Also called Dual Branding has become a rage in the marketing arena, with companies realizing that isolation is not after all the best policy. The markets of yesterday saw companies focusing on the customer thinking about “How can I promote my jeans?” The marketers today believe that the myopia needs to clear off to a “How do I define my customer?” approach. By saying, “defining my customer”, i don’t mean getting back to classroom and assessing who the target consumer is. Defining a customer means more in terms of creating a persona for the customer, or rather shaping the customer. Kotler defines Co-branding as “two or more well-known brands are combined in an offer” and each brand’s sponsor expects that the other brand name will strengthen the brand preference or purchase intention and hopes to reach a new audience. He talks of co-branding being quite beneficial such that:
Many line extensions capitalize on a partner’s brand equity.
Brand extension success rates are maximized in the new market when co-branded with the reputed brand that has established in that market.
Co-branding may help usage extension.
Image reinforcement may take place due to co-branding.
Loyalty programs increasingly include co-branding arrangements. The corporations are sharing the cost of loyalty programs; hence, the promotional costs to the companies are coming down.
Co-branding signals a trade marketing operation.
Capitalizing on the synergies among a number of brands is yet another advantage of co-branding.
Co-branding is not a new concept that it remains crucial to consider the strategic objectives of the project and to address all the possible risks before it is launched. Co-branding can be an asset in nearly all aspects of marketing, from creating initial awareness to building loyalty. There are four main approaches to co-branding that companies should consider. Co-branding began with endorsements. This approach can be a good beginning point for organizations; the relationship is simple, but it can result in significant brand enhancement and sometimes even an unplanned opportunity. Partners in ingredient co-branding are usually the company’s current suppliers or largest buyers. Easy access to offerings and a well-established relationship translates into a lower level of investment required than in other forms of co-branding. An ingredient brand’s success relies on being distinct, either through patent protection or by being a dominant brand. Other players in the value chain can create new experiences for the consumer, which, in turn, can create a level of customer value and differentiation not possible with promotional or ingredient co-branding. There are three types of value-chain co-branding:
Product-service co-branding. This approach allows partners to share industry-specific competencies while at the same time opening previously unavailable customer bases.
Supplier-retailer co-branding. These relationships can range from the natural to the less obvious—even to traditional rivals, which can help both partners become better positioned against well-entrenched competitors.
Alliance co-branding. Globalization and better, broader offerings through cooperation aside, forming alliances with similar companies may be crucial for rapidly consolidating industries.
In this approach, partners create entirely new offerings to provide substantial increases in customer and corporate value. It offers the potential to grow existing markets and create entirely new ones. Because both partners are seeking a high level of value creation, the rewards and risks are often an order of magnitude larger than those created by other co-branding approaches. Marketing goods or services under two or more trademarks of different companies is a popular way to broaden an existing or new brand’s exposure in the marketplace and can be used in many ways. Although co-branding is not a new concept, it remains crucial to consider the strategic objectives of the project and to address all the possible risks before it is launched. While one participant in a co-branding exercise may have in mind to increase revenue or brand recognition, another participant may wish to penetrate new markets or introduce new products or services. Whichever objective is applicable in a particular situation, each participant should be absolutely certain from the outset that his specific objectives coincide with the actual opportunities that will arise from the intended marketing campaign. To ensure that all participants benefit from the campaign, it is important to identify the right partner the compatibility of potential partners plays a crucial role in the success of the project.
The parties need not necessarily be of equal size or reputation. When a dominant partner joins forces with a smaller brand, the smaller partner usually benefits from the trust and loyalty that attach to the bigger brand, while the latter may use the smaller brand to penetrate new market sectors. Co-branding by two or more small players can be more strategic and creative in nature. In this kind of situation parties should ensure that the sum total of the joint marketing effort results in greater brand recognition than what would have been achieved with individual campaigns. After a compatible partner has been identified, the risks of the co-branding project must be considered and addressed. The following situations could pose serious risks for a participant and should be addressed in the co-operation agreement:
The failure of the project because of financial or other strategic objectives not being achieved.
A change of strategy or withdrawal of products.
A breach of contract, insolvency or change in control of one of the participants.
The sudden degeneration of a participant’s previously stainless reputation.
The unauthorized use of a participant’s trademark.
It is particularly important that appropriate contractual measures be put in place to ensure that participants retain ownership of, and quality control over, their individual trademarks. This can be accomplished with properly worded, reciprocal trademark licenses incorporated into the co-operation agreement. These licenses should not only stipulate what would constitute authorized use of the parties’ trademarks, but also which restrictions and limitations apply. A serious risk which all trademark proprietors should guard against is the dilution of their trademarks, where use of the trademark on products other than those in respect of which the mark is registered or renowned for will tarnish or damage its distinctive character or reputation. For instance, it is conceivable that Coca-Cola restaurants, Coca-Cola motors, Coca-Cola paint and the like could eventually dilute or destroy this well-known mark. The risk of dilution is inherent in co-branding and the contract should therefore provide a participant with the option to terminate the license in appropriate circumstances. Co-branding is not to every company’s liking. It is interesting to note that BMW forms strategic alliances only in exceptional circumstances. However, despite the risks involved, co-branding participants can derive enormous benefits from such an exercise, given the right circumstances and provided it is planned and managed with the necessary care.