RetailWire Discussion: The Co-Branded Opportunity

By Tom Ryan

Co-branding programs have proven to be a valuable tool to help brands build equity while creating new products, but they're not without risks, wrote Steve McKee, president of McKee Wallwork Cleveland Advertising, recently in BusinessWeek.

Co-branding programs are now a fairly common marketing tool, he noted. Examples include Breyer's/Hershey in ice cream, Lay's/KC Masterpiece in snacks, Kellogg's/Healthy Choice in cereal, and Cinnabon/Mrs. Smith's in desserts. Outside the supermarket, examples include Coach/Lexus in the auto industry, Bulgari/Ritz-Carlton in hospitality, Disney/Crocs in footwear, Tim Hortons/Cold Stone in franchising and Southwest/SeaWorld in airlines.

Mr. McKee listed four primary reasons brands explore co-branding programs:

Piggybacking on introductions: This enables newer brands to tap into the loyalty of a more established brand. As an example, Mr. McKee points the "Intel Inside" campaign tied to major computer makers such as IBM and Compaq.
The "halo affect" of shared brands: One example offered was Nike's alliance with Michael Jordan starting in 1984 that has benefited both sides. Also cited was EconoLodge's housekeeper-certification program with Mr. Clean.
Potential cost-savings: A Pizza Hut and Taco Bell shared restaurant not only shares real estate but often counter space and staffing.
Charging a premium: An example cited was Ford's two-decade partnership with Eddie Bauer and its more recent creation of the "450 horsepower supercharged Ford F-150 Harley-Davidson Super Crew."

The risks of co-branding, according to Mr. McKee, are that they tend to be dilutive to brand equity "since it spreads the credit for a positive experience across two brands where normally there's only one." Also, a negative experience created by one brand can also unfairly tarnish the partner brand. Finally, Mr. McKee said although the co-brand is expected to be larger than the sum of its parts, "You can't get away from the fact that you are to some extent relying on another brand's equity. That can, in some cases, make your brand look weak or secondary."

Mr. McKee said it's important that the two brands "fit" together. These include sharing similar characteristics and values as well as a similar equity strength with consumers.

"Co-branding is an often-overlooked strategy by which the whole can truly be greater than the sum of the parts," wrote Mr. McKee. "While it should be used sparingly and judiciously, it could generate a new level of interest and excitement around your products and services."

Discussion Questions: What do you think are the pros and cons of co-branding programs? What factors should be particularly assessed when exploring co-branded opportunities? What are your favorite examples?

The Pros and Cons of Co-Branding - Business Week

Comments:

Co-branding makes a lot of sense under the right circumstances, and can drive brand synergy as well as incremental sales. But the most important point is to ensure that the two brands in question are co-equals: They need to have parallel status in the eyes of the consumer or one of them will dilute the value of the other. At the same time, there should be a clear relationship between the two brands in question. Are they both food categories, or luxury travel brands, or home cleaning products? If so, co-branding makes a lot of sense...if not, the consumer just isn't going to see the relationship.

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Richard Seesel, Principal, Retailing In Focus LLC

Co-branding, when used judiciously, can be a great marketing tool. The key is for the co-branded product to reinforce the core story of each brand. When it works well, co-branding unites the equity of both brands to create a product that is as strong or stronger than each of the two contributing brands.

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Max Goldberg, Founding Partner, The Radical Clarity Group

Don't cannibalize your own sales. Co-branding partners simply need to be complementary, not competitive.

Len Lewis, President, Lewis Communications, Inc.

Pick the right partner and co-branding is a great strategy. Pick the wrong one and it's a brand buster.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

I have a slightly different view on co-branding. Whereas, in some cases it might provide some impact for one of the brands, I believe that in more cases than not, the brand equity of one or both brands is compromised.

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David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates

Co-branding at the level of Lays/KC is a whole different animal from co-branding at the Ford/Harley-Davidson level. While it's true that the brands should be complementary, and equals in the eyes of consumers, in the case of something like Ford/Harley, it needs to be about more than brand: the two together should offer something more than what you get from either. It's not just about 1+1=3, it's about collaborating on the design and/or offering to make sure that the best of both brands are offered. That's a lot more involved than just slapping another logo next to yours.

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Nikki Baird, Managing Partner, RSR Research

Costco was a retail pioneer here, and has done a great job with this.

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Warren Thayer, Editor & Managing Partner, Frozen & Dairy Buyer

The perils of co-branding have already been mentioned in the article. One brand's mistake can hurt the other co-brand's brand, so like a good marriage, both parties have to always be cognizant of the other partner's feelings, and make certain that the lines of communication remain open.

While it is difficult for me to pinpoint my favorite co-brands, 7-Eleven does a great job with its co-branded Slurpees. It allows them to charge a premium for sugary flavored ice.

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Joel Warady, Chief Marketing Officer, Enjoy Life Foods

I think there can be a lot of value in co-branding, especially when it's a retailer and a national brand teaming up. The brand benefits by gaining a more solid foothold in the outlet, while the retailer can offer an exclusive. Weight Watchers meals at Applebee's, Kroger Brand ice cream with Oreos, these a few examples where both brands win...and so do consumers.

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Liz Crawford, President, Crawford Consulting

Another type of co-branding that is mutually beneficial but often overlooked, happens in-store when manufacturers co-brand with retailers. Retailers who have a strongly positioned brand in the minds of their shoppers (e.g. Publix or Aldi) lend that goodwill to manufacturers through providing media space, signage and graphic presentations.

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Sandy Miller, President, Miller Zell

With the right product, right partner, and right idea, co-branding is a great idea. If everything doesn't match, all the partners are losers.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

I concur that the right match can work very well, and the wrong match can be disastrous but, if the stars have to really align to make co-branding work, how many good opportunities are truly out there? Isn't it a better investment to work on building the core brand further?

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Ted Hurlbut, Principal, Hurlbut & Associates

The right partner will make all the difference. Co-branding can be a lot of fun for the consumer but the brands have to "get along" for it to be effective.

Scott Knaul, Director, Retail Strategic Services, Workforce Insight

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