned with how best to lend its superior brand recognition to these institutions, without diluting its reputation for excellence, the Cleveland Clinic developed a highly structured, four-tiered program. The first tier is made up of core entities with full rights to the brand; the second tier includes owned entities with their own brands. These partners are allowed to use the system’s Cleveland Clinic Health System logo, but only at half size and under their own logos. Third-tier partners, which include Cleveland Clinic departments in non-owned hospitals, are prohibited from using the logo, significantly reducing the brand’s exposure. The fourth tier recognizes outside affiliations of the Cleveland Clinic and allows logo usage, but only in conjunction with other partners’ logos, thereby limiting the implied level of association. Because cobranding so often covers multiple offerings and entities, companies would do well to emulate the Cleveland Clinic’s granular approach toward mitigating dilution risks. ➢ Devaluation Brands are also exposed to the risk of devaluation, sometimes virtually overnight. At times, both companies can be affected, as in the case of a partnership between a discount chain and an upscale house wares company. At first, the co-brand created significant earnings for both companies—in one year generating more than $1 billion in sales. But when the discounter filed for bankruptcy the announcement depressed the partner company’s stock. It also caused the investment community to question the partner about its contingency plans—an unexpected challenge for a co-brand. Subsequent bad press about possible criminal activity by the house ware brand’s CEO had similar effects and raised similar questions for the discounter’s managers. Shortly after the allegations were made public, a
consumer tracking firm reported that nearly 20 percent of the upscale manufacturer’s customers said that now, because of the negative media attention, they would be less likely to buy the company’s products. Beyond brand risk, leading practitioners have also learned to look for threats to operations, and to address those risks with flexibility. Though brands can be the best of friends, it can often be much harder to make the underlying organizations work well together. One fast-food chain that serves mostly sandwich fare had unsuccessfully tried co-branding with Italian and Mexican restaurant chains. While these partnerships created great brand synergies, operational friction was created because the co-branded restaurants attracted customers at the same time of day—during the lunch and dinner rushes. The chain went ahead with the deals anyway, overburdening its staff and diminishing the in-store customer dining experience. Finally, the company learned its lesson, and its most recent co-branding partner is a breakfast-food chain. Another risk of co-branding believes that the partner brand is omnipotent, particularly when taking on entrenched competitors. One large beverage maker, hoping to successfully enter the children’s boxed-juice market, partnered with a global entertainment company to use its cartoon character brands. Nevertheless, the co-branding agreement yielded disappointing results. One brand manager at the beverage company noted the co-brand’s pronounced difficulty in gaining consumer trial when challenging wellentrenched, competitively priced alternatives. As a result, the drink maker has given up hopes of achieving significant margins, cut its product line by one-third and slashed the cost of some offerings from $2.99 to 99 cents. Though not all contingencies are foreseeable, many can be overcome with a strategy that’s a surefire winner in almost any relationship: choosing a flexible partner. Virgin credits Kyocera’s willingness to create an entirely new product—as opposed to repositioning existing products—with making that deal work.
Few businesses have made co-branding work like payment-card leader Visa, which has leveraged each of the four types of co-branding described here to place its offerings everywhere its customers want to be. With more than a billion cards in use today in 130-plus countries and territories, Visa’s shared network supports nearly $2 trillion in transactions annually. This level of global success makes Visa—a name chosen because it is pronounced the same in almost every language—a highly potent co-brand. Visa, whose sponsorships have helped it gained worldwide recognition as a brand—most notably with the Olympics, but also with others such as the National Football League and horse racing’s Triple Crown—is continuing to build its stable of sponsor relationships. Visa also serves as the key
ingredient in numerous affinity-card products, like United Air Lines’ Mileage Plus Visa. These highly successful programs offer reward points and air-line miles tied to purchases, and include partners ranging from hotel chains and airlines to universities and charities. Visa created innovation-based co-brand value when it partnered in January 2001 with Palm, VeriFone and French point-of-sale terminal maker Group Ingenico to enable purchase transactions without a Visa card—using instead the infrared port on a Palm handheld computer. This kind of partnering is helping Visa prepare for a time when carrying a plastic card may no longer be the way people shop.
Side by Side Many benefits from co-branding are hard to quantify, including the in-crease in brand equity created in the consumer’s mind when one brand is associated with another. Take the Ford-Eddie Bauer relationship. A spokesperson for sportswear retailer Eddie Bauer has said that while the company is unable to put a dollar figure on the payback, he is sure the chain’s exposure has improved as a result of the partnership. In fact, the relationship is so strong that it just recently passed the 20-year mark, surviving more than 16 model changes at Ford and selling more than a million rolling billboards. Other benefits of co-branding are seen immediately in top- and bottom-line improvement. Allied Domecq has seen annual sales at stand alone stores jump to more than $1 million after it combined its Dunkin’ Donuts, Baskin Robbins and Togo’s brands under one roof, from an average of roughly half that when they are separate stores. Other co-branders, from credit cards to catalogers, have reported similar results, sometimes crediting co-branding with saving their companies.
➢ Promotional co-branding, ingredient co-branding, value chain co-branding and innovation based co-branding have contributed to companies' kitties to varying degrees. But now, marketers need to go a step further in order to grab the customers' attention. It is here that 'brand flavouring', a concept that I have introduced, will give marketers that extra mindshare of the consumers. 'Brand flavouring' requires a careful amalgamation of two or more brands, wherein the overall product has a unique appeal, while the participating brands' values are still the same. It is like the unique taste that you get when you have an ice cream with a gulab jamun or an ice cream with Pepsi. Note that the individual tastes are still retained here. Add a few nuts to the above combination and the experience can get even better!
Earlier the marketers were just bothered about how to promote their brand. But now they have graduated to a more "defining their customer" approach. This approach though tedious makes branding and eventually co -branding easier for them. 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. Customer Profiling – Urban Indian youth Demographics: Age group 18 to 30, SEC A & B max (SEC = Socio Economic Classification), college educated Psychographics: Fashion conscious, has his own distinct style, wants to be updated with the latest gizmos in town -cell phones, fashion accessories, computer and media related gadgets, ready to pay for a premium product which makes him look exclusive. 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. Need for co branding in retail sector in coming future: Modern consumer's will be discerning and will demand their needs be met all of the time and at the right price. Information about consumer shopping habits has never before been better and technology is improving all of the time to increase marketer's knowledge. The traditional retailers will find consolidation in buying habits and will find it tough. For example consumers will find it easier to buy fresh vegetables from a food retailer on Sunday rather than going to traditional vegetable seller in a mandi. The market shares of traditional retailers will be gobbled up once the majors like Wal-Mart enter into Indian retail space. The superstores of the supermarket chains provide a perfect host environment for a plethora of co-branding opportunities. But the question that arises here is Will a consumer buy a car from them? The key issue in place would not be whether or not they have the skills to serve these markets profitably and for a long term. The question here is can they do it on their or do they need to bring some expertise or provide some more value propositions. The possible answer to the problem in the form of co branding where in leveraging on the strengths of the co – partner. For example : If the supermarket store owner co brands with a car manufacturer and a finance provider there is a very high possibility of him to get into these domain where it will be a win – win situation for all the three that is : the supermarket , the car manufacturer and the financial institution. Some of the possible workable structures in retail co-branding would be the "joint development agreement" or the "franchise agreement". SWOT Analysis for Co- Branding in Retail Strengths * * * * * * Ability to adapt to the change markets Provide one service in exchange of The other Benefit by association Building of two in house brands
Weaknesses * Long term association with poor performer or weaker brand * Dropping of standard because of the inability of the poor franchisees. Opportunities * 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: 1. 2. 3. 4. 5. to to to to to create financial benefits; provide customers with greater value; improve on a property's overall image; strengthen an operation's competitive position; and create operational advantages.
Disney worldwide has an agreement with McDonalds whereby the characters from its new films are distributed as toys with McDonalds "Happy Meals". This is a win -win situation for both parties as it ensures publicity for Disney within its relevant target audience and an increase in sales for McDonalds. With the McDonald's partnership, Disney also uses the extraordinary reach of the chain to promote and advertise new movies both in stores and through ads the fast-food company funds. That's especially valuable to a studio at a time when the costs to make and sell films are soaring. ➢
Disadvantages of Co-branding
- 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) * B.S.S = Brand Strength Score So, the equation for economic viability comes out to be : B.S.S ( A) <= B.S.S (C) B.S.S ( B) <= B.S.S (C) Similarly if let us suppose there are 4 choices or alternatives with Brand A to co brand with let us suppose say in this case Brand B, D , E , F then it is possible to calculate the B.S.S of
A+ B A+ D A+E A+F And then the resultant B.S.S whichever is the highest and is well over the B.S.S of both the individual brands will suggest the right partner to co brand with. The Future of Co branding in India In future companies planning to engage in co – branding activities will increasingly adopt more systematic processes for identifying 'brand' partners and strategies for mutual brand enhancement. In any situation where two brands are made alongside each other the values embodied by each brand can be expected to cross fertilized the other. if this cross fertilization is successful then the brands will benefit . This, exchange however needs to be managed and objectives need to be established at the outset of any initiative in order to ensure that the exchange is meaningful and beneficial. In case of the retail sector which will be on a boom in the coming years we may see large retail chains becoming increasingly assertive in requiring special co – branded packs of leading brand name products rather than pursuing the supermarkets tactic of developing look-alikes own label products which mimic the get up of the brand leader.
➢ 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, AirSahara and Standard-Chartered Bank, HSBC and Star India Bazaar, show that these have spread across to all possible business sectors in India. The popularity of these cards in India is on the increase as the 'price conscious' consumers get to enjoy extra exclusive benefits from multiple recognised brands at no extra cost. Co-branded credit cards spur spending as they reward loyal customers with rewards, encashable bonus points, discounts, cash-back offers and a host of such schemes. Ease and convenience during shopping, payment of bills and transacting at petrol or retail outlets are other reasons. For the card issuers, it is an easy way to directly expand their consumer base and increase customer loyalty. For the other partner, there is an access to a
database with complete details of a large number of customers which can make their segmentation and targeting of customers much more systematic, thus increasing their profitability. According to an ICICI estimate, about 30 per cent of the credit cards issued by it are of the co-branded variety. This is because most of the new issues are co-branded since they are actually stimulating sales.1 Marry the Right Person Co-branding can be an interesting way for companies to venture into new areas. Boots-Piramal and Saregama-Records are jointly producing a series of music albums of old Hindi songs. Boots-Piramal fits in perfectly in this alliance as Strepsils from Boots Piramal has always been marketed on the 'voice' platform. Boots-Piramal has taken Strepsils from the 'smooth voice' platform to a next level of 'sweet voice' platform by its arrangement with Saregama. Both of them will also co-promote each other's products at their respective outlets, and thus increase their brand visibility. Co-branding has helped MTV India enter new territories apart from television programming. The MTV brand has lent its youthful 'funky' character to Citibank credit cards, Airtel SIM cards and Fastrack watches. MTV has had reasonable success in its co-branding ventures with Airtel SIM cards and Citibank credit cards.2 Here, the participants cooperate because they have, or want to consciously achieve, an alignment of their brand values in the customer's mind. As is evident, Airtel and Fastrack have re-asserted their youthful character with their MTV partnership. Marriages are Made in Heaven - Keep Them Good & They'll Do You Good P&G, India, undertook a co-branding exercise with the National Association for Blind in the form of Project Drishti 3, where one rupee per pack of Whisper purchased by the customer was diverted towards the cause of a blind female child. Using the funds so collected, P&G arranged for the restoration of eyesight of two hundred and fifty blind girls through corneal transplant operations. This deal gave P&G much more than it invested. By associating itself with a noble cause, it came to be associated in the public mind with a worthy cause. Cause-related marketing is a form of co-branding. The 1983 partnership between American Express and the project to restore the Statue of Liberty demonstrated the benefits associated with an effective cause-related marketing strategy. The result of the campaign was a 28% increase in AMEX
card use, with a 17% rise in new card applications, while raising $1.7 million for the Statue of Liberty repairs.4 Corporations need to pursue this strategy effectively as this will boost their brand image tremendously in today's world of Corporate Social Responsibility. Co-branding in this way can change consumers' perceptions about the companies' products or services, and increase employee satisfaction. Combining their operational expertise with the human resources and knowledge of an NGO, companies can achieve both individual and social goals. ➢ Brand Flavoring - The Next Step Brand flavoring is about presenting the picture in a different way. Building and nurturing new brands takes a lot of time and effort. Also, at a time when product life cycles have shortened tremendously and lost meaning, creating new brands at the same pace is definitely not an option. It is here that brand flavouring can be an option. Brand flavoring is a kind of extension of co-branding, wherein the attempt is to bring diverse partners together. Different brands can come together to lend different flavors to a unique final product. Flavors are distinctive brand attributes. The strength of such an exercise will depend on how well the partner brand values can contribute to the overall product/service. The concept is limited in the sense that only strong brands can really contribute in such an environment without diluting their individual brand equity. Using this concept, I have presented some ideas, some highly ambitious ones, but whoever said that anything was impossible. (Some of them are pure co-branding solutions, though.) Of the people... for the... AIR has an approximate coverage of 92% of the Indian sub-continent while Doordarshan reaches approximately 90% of the population, which is far more than the combined reach of all the satellite channels put together.5 Yet, no co-branding arrangements exist between public and private enterprises. Co-branding will help media houses share content and technology, increase their household reach and revenues and do much more to their image. More than just increasing revenues, such arrangements will increase the quality of content and do social good. Helping Hand: The Indian SME sector's contribution to GDP was about 40% in 2004 and over 11.4 million SSI units provided employment to about 27.1 million people. Also, SME's contributed to about 40% of the country's industrial production and 34% of the country's exports.6 Now, the twist in the story. Rane Brakes Linings Ltd. demonstrated its world class quality by winning the Deming award in 2003. Yet, even today only 3%
of its total revenues come from overseas exports.7 Co-branding with auto majors like TATA, Hyundai or Toyota, will help it improve its brand image and market share in the global market. This is just a single example. Co-branding arrangements are possible between Arvind Brands, Versace and an established cotton supplier in Coimbatore. What about a local food processor tying up with Amul or Haldirams? How about extending the alliance of one with Heinz or Kraft? Co-branding in such a way will help local companies develop a global image. In this age of SCM and CRM, co-branding must be used to increase operational efficiency and profitability. All this will finally lead to a huge growth in GDP, as the SME's are major players in our economy. Brand India: Thailand and Malaysia being smaller than MP attract more foreign tourists than the whole of India!! We now have an "Incredible India" brand, but that is not enough. Private-public co-branding is very essential here. Which foreign tourist will not be lured by an Incredible India package co-branded with a hospitality partner in Taj-Hotels, an airliner in Jet-Airways, a travel partner in Cox & Kings, and a wireless mobile-cum-internet provider in Airtel? Taking this to a next level, how about co-branding arrangements with SAARC or ASEAN countries? How about a business trip arranged in Singapore, followed by a business agreement signed in Hyderabad, and then a relaxing evening in Phuket? Why should we lose $ 900 million annually, due to lack of co-branding arrangements between India and Pakistan?8 While in Rome... At a time when Indian companies are making a mark on the world stage, smaller companies will find co-branding a very convenient tool to capture new markets. Titan, being a world class company, is still facing a lot of problems in expanding into the European market. Would cobranding with Swatch or Tissot be an alternate solution? It always helps to be-friend a Roman while in Rome. On the same lines, ethnic Tanishq jewellery co-branded with Swarowski would definitely lure any European lady. Of Superpowers and more... How about a convergence enabled product from Lenovo of China, TCS & Airtel of India and NTT DoCoMo of Japan? For all this to happen, the talent pool needs to be developed. We need to foster partnerships in education where students learn the best from an IIT in India, Harvard in USA and an NTU in Singapore. Think of the brand appeal of these students! This is very important, as India's large talent pool needs to be well tapped and encouraged, for India to become a superpower. Rural-Urban divide... Even in the twenty first century, companies struggle to capture similar market shares in urban and rural India. Co-branding will help share each others distribution networks, increase each others' visibility
and so on. Not just that, quality local brands like MTR and Priya-Pickles can drastically increase their national presence by having an arrangement with Haldirams or Fritolays. Haldirams or Fritolays will only gain from venturing into new areas of pickles or papads with regional expertise. See the synergy of brand values? Conclusion Indian enterprises need to realize that they now operate in an environment where they need to fight while co-operating with their competitors, to increase the market size and their market-shares. Globalization has led to a proliferation of brands where the consumer has been spoilt for choice. Smart co-branding is one way to survive and grow. As India grows up to the new status that it has acquired, co-branding and further such developments will increasingly help its companies re-affirm its status. A Microsoft-Apple happened in the US. Similarly, co-branded products / services from Coke-Pepsi-Haldirams-MTR; Sundaram-Fasteners-Bajaj-M&MAshok-Leyland-Toyota; Infosys-TCS-Satyam-Wipro-Accenture-IBM, Star-IndiaBazar-Wal Mart-Metro-Pepsi Foods-Arvind Mills; Airtel-STAR-Reliance-AdlabsFOX-Studios will all happen in India. When differentiation is no longer possible, come together and mix the old wines in a newer bottle!!!
1 "The Power of Partnership", Utpal Bhaskar, "The Brand Reporter", Oct 1631 2005.
2 http://www.indiantelevision.com/headline/y2k4/feb/feb150.htm. 3 "Co-Branding", Sachin Mehta, www.indiainfoline.com/bisc/art4250101.html 4 "Mutual Interest: Options for Cause-Related Marketing with the Mutual Fund Industry", Tessa Hebb, http://www.unitedway.ca/english/docs/mutual_interest.pdf 5 "Dedicated To The Public Good", B.S. Padmanabhan, http://www.flonnet.com/fl2219/stories/20050923005011400.htm 6 Year End Review 2004 - Ministry of SSI & ARI Report, Govt. of India. 7 "Rane Brake Eyeing Commercial Aviation", The Hindu Business Line, August 25, 2005 http://www.thehindubusinessline.com/2005/08/25/stories/200508250271020 0.htm 8 "Pakistan, India Losing $900m Share Of World Tourism Market", Report by Farman Ali, http://www.dawn.com/2004/10/01/nat13.htm
9.Aaker, D. A. (1996) 'Building Strong Brands' 10. Blackett, T. and Boad, B. (1997) 'Co-Branding: The Science of Alliance' 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
This action might not be possible to undo. Are you sure you want to continue?