Branding Retain Agreement - PDF by bbg16256

VIEWS: 0 PAGES: 13

More Info
									                                  Academic papers
                                  2 + 2 = 5? A framework for using
                                  co-branding to leverage a brand
                                  Received (in revised form): 26th November, 2002




                                  LANCE LEUTHESSER
                                  holds a PhD in marketing from the University of Texas at Austin, and is a professor of marketing at California
                                  State University Fullerton. He has written on corporate identity, brand equity and business relationships. His
                                  articles have appeared in a number of publications. He has held executive management positions in firms serving
                                  business and consumer markets.


                                  CHIRANJEEV KOHLI
                                  holds a PhD in marketing from Indiana University, and is a professor of marketing at California State University
                                  Fullerton. He specialises in the creation, measurement and management of corporate and brand identity. His
                                  work has been reported in a number of publications. He has provided brand consulting services for several
                                  clients including Autodesk, Canon USA, Conagra, Transamerica and Verizon Communications.

                                  RAJNEESH SURI
                                  holds a PhD in marketing from University of Illinois at Urbana-Champaign, and is an assistant professor of
                                  marketing at Drexel University, Philadelphia. His work on branding and pricing has been reported in a number of
                                  publications. He is an alumnus of McKinsey & Company, where he worked as a consultant and pricing expert.


                                  Abstract
                                  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. In this paper, co-branding is defined and differentiated
                                  from other types of branding alliance. The literature on co-branding is reviewed and a framework
                                  proposed to help managers identify co-branding opportunities to enhance the success of their products.
                                  The advantages and shortcomings of each of the proposed strategies are also discussed.



                                  INTRODUCTION                                                the product itself. Successful brands
                                  As marketers seek growth through the                        provide quality assurances to con-
                                  development of new products, they                           sumers and can be leveraged to
                                  face markets cluttered with compet-                         introduce new products. The most
                                  ing brands. It is difficult to establish                     common way of leveraging brands is
                                  a unique position for new products.                         through line and brand extensions —
                                  Even innovative differentiated products                     applying the brand to other products in
                                  can be imitated quickly, leaving no                         either the same or different product
                                  strategic edge. So, the risks inherent in                   categories.
                                  establishing new brands are high, with                         An alternative for developing new
                                  a failure rate ranging from 80 to 90 per                    products is co-branding, a branding
                                  cent.                                                       strategy that has seen a dramatic
Chiranjeev Kohli
Department of Marketing,             Established successful brands help to                    increase in use over the past decade.
College of Business, California
State University Fullerton,       create differentiation through brand                        Co-branding involves combining two
Fullerton, CA 92834, USA
                                  associations that go beyond the limits                      or more well-known brands into
Tel: 1 714 278 3796
E-mail: ckohli@fullerton.edu      of the features and attributes of                           a single product. When it works

                                  HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 11, NO. 1, 35–47 SEPTEMBER 2003                         35
LEUTHESSER, KOHLI AND SURI




                             well, co-branding has the potential to                      branding as the combining and retain-
                             achieve ‘best of all worlds’ synergy that                   ing of two or more brands to create a
                             capitalises on the unique strengths of                      single product or service. This defini-
                             each contributing brand (henceforth                         tion is adopted for two reasons. First,
                             referred to as ‘parent’ brands). In this                    despite the lack of universal agreement
                             paper previous research on co-branding                      on its definition, there appears to be
                             is reviewed and a framework offered                         general agreement that co-branding in-
                             that should prove useful to brand                           volves the creation of a single product
                             managers when assessing co-branding                         using two brands.5–7 This is, in fact,
                             opportunities. As shown, co-branding                        the criterion that is most often used
                             opportunities can be distinguished in                       specifically to distinguish co-branding
                             terms of both the nature of the                             from other types of branding alliances.
                             complementarity of the parent brands                        Secondly, it presents an alternative to
                             and their respective target markets.                        line and brand extensions for achieving
                             The advantages and potential pitfalls of                    growth through new product develop-
                             each of these strategic co-branding                         ment, and is therefore an attractive
                             options are also discussed.                                 product-introduction strategy for brand
                                                                                         managers.
                                                                                            If a co-brand is a single product,
                             DEFINING CO-BRANDING AND THE                                the question arises, ‘Who owns the
                             SCOPE OF THE STUDY                                          product?’ In fact, the product may be
                             There is no universally accepted defini-                     owned by one, or both, of the
                             tion of co-branding. In the marketing                       parent brands. Many co-brands, usually
                             literature the term has been used                           referred to as ‘ingredient’ or ‘com-
                             interchangeably with labels such as                         ponent’ co-brands, involve a primary
                             ‘brand alliance’ and ‘composite brand-                      brand that ‘contains’ the secondary
                             ing’. Defined broadly, co-branding has                       brand. In some cases the secondary
                             been described as any pairing of two                        brand is always an ingredient; that is, it
                             brands in a marketing context such                          is not otherwise marketed as a separate
                             as advertisements, products, product                        product (eg DuPont Teflon, Intel
                             placements and distribution outlets.1                       microprocessor). The primary brand
                             More narrowly defined, co-branding                           owner usually owns the co-branded
                             means the combination of two brands                         product and is mainly responsible for
                             to create a single, unique product.2–4                      its marketing, while the secondary
                             When co-branding results in the crea-                       brand owner acts as a supplier or
                             tion of a new product, it usually signals                   licensor. In other cases, such as retail
                             to customers that the partners are                          co-branding (eg Circle K convenience
                             committed to a long-term relationship.                      store paired with 76 gasoline station;
                             In contrast, promotional alliances such                     Carl’s Jr. restaurant paired with Green
                             as joint promotions and product bun-                        Burrito restaurant), there is a more
                             dling are either not perceived as                           parallel relationship between the two
                             permanent (the former) or do not                            parent brands. These arrangements
                             result in the creation of a single                          often entail more complex alliances in
                             product (the latter).                                       which the partners enter into joint
                                 For the purpose of this paper the                       venture and profit-sharing agreements.
                             narrower definition is adopted of co-                           The financial structure of a co-

36                           HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 11, NO. 1, 35–47 SEPTEMBER 2003
                                             2 + 2 = 5? A FRAMEWORK FOR USING CO-BRANDING TO LEVERAGE A BRAND




branding arrangement is critically im-                      be a pre-requisite to assessing the
portant, for each partner must be                           relative attractiveness of co-branding,
adequately rewarded in order for the                        so it should not be surprising that the
relationship to endure. Whether a                           majority of research to date has
co-branding partner obtains revenue                         addressed the first of these broad
from royalties, from sales of ingredients                   areas.
or components, or from direct sales of                          Various theories such as infor-
the co-branded product, customers’                          mation integration8,9 and cognitive
perceptions of the co-brand and any                         consistency10 have been used to explain
influence those perceptions might sub-                       how consumers reconcile their at-
sequently have on the parent brands                         titudes towards co-branded products.
should, however, be the same. In other                      Cognitive consistency suggests that
words, the market response to a                             consumers will seek to maintain
co-brand should be relatively inde-                         consistency and internal harmony
pendent of the legal or financial                            among their attitudes. Therefore, when
structure used to implement it, because                     evaluating a co-brand with two
ultimately brands are ‘owned’ in the                        (possibly conflicting) brands, consumers
minds and hearts of consumers. It is                        will tend to assimilate their attitudes
this aspect of co-branding that is the                      towards the parent brands such that
main focus in this paper.                                   their attitudes towards the co-brand
                                                            will be an averaging of the parent
                                                            brand attitudes.11 Information integra-
FINDINGS FROM RESEARCH ON                                   tion suggests that as new information is
CO-BRANDING                                                 received, it is processed and integrated
Co-branding is really a special case of                     into existing beliefs and attitudes.12
brand extension in which two brands                         Furthermore, among this new informa-
are extended to a new product. There-                       tion, salient and accessible information
fore, both co-branding and brand ex-                        is likely to be given greater weight.13 If
tensions raise the same basic issues,                       this is true, then better-known brands
namely, how brand equity transfers to                       are likely to play a greater role in the
the new product and how the new                             formation of attitudes towards co-
product subsequently has an impact on                       branded products.
brand equity.                                                   Empirical research on co-branding is
   With the large base of attitude                          limited to a relatively few studies that
research as background, research on                         have typically examined product con-
co-branding has generally addressed                         cepts or fictitious products rather than
two broad areas: first, how customers’                       real instances of co-branding. In a
perceptions of a co-brand are in-                           study involving co-branding of motor
fluenced by their perceptions of the                         vehicles and electronic components,
two parent brands and vice versa;                           Simonin and Ruth14 found that pre-
secondly, the relative merits of co-                        existing attitudes towards the parent
branding versus other new product-                          brands, the perceived fit (compatibility)
development strategies, such as line and                    of the parent brands’ product categories
brand extensions. It stands to reason                       and the perceived similarity of the
that a general understanding of how                         images of the two parent brands all had
customers perceive co-branding would                        a significant positive influence on

HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 11, NO. 1, 35–47 SEPTEMBER 2003                 37
LEUTHESSER, KOHLI AND SURI




                             attitudes towards the co-brand. These                       immune to brand dilution and confu-
                             findings are consistent with prior                           sion — risks associated with the alterna-
                             research on brand extensions, which                         tive of brand extensions18 — because if
                             suggests that attitudes towards brand                       a co-brand fails, it really ‘belongs’ to
                             extensions are more favourable the                          the primary brand.19 Therefore, a co-
                             better the perceived fit between the                         branding arrangement is likely to pose a
                             brand’s original product class and                          greater risk to the primary brand than to
                             the product class of the extension.15                       the secondary brand.
                             Simonin and Ruth16 further found that                          Park et al.20 examined the effects of
                             where one parent brand was more                             product complementarity on evalua-
                             familiar than the other, it had a                           tions of a co-branded product, using a
                             stronger influence on attitude towards                       hypothetical co-brand of Godiva (fine
                             the co-brand than the less familiar                         chocolates) and Slim-Fast (weight-loss
                             parent, which supports the notion of                        products). Brand attribute ratings con-
                             attitude accessibility. Finally, attitude                   firmed the complementarity of the
                             towards the co-brand exhibited a                            two brands: Godiva rated high on
                             significant ‘spillover’ (post-effect) on                     taste and richness whereas Slim-Fast
                             attitudes towards the parent brands,                        rated favourably on calorie content
                             but the effect was stronger when                            and value. In terms of global brand
                             the parent brand was less famil-                            evaluation, Godiva was rated very
                             iar. Replications with a Northwest                          favourably, Slim-Fast significantly less
                             Airlines/Visa card co-brand and an                          so. A hypothetical cake mix extension
                             assortment of Disney/retailer co-brands                     by either brand alone (ie Godiva cake
                             produced similar results. Taken to-                         mix and Slim-Fast cake mix) was
                             gether, the findings of these studies                        judged to be similar to the parent
                             suggest that strong parent brands in-                       brand. That is, Godiva cake mix was
                             fluence the perceptions of co-brands                         perceived to be good tasting, but
                             more than weaker parent brands, and                         high on calories, whereas Slim-Fast
                             strong parent brands are less influenced                     cake mix was perceived to be low
                             by attitudes towards the co-brand.                          on calories and low on taste. Co-
                                As previously mentioned, in in-                          brands (‘Slim-Fast cake mix by Godiva’
                             stances involving a primary and a                           and ‘Godiva cake mix by Slim-Fast’)
                             secondary brand, the secondary brand is                     were, however, judged to possess the
                             usually a supplier or licensor to the                       desirable attributes of both brands (ie
                             primary brand, an ‘arm’s length’ ar-                        good taste and low calories). Similar
                             rangement that is relatively simple                         findings were reported for another
                             from both strategic and operational                         study involving a hypothetical motor
                             viewpoints.17 In such cases, the secon-                     vehicle co-brand ‘Jaguar sedan by
                             dary brand generally has little at stake                    Toyota’, where the co-brand was
                             except its reputation. Findings from                        perceived as possessing the salient
                             the co-branding literature suggest that                     attributes of both brands.21
                             secondary brands are relatively immune                         Another study conducted by Park et
                                                                                            22
                             to negative spillover effects, particularly                 al. paired Godiva with Haagen-Dazs
                                                                                                                       ¨
                             if they are well-known and well-                            (a brand associated with premium ice
                             respected brands. Furthermore, secon-                       cream), thus mating two products with
                             dary brands also appear to be relatively                    highly favourable global ratings, but

38                           HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 11, NO. 1, 35–47 SEPTEMBER 2003
                                             2 + 2 = 5? A FRAMEWORK FOR USING CO-BRANDING TO LEVERAGE A BRAND




low complementarity (both perceived                         its Silverstone, Kevlar, StainMaster
as rich-tasting, high-calorie products).                    and other brands to a wide range
Choice and preference measures                              of manufacturers, from ones offer-
revealed that this combination per-                         ing high-profile, high-equity primary
formed about the same as extensions by                      brands to ones with marginal, low-
either brand, and not as well as the                        equity marks, and nearly all of those
Godiva/Slim-Fast co-brand.                                  instances have involved co-branding.
   In summary, the above results sug-                       DuPont has been highly successful,
gest that product complementarity may                       achieving market dominance and near
be a key appeal in co-branding, be-                         monopoly status in some instances.
cause complementarity allows the co-                           Finally, Blackett and Boad31 iden-
brand to inherit the desirable qualities                    tified another source of value that a
of each of the parent brands.                               brand could offer. ‘Reach/awareness
   The pairing of ‘high-quality’ or                         co-branding’ refers to cooperation
‘high-image’ brands with brands of                          where a partner increases awareness by
lesser status is another area that has                      quickly gaining access to the other’s
received attention in the co-brand-                         customer base. Credit card co-branding
ing literature.23–25 Rao et al.26 found                     (eg American Express’s Optima card
that high-quality brands can confer                         with Delta Airlines’ SkyMiles pro-
quality perceptions to partner brands                       gramme) represents a commonplace
(eg Coca-Cola ‘endorsed’ Nutrasweet                         example of reach/awareness co-brand-
by using it in Diet Coke, thereby                           ing.
allaying fears about the safety of                             Based on the preceding review, the
the ingredient). Also, replacing little-                    following conclusions can be made:
known or unidentified ingredients with
nationally branded, high-quality in-                        — Co-branded products can acquire
gredients has been shown to enhance                           the salient attributes of both parent
the perceived quality of lower quality                        brands, making co-branding a
and private label products.27,28 It is                        particularly attractive alternative to
noteworthy that associating a nationally                      brand extension where the parent
branded ingredient with a private label                       brands complement each other
product (eg Heartland Raisin Bran                             strongly.
with SunMaid raisins) did not adversely                     — Perceptions of a co-branded
affect the evaluation of the national                         product can have spillover effects
brand.29 Similarly, Washburn et al.30                         on the parent brands; lesser-known
found that low-equity brands gain                             parent brands are likely to be
more in a co-branding situation than                          affected the most.
high-equity brands, but do not damage                       — Pairing a ‘high-status’ parent brand
the high-equity brands they partner                           with a ‘low-status’ parent brand is
with. Therefore, it seems that well-                          not necessarily detrimental to the
respected, powerful brands have rela-                         high-status brand.
tively little to lose in co-branding                        — Each partner to a co-branding ar-
ventures, even when the partner brand                         rangement brings a customer base,
is a weak one. DuPont’s practices                             which is potentially available to the
seem to reflect the above think-                               other, as in reach/awareness co-
ing. For years DuPont has supplied                            branding.

HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 11, NO. 1, 35–47 SEPTEMBER 2003                 39
LEUTHESSER, KOHLI AND SURI




                             Figure 1   Co-branding strategies



                             A FRAMEWORK FOR CO-BRANDING                                 tinction is not made in this paper. The
                             STRATEGIES                                                  idea of a ‘total’ product highlights the
                             A model of co-branding strategies is                        multitude of factors that make up a
                             shown in Figure 1. Following the                            product’s complete bundle of benefits,
                             above review of co-branding research,                       and encourages marketers to think
                             two principle dimensions can be iden-                       broadly and creatively about their
                             tified that distinguish among different                      products.
                             types of co-branding arrangements.                             A co-branding situation in which
                             The first dimension is the nature of the                     each brand makes a significant
                             complementarity of the parent brands.                       contribution to the co-brand’s core
                             The nature of the complementarity                           benefits represents ‘core’ complemen-
                             between the parent brands, and thus                         tarity. Examples of co-branding ar-
                             the way in which each brand con-                            rangements that frequently involve
                             tributes value, could, however, vary a                      core complementarity include in-
                             great deal.                                                 gredient and component co-branding
                                A useful way to distinguish the                          (eg Reese’s Peanut Butter Cups with
                             nature of the complementarity be-                           Hershey’s chocolate, Dell computers
                             tween the brands is from the perspec-                       with ‘Intel inside’). In core com-
                             tive of the ‘total’ product, a view                         plementarity, the attributes of both
                             that focuses on the entire bundle of                        brands are required for the essential
                             benefits, tangible and intangible, that                      functioning of the product.
                             the product delivers to the customer.                          It is not always easy to know
                             From this perspective, products consist                     whether a co-brand involves core
                             of a core, or essential, group of benefits                   complementarity. This requires a
                             along with a set of additional benefits                      thoughtful     examination     of    the
                             that comprise the extended product.                         product’s benefits from the customer’s
                             The extended product is sometimes                           perspective and a careful inventorying
                             divided into tangible and augmented                         of its determinant attributes — the
                             components. For simplicity that dis-                        satisfaction-producing attributes that

40                           HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 11, NO. 1, 35–47 SEPTEMBER 2003
                                             2 + 2 = 5? A FRAMEWORK FOR USING CO-BRANDING TO LEVERAGE A BRAND




customers regard as both highly                             at lower cost. Intel’s stronger brand
important and meaningfully different                        name and image, however, offset
across competitive offerings. If both                       AMD’s price/performance advantage.
brands contribute to the set of                             So, while it is possible to distinguish
determinant attributes, then core                           conceptually between pure core
complementarity exists. Core com-                           complementarity and pure extended
plementarity ensures that each partner                      complementarity, in practice there will
is contributing to this success.                            be many hybrid instances where
    If core complementarity does not                        product complementarity must be
exist, ‘extended’ complementarity is a                      assessed both ways.
possibility. In these situations, a brand                      The other dimension reflected in
lends its good name to the co-brand.                        Figure 1 is target market. This is
As previous research has shown, a                           based on the common observation
strong brand may lend quality percep-                       that co-branding can bring together
tions to an otherwise unknown partner,                      brands with different market franchises,
or a partner with a weaker quality                          thereby offering opportunities for ac-
image, or a partner for which quality is                    cess to new markets. In fact, one
difficult to judge independently. Alter-                     partner may be able to gain access to
natively, two brands with comparable                        the other’s market, or the co-brand
images may join forces because they                         may provide an opportunity to develop
believe that there will be synergies in                     a market entirely new to both. Where
endorsing each other. A brand name                          the co-brand’s target market is substan-
may be a part of extended complemen-                        tially different than a partner’s existing
tarity. A brand name is a surrogate                         customer base, the co-branding effort
for product benefits, the validation                         is effectively a market-development
of which is always pending. Brand                           strategy for that partner. On the other
name clearly can, and often does,                           hand, where the co-brand’s target
influence customer choice, however.                          market is substantially the same, then
Swaminathan32 found that for co-                            the co-branding effort is a market-
branded consumer packaged goods, a                          penetration strategy for that partner. It
positive experience of a parent brand                       should be clear, then, that the measure
enhanced the possibility of a consumer                      of target market and thus the co-
trial.                                                      branding strategies depicted in Figure 1
    While core and extended product                         are partner specific, and that the same
complementarity are mutually ex-                            co-branding arrangement might entail
clusive for classification purposes (that                    different co-branding strategies by each
is, ‘extended’ means ‘not core’), this is                   partner.
not to suggest that products with core                         Figure 1 defines four co-branding
complementarity lack extended com-                          strategies:
plementarity. It is certainly possible that
a co-branding partner could contribute                      — Reaching in to achieve greater
at both the core and extended levels.                         market penetration by choosing a
The example of Intel illustrates this.                        partner that adds significantly to the
For a long time AMD has tried to                              co-brand’s core bundle of benefits.
compete with Intel by providing                             — Reaching out to tap new markets by
microprocessors of similar performance                        choosing a partner that adds sig-

HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 11, NO. 1, 35–47 SEPTEMBER 2003                 41
LEUTHESSER, KOHLI AND SURI




                               nificantly to the co-brand’s core                          not directly tied to Intel; in Dell’s case
                               bundle of benefits, while bringing                         by delivering industry-leading service
                               in a new customer base.                                   and customer satisfaction. Alternatively,
                             — Reaching up to achieve greater                            the co-branding partner could try to
                               market penetration by choosing                            forge an exclusive agreement with the
                               a partner that contributes posi-                          component supplier, or an arrangement
                               tive brand image and associations                         in which the component is customised
                               that, while not essential to the                          and thus unique to the partnership.
                               core functioning of the co-brand,                         This is precisely the kind of
                               nevertheless significantly elevate the                     accommodation that Disney has made
                               co-brand’s image and value.                               in the past by licensing apparel designs
                             — Reaching beyond by choosing a co-                         unique to individual large retailers such
                               branding partner that brings both                         as Wal-Mart, K-Mart and Sears.
                               strong image and access to new                               Another risk that may be present
                               customers.                                                in co-branding situations characterised
                                                                                         by high core complementarity is the
                             In the following sections examples are                      potential that a co-branding partner
                             provided and the managerial implica-                        will ultimately become a competitor.33
                             tions of each of these strategies are                       When IBM partnered with Microsoft
                             discussed.                                                  to develop the DOS operating sys-
                                                                                         tem for its personal computers, it trig-
                                                                                         gered a well-known sequence of events
                             Reaching in                                                 that eventually led Microsoft to the
                             This strategy involves core product                         pre-eminent position in personal com-
                             complementarity, with the objective of                      puter operating systems. This occurred
                             reaching in to achieve greater market                       even though Microsoft had very little
                             share in the current target market.                         brand equity compared to IBM at that
                             Many instances of component or                              time. So, where core complementarity
                             ingredient co-branding exemplify this                       is very high, a partner to a prospective
                             strategy. For example, a personal                           co-branding arrangement should ex-
                             computer manufacturer chooses to                            amine to what extent a potential exists
                             co-brand with Intel because the                             to spawn a future competitor. Such a
                             computer manufacturer’s customers                           risk is particularly great if the partner’s
                             place high value on the performance                         primary target market is at stake.
                             and reliability delivered by Intel                             So far, this discussion has focused on
                             microprocessors. In these situations                        situations where a co-branding partner
                             customer value is intimately linked to                      teams up with a very powerful, or
                             both brands, and in many instances                          potentially very powerful, brand ally. In
                             more strongly to Intel than the                             other cases, the partners may make
                             computer brand. This presents a danger                      more balanced contributions. For ex-
                             to the computer manufacturer, for                           ample, Dreyer’s M&M Ice Cream,
                             without a strong franchise of its own,                      Jell-O No Bake Oreo Cheesecake,
                             the co-branding strategy will provide it                    Smucker’s 3 Musketeers Sundae Syrup
                             with no sustainable differential ad-                        and Brach’s Jif Peanut Butter Bars are
                             vantage. So, successful manufacturers                       among a growing list of food products
                             like Dell achieve excellence in areas                       for which the primary brand owner has

42                           HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 11, NO. 1, 35–47 SEPTEMBER 2003
                                             2 + 2 = 5? A FRAMEWORK FOR USING CO-BRANDING TO LEVERAGE A BRAND




chosen co-branding in lieu of line                          reaching out to serve a new market.
extension. Among these examples,                            Retail co-branding is an increasingly
the Dreyer’s/M&M and Jell-O/Oreo                            popular method of accomplishing this.
combinations appear to exhibit a                            By providing access to each partner’s
stronger degree of core complemen-                          customer base, retail co-brands can
tarity than the Smucker’s/3 Musketeers                      substantially increase the sales and
and Brach’s/Jif combinations, because                       profit potential of a single location
the secondary brands in the first pair                       without a proportionate increase in
have greater physical distinctiveness                       investment.
than the ingredients in the second pair.                        Since retail co-branding involves
It is likely, for example, that consumers                   little more than combining two
in a blind taste test would be able to                      separate services into what is essentially
distinguish the former two co-brands                        a single diversified one, it is not
from similar generic competitors more                       surprising that the strategy has been
easily than they could in the case of the                   applied mostly to retail businesses
latter two. In fact, the latter two                         where convenience is highly valued.
co-brands may have little sustainable                       Combinations such as Carl’s Jr.
advantage over line extensions in which                     (hamburgers)/Green Burrito (Mexican
the secondary brands are replaced with                      food), Togo’s (sandwiches)/Baskin-
generic ingredients. Assuming this to be                    Robbins (ice cream) and Circle K
true, what then are the drawbacks of                        (convenience store)/76 (gasoline) il-
such co-brands? Fortunately, there                          lustrate this. As these examples also
appear to be few, if any. In each case the                  illustrate, a retail co-brand might
primary brand is distinctive in its own                     combine offerings that are targeted
right, so the threat of competition from                    to more or less the same pur-
the secondary brand is likely to be                         chase occasion, making the offerings
small. Furthermore, any premium that                        mutually exclusive (eg few customers
the primary brand pays to incorporate                       purchase both a Carl’s hamburger and a
the branded ingredient (either by                           Green Burrito entre on the same visit);
purchasing the ingredient or by paying                      or, it might combine offerings targeted
a royalty to use the brand name) would                      to different purchase occasions but that
probably be offset by somewhat greater                      lend themselves to being consolidated
product trial and the likely result of                      in a single visit (Togo/Baskin Robbins,
more adopters. In the event that the                        Circle K/76). The first type of
secondary brand becomes overused in                         combination, greater depth of offering
too many competing products, it will                        for a common purchase occasion,
lose its effectiveness in this role, which                  should be particularly appealing where
will tend to put a brake on overuse.                        choice is the result of group decision
There is also the possibility that the                      making, because it provides a greater
primary brand will gain access to the                       chance of satisfying all the group
secondary brand’s customers.                                members. If all visits were by
                                                            individual customers this type of retail
                                                            co-brand would provide no synergy,
Reaching out                                                other than a potentially lower
This strategy involves core com-                            investment compared to separate
plementarity, with the objective of                         locations. The second type of

HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 11, NO. 1, 35–47 SEPTEMBER 2003                 43
LEUTHESSER, KOHLI AND SURI




                             combination, which features offering                        for Ford in the future. Eddie
                             breadth, has synergies for both                             Bauer’s parent company, Chicago-
                             individual and group buyers because it                      based Spiegel, is experiencing serious
                             provides individuals with the oppor-                        financial difficulty, in large part due to
                             tunity to combine purchase occasions                        Eddie Bauer, which represents almost
                             and it provides the capacity to serve                       60 per cent of its sales. In the 1990s
                             the different needs of group members.                       Eddie Bauer expanded aggressively into
                             In general, retail co-brands that offer                     shopping malls, and changed its earthy,
                             breadth appear to have greater                              outdoorsy image in an unsuccessful
                             potential for success than co-brands                        attempt to attract more Generation X
                             offering depth.                                             customers. It later reversed it-
                                                                                         self, bringing back the traditional
                                                                                         Seattle-hiker look, but sales declined
                             Reaching up                                                 substantially.36 Now Spiegel is search-
                             This strategy involves extended com-                        ing for a buyer for the Eddie Bauer
                             plementarity, with the objective of                         business, and this could mean another
                             reaching up to achieve greater market                       round of brand repositioning. Sooner
                             share in the partner’s current target                       or later Ford will have to reconcile this
                             market. Reaching up is essentially an                       with its positioning for the Explorer,
                             image-enhancement strategy, in which                        for consistency is generally regarded as
                             a co-brand is chosen primarily for                          one of the linchpins of strong brand
                             the positive associations linked to                         positioning. So, when a co-branding
                             the brand, rather than for particular                       partner is chosen primarily for its
                             product attributes incorporated into the                    image, the stability of that image is an
                             co-brand.                                                   important concern.
                                The practice of motor vehicle                               This type of co-branding is also
                             manufacturers using ‘designer’ labels on                    gaining widespread use on the internet
                             upmarket versions of their models is an                     as dot.com companies search for ways
                             example of reaching up. When the                            to make money. A persistent problem
                             Ford motor company introduced the                           area for many internet sellers is transac-
                             top-of-the-range ‘Eddie Bauer’ version                      tion security. This gives a significant
                             of its Explorer sports utility vehicle, it                  competitive advantage to the larger
                             quickly outsold other versions of the                       online sellers such as Amazon.com that
                             Explorer costing considerably less.34 To                    have earned trust through extensive
                             date Ford has sold over one million                         media attention. To offset their disad-
                             Eddie Bauer vehicles.35 Clearly, the                        vantage, many online businesses are
                             designer label adds a greater measure of                    using branded services, such as PayPal,
                             distinctiveness than more generic labels                    to handle the purchase transaction.
                             such as ‘Limited’, and the strategy has                     With this service, purchasers provide
                             been applied by Ford to other models,                       credit card information, not to the
                             such as the Lincoln Town Car Cartier                        online seller, but instead to the PayPal
                             edition. While this strategy adds                           service, which processes the transaction
                             distinctiveness, it comes at the price of                   and in turn charges the seller a small
                             loss of control over that distinctiveness.                  fixed fee plus a percentage of the
                             Although still successful with its Eddie                    purchase amount. The PayPal website
                             Bauer label, there could be problems                        (www.paypal.com) highlights that ‘cus-

44                           HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 11, NO. 1, 35–47 SEPTEMBER 2003
                                             2 + 2 = 5? A FRAMEWORK FOR USING CO-BRANDING TO LEVERAGE A BRAND




tomers recognize and trust the PayPal                          In the realm of products, the
name and brand’.                                            Hoover Company recently introduced
                                                            a new vacuum cleaner capable of
                                                            washing and drying hard floors. The
Reaching beyond                                             idea for the product came from the
This strategy involves extended com-                        director of marketing development for
plementarity, with the objective of                         Reckitt Benckiser, the firm that
reaching up and out — reaching                              markets the Lysol (cleaning products)
beyond.                                                     and Old English (furniture polish)
    Credit card co-branding is an ex-                       brands.39 The new vacuum, called the
ample of reaching beyond. In terms of                       Floor Mate, comes bundled with
volume, credit card co-branding leads                       specially formulated versions of Lysol
all other forms; an estimated 40–50 per                     cleaner and Old English polish that
cent of all credit cards issued world-                      carry the Hoover co-brand. The
wide are co-branded, and together                           special versions of Lysol and Old
MasterCard and Visa have more than                          English are sold separately, and Reckitt
20,000 co-branded programmes.37 Co-                         Benckiser clearly anticipates that
branded credit cards, specifically ‘af-                      purchasers of Hoover’s Floor Mate will
finity’ and ‘rewards’ cards, connect                         continue to consume these products
credit card issuers with market seg-                        whenever they use the Floor Mate.
ments served by the linked (secondary)
brand. Affinity cards (eg credit cards
linked to universities and charities)                       CONCLUSIONS
provide benefits to the linked organisa-                     Successful co-branding occurs when
tion — usually a portion of the                             both brands add value to a partnership.
transaction fees — so users of these                        The value-added potential should be
cards know that each time they make                         assessed by examining both the com-
a purchase it benefits an organisation                       plementarity between the two brands
with which they have a strong sense of                      and the potential customer base for the
commitment. Affinity cards, as a group,                      co-brand. A great deal of attention has
have a very low annual attrition rate of                    been given to the potential for inter-
around 5–6 per cent compared to                             brand effects in co-branding, that is,
25–35 per cent for other credit cards.38                    the potential for enhancement or
Rewards cards (eg car, airline, lodg-                       diminishment of the brand equity of
ing and retail credit cards), on the                        either partner. Much of this attention
other hand, provide benefits such as                         has been directed to effects on brand
discounts or points directly to the                         attitudes. In general, research sug-
cardholder in an effort to encourage                        gests that consumers tend to respond
more, or continued, patronage with                          favourably to co-brands in which each
the linked brand. For the credit card                       partner appears to have a legitimate fit
issuer, a critically important aspect of                    with the product category, and the
this business is access to the customer                     attitudes towards the parent brands will
list of its co-branding partner, which                      be reinforced, or at least maintained, as
provides a very attractive means of                         a result of the partnership. Further-
acquiring new customers for its other                       more, attitudes towards strong, well-
products and services.                                      known brands are less likely to be

HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 11, NO. 1, 35–47 SEPTEMBER 2003                 45
LEUTHESSER, KOHLI AND SURI




                             influenced by co-branding than less-                          (2) Levin, A. M., Davis, J. C. and Levin, I.
                                                                                              (1996) ‘Theoretical and empirical linkages
                             known brands, a finding that is entirely                          between consumers’ responses to different
                             consistent with a long history of                                branding strategies’, Advances in Consumer
                             research on attitudes showing that                               Research, Vol. 23, pp. 296–300.
                                                                                          (3) Park, C. W., Jun, S. Y. and Shocker, A. D.
                             well-formed attitudes are highly resis-                          (1996) ‘Composite branding alliances: An
                             tant to change.                                                  investigation of extension and feedback
                                 Brand attitudes are, however, only                           effects’, Journal of Marketing Research, Vol.
                             one aspect of brand equity. In the                               33, November, pp. 453–466.
                                                                                          (4) Washburn, J. H., Till, B. D. and Priluck, R.
                             end, brand equity must be reflected in                            (2000) ‘Co-branding: Brand equity and trial
                             market response — sales, profits and                              effects’, Journal of Consumer Marketing, Vol.
                             market reach. The authors conclude                               17, No. 7, pp. 591–604.
                                                                                          (5) Levin et al., ref. 2 above.
                             that co-branding can, in many cases, be                      (6) Washburn et al., ref. 4 above.
                             a more effective strategy for achieving                      (7) Shocker, A. D. (1995) ‘Positive and negative
                             this than line or brand extensions,                              effects of brand extension and co-branding’,
                                                                                              Advances in Consumer Research, Vol. 22, pp.
                             because co-branding appears to have                              432–434.
                             less potential to have an impact on                          (8) Anderson, N. H. (1981) ‘Foundations of
                             attitudes to the parent brand and on                             Information Integration Theory’, Academic
                             brand image.                                                     Press, New York, NY.
                                                                                          (9) Simonin, B. L. and Ruth, J. A. (1998) ‘Is a
                                 There are also disadvantages to                              company known by the company it keeps?
                             co-branding. Co-branding can place                               Assessing the spillover effects of brand
                             differential advantage in the hands of                           alliances on consumer brand attitudes’,
                                                                                              Journal of Marketing Research, Vol. 35,
                             another partner. It can spawn a poten-                           February, pp. 30–42.
                             tial competitor. Co-branding places                         (10) Schewe, C. D. (1973) ‘Selected social
                             control of important product charac-                             psychological models for analyzing buyers’,
                                                                                              Journal of Marketing, Vol. 37, July,
                             teristics, including image, in the hands                         pp. 31–39.
                             of the other partner to some extent. In                     (11) Levin et al., ref. 2 above.
                             some cases, co-branding may actually                        (12) Anderson, ref. 8 above.
                             limit market reach compared to line or                      (13) Fazio, R. H. (1989) ‘On the power and
                                                                                              functionality of attitudes: The role of
                             brand extensions.                                                attitude accessibility’, in ‘Attitude Structure
                                 The advantages, and potential pit-                           and Function’, Pratkanis, A., Breckler, S.
                             falls, of a co-branding arrangement can                          and Greenwald, A. (eds) Lawrence Erlbaum
                                                                                              Associates, Hillsdale, NJ.
                             be brought into view by examining                           (14) Simonin and Ruth, ref. 9 above.
                             the strategy in accordance with the                         (15) Aaker, D. A. and Keller, K. K. (1990)
                             framework presented here. As it has                              ‘Consumer evaluations of brand extensions’,
                                                                                              Journal of Marketing, Vol. 54, No. 1, pp.
                             been attempted to show, a clear defini-                           27–31.
                             tion of customer, a careful delineation                     (16) Simonin and Ruth, ref. 9 above.
                             of customer benefits and clear respon-                       (17) Sengupta, S. and Bucklin, L. P. (1995) ‘To
                             sibilities for delivering these benefits to                       ally or not to ally’, Marketing Management,
                                                                                              Vol. 4, No. 2, pp. 24–32.
                             customers will reveal the advantages,                       (18) Aaker, D. A. (1996) ‘Building Strong
                             and perhaps some unexpected disad-                               Brands’ The Free Press, New York, NY.
                             vantages, of co-branding.                                   (19) Washburn et al., ref. 4 above.
                                                                                         (20) Park et al., ref. 3 above.
                                                                                         (21) Shocker, ref. 7 above.
                             References                                                  (22) Park et al., ref. 3 above.
                               (1) Grossman, R. P. (1997) ‘Co-branding in                (23) Washburn et al., ref. 4 above.
                                   advertising’, Journal of Product and Brand            (24) McCarthy, M. S. and Norris, D. G. (1999)
                                   Management, Vol. 6, No. 3, pp. 191–201.                    ‘Improving competitive position using



46                           HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 11, NO. 1, 35–47 SEPTEMBER 2003
                                             2 + 2 = 5? A FRAMEWORK FOR USING CO-BRANDING TO LEVERAGE A BRAND




       branded ingredients’, Journal of Product and              Martin’s Press, New York, NY.
       Brand Management, Vol. 8, No. 4, pp.                 (32) Swaminathan, V. (1999) ‘Do cobranding
       267–285.                                                  strategies influence brand choice? An
(25)   Rao, A. R., Qu, L. and Ruekert, R. W.                     empirical analysis’, Proceedings of the American
       (1999) ‘Signaling unobservable product                    Marketing Association, Summer, No. 73.
       quality through a brand ally’, Journal of            (33) Sengupta and Bucklin, ref. 17 above.
       Marketing Research, Vol. 36, No. 2, pp.              (34) Boad, B. (1999) ‘Co-branding comes of
       258–268.                                                  age’, Managing Intellectual Property, Issue 94,
(26)   Ibid.                                                     pp. 20–26.
(27)   McCarthy and Norris, ref. 24 above.                  (35) Copple, B. (2002) ‘Fashionably late’, Forbes,
(28)   Vaidyanathan, R. and Aggarwal, P. (2000)                  Vol. 170, No. 3, p. 46.
       ‘Strategic brand alliances: Implications of          (36) Ibid.
       ingredient branding for national and private         (37) Punch, L. (2001) ‘Loyalty theater:
       label brands’, Journal of Product and Brand               Cobranding 10 years after’, Credit Card
       Management, Vol. 9, No. 4, pp. 214–228.                   Management, Vol. 14, April, pp. 42–50.
(29)   Ibid.                                                (38) Ibid.
(30)   Washburn et al., ref. 4 above.                       (39) Greenberg, K. (2001) ‘Hoover Lysol, Old
(31)   Blackett, T. and Boad, B. (1997)                          English Floor Mate’, Brandweek, Vol. 42
       ‘Co-Branding: The Science of Alliance’, St                (43), p. 6.




HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 11, NO. 1, 35–47 SEPTEMBER 2003                          47

								
To top