Co-branding, a 1+1>2 formula

Adidas + Yohji Yamamoto, Intel Inside + Compaq Personal Computer, D&G + Motorola, British Airways and Citibank, Adidas + McCartney, Mercedes and Swatch, Bacardi and Coca Cola, Danone and Quick, GOME and Motorola, Industrial and Commercial Bank of China and American Express...these are only few among the most famous examples of co-branding we have seen emerging in the latest years.

Is co-branding a new phenomenon? Not really. There are classic examples of this sort of branding strategy adopted by detergents and white goods brand as well as by oil brands and car manufacturers starting in the early nineteen sixties.

Until the eighties, however, since the value of a company had just been measured on the bases of its revenues and tangible assets, not many companies had really paid attention to any sort of branding strategy, not to mention co-branding strategy. It is only in the last thirty years that companies have understood that the real value of a business resides in the minds of its consumers: in the brand.

But how can co-branding enhance this value? Why do brands invest in interlocking their identities to create co-branded products?

Co-branding, as it has been defined by Tom Blackett and Bob Boad in their book (Co-Branding: the Science of Alliance, St Martin’s Press, 1999) is:

“…used to encompass a wide range of marketing activities involving the use of two (and sometimes more) brands. Thus co-branding could be considered to include sponsorships, where Marlboro lends its name to Ferrari or accountants Ernst and Young support the Monet exhibition.”

The ultimate objective of any co-branded strategy would be to combine the strengths of involved parties to increase respective brands value. In order to be successful, the co-branding effort needs to be directed to:

1. Increase brands distinctiveness by capitalizing on the values embedded in the cooperating brands.

Product and services life cycle shorten by the day, and distinctive products and services features and innovations are easily copied among brands in the same industry. This is a reality of today’s business that co-branded products can withstand to. By merging values and identities of brands originally engaged in different industries, co-branded products and services can gain consumer choices, loyalty and ultimately make the brand unique and distinctive.

In this category Labbrand includes:

Loyalty programs co-branding, where the involved parties share the cost of customer

loyalty programs or other CRM marketing programs to deliver extra benefits and eventually strengthen the relationship among consumers and the two brands

British Airways and Citibank, for instance, co-branded a credit card allowing the owner to automatically become a member of the British Airways Executive Club.

Trade marketing co-branding, where the involved parties cooperate in designing co-branded products made specifically for a certain distributor or facility. Danone provides a good example in this sense as it has produced a special yogurt for Quick, the European fast food chain.

By increasing their distinctiveness, involved brands get to occupy a unique place in consumers minds and eventually gain customer loyalty by providing them with merged benefits.

2. Deliver consumers greater value by creating highly relevant products or services:

Due to the increasing amount of choices available and in order to cut through all other offerings brands have to custom design added value products and services to meet variable individual needs. As brands research and uncover these specific customers’ needs, they also find that a single brand may not be able to meet the demands of such profoundly segmented market.

In this category Labbrand includes:

Usage extension co-branding. Bacardi and Coca Cola, for instance have co-branded Bacardi Mixers range to demonstrate and spur other ways to consume the two brands.

Multiple sponsors co-branding, where more than two companies unify their effort to form a strategic alliance and create a specific co-branded technologically enhanced product.

Market niche co-branding. Take for instance the cooperation between Adidas and Stella McCartney. This brought about a women-oriented, stylish and casual sport design collection: Adidas by Stella McCartney. This co-branded line manages to satisfy the demand of female buyers looking for sportswear that blends functionality and style while being able to deliver “products that both perform and look great”1

Moreover, having a high end designer create a sport range for women translated into practical benefits for both the collaborating parties: new consumers, willing to pay a premium to get the “special” sportswear, and buzz advertising around a range of products that was, back in 2004, the first ever sportswear collection signed by a high-end designer.

Look also at Smart car: a joint creation of Mercedes and Swatch designed especially for young consumers of big metropolis. In this case signatures of cooperating brands do not even appear on the car but in fact this is the result of each company’s specific expertise.

3. Increase the esteem consumers have toward participating brands

As consumers became ever more environmental and social aware it becomes essential for brands to create new touch points and build images consistent to the brand promise in consumer’s mind while aligning participating brand values.

In this category Labbrand includes:

Image reinforcement co-branding. A very good example to explain this form of co-branding can be seen in companies getting involved with NGOs to direct a percentage of their revenue toward a worthy cause. P&G and the National Association for Blinds, Starbucks and the African Wildlife foundation are just a few examples of companies cooperating with charities and fundraising organizations to align their brand values in consumers mind.

Co-branded in the luxury industry, Motorola mobile phone designed by D&G merges the image of the Italian luxurious brand with the high quality technological brand promise of the American mobile phone manufacturer.

Complementary brands co-branding, refers to brands in the same or complementary industries that cooperate to strengthen respective brand images in consumers’ mind. Credit cards such as Visa and Mastercard are a perfect example of complementary alliances as they merge the customer service skills of payment services franchisers with the image of reliability of banks.

Danone and Motta, both in the food industry, co-branded a yogurt ice-cream called Yolka that successfully satisfied the desires of healthy conscious gourmand and avoided direct competition to their respective brand portfolio.

Global co-branding, consisting mainly in alliances among MNCs and local players. Typically, the local player will provide an already established distribution network and local brand image while the MNC will bring technical know-how and international brand attachment.

For example, in 2004 Industrial and Commercial Bank of China and American Express Co. co-branded a credit card issued by the bank and bearing the American Express logo designed to sustain the nation’s effort to build a national credit-card system.

4. Increase the knowledge consumers have toward cooperating brands through the merger of each other’s strength in the respective domains.

In this category Labbrand includes:

Ingredient co-branding, whose appellation refers to the fact that a material,adding value ingredient is created by the cooperation of the two involved brands. This greatly increases the ultimate products value for consumers, and consequently the brand value in consumers’ minds.

Intel and Compaq Personal Computer, for instance, represent a perfect example of synergy in this sense as the value created in their cooperation is great and without it the ultimate value of the product will be tremendously diminished. .

Coopetition, as this has been defined by Brandenburger and Nalebuff in their homonym book (1996, Co-Opetition : A Revolution Mindset That Combines Competition and Cooperation), which dictates that in order to dominate the market companies may need to cooperate with and compete against the same company.

Examples in coopetion are found in the co-branded city cars Toyota Aygo, Peugeot 107, and Citroen C1 by Peugeot and Citroen launched in direct competition to the Ford Ka, the Volkswagen Lupo and the Mercedes/Swatch Smart

The direction co-branding takes should not be considered unambiguous but rather as a comprehensive value creation process that might combine one or all of the four co-brand equity enhancement process aforementioned.

Very often the value pursued by each party may be different from one other, and the benefits that are likely to be achieved by the parties are usually in more than one field.

Adidas and the Japanese designer brand Yamamoto, for instance, have successfully created Adidas Y3 by matching very different goals. In this cooperation Adidas benefits in brand image from the “coolness” of Yamamoto and steps into the style arena while Yamamoto benefits from the size and network of Adidas to increase brand awareness.

That being said, crossover branding cannot represent an easy made strategy for every brand. Such kind of cooperation needs careful coordination among the parties involved and attentive care in realization. In fact over 90% of co-branding ventures fail.

Co-branding must, indeed, create equal value for both cooperating brands. No cooperation based on an unequal relationship has proved to be successful.

Moreover, no co-branding strategy can be feasible if the brands involved do not share core values and brand belief with each other. Interlocking two brands identities can indeed be tricky as you need to look at your brand message and make sure that its perception will not be diluted in consumers’ minds. Otherwise, the brands original consumer can be lost and disputes may arise between the partners.

Co-branding needs careful coordination, attentive communication among parties and detailed performing analysis. This complicates day to day operations and can cause one or both brands to under perform and fail to meet each others standards. Respective brand goals and objectives being brought to the cooperation should clearly coincide with each others ultimate partnership strategies.

With the increased sophistication of today’s consumers it becomes vital for brands to understand their audiences’ needs and desires as consumers decide, in fact, the life or death of a brand. Consumers in the 21st century have become increasingly aware of the quality of the products and services they seek and now search for added value in these items. Crossover branding, if rightly conceived and managed, can provide an attractive 1+1>2 formulas which creates added value for both participating brands and consumers. 1.Bill Sweeney, Project Leader and Head of Apparel at Adidas Sport Performance Division.