Co branding: Beyond Brands
Vertical: Marketing

By
Mohit Taneja
E-mail: mohit4@mica.ac.in
Jayanti Kalyani
E-mail: jayanti4@mica.ac.in
(PGP2)
MICA
(Mudra Institute of Communications , Ahmedabad)
 

Executive Summary

Co-branding involves combining two or more well-known brands into a single product. Used properly, it is an effective way to leverage strong brands and has the potential to achieve 'best of all worlds' synergy that capitalizes on the unique strengths of each contributing brand. In the paper, we have tried to see what the benefits of cobranding are and how it affects a brand. This paper also illustrates how important it to have a strategic fit between the "co - brands". A framework for the economic viability of a co branding venture in which we attempt to answer a few questions like

• Should a brand go in for cobranding
• How to select the most appropriate brand partner

A co branded extension is a composite brand concept that contains the characteristics of two underlying concepts (Cohen and Murphy 1984; Park, Jun, and Shocker 1996). Each of the two participating concepts is associated with a set of attributes that are combined according to a set of rules to form the composite concept. In other words, a co branded extension does not involve the transfer of the entire brand concept from a parent category to an extension category. Rather, it merely involves the transfer of a subset of attributes from the two parent brands, and their recombination into a coherent composite concept that could become a member of the extension category to which new brand belongs.

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 cobranding easier for them.

Lets 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 cobranding 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

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 favourably 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 cobranding and/or strategic alliances in order to strengthen their consumer base. E.g. when a giant like Walmart enters India , for the Indian retailers to fight back, they will have to go the cobranding way to increase or maintain their customers.

Need for cobranding 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 cobranding 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. to create financial benefits; 
2. to provide customers with greater value; 
3. to improve on a property's overall image; 
4. to strengthen an operation's competitive position; and 
5. to 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.

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

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 which ever 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 Cobranding 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 fertilised 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.

Bibliography

(1) Aaker, D. A. (1996) 'Building Strong Brands'
(2) Blackett, T. and Boad, B. (1997) 'Co-Branding: The Science of Alliance'
(3) 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
(4) Paul F. Nunes, Stephen F. Dull and Patrick D. Lynch 'When two Brands are better than one',      Outlook 2003
(5) 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.
(6) 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
 

Mohit Taneja
E-mail: mohit4@mica.ac.in
Jayanti Kalyani
E-mail: jayanti4@mica.ac.in
(PGP2)
MICA
(Mudra Institute of Communications , Ahmedabad)
 

Source : E-mail January 8, 2005

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