Chapter 7: Co-Branding

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Introduction
A brand is an overall experience of a customer that distinguishes an
organization or product from its rivals in the eyes of the
customer. Brands are used in business, marketing, and advertising.
Unique design, sign, symbol, words, or a combination of these, employed in
creating an image that identifies a product and differentiates it from its
competitors.
Over time, this image becomes associated with a level of credibility, quality,
and satisfaction in the consumer's mind (see positioning).
Thus brands help consumers in crowded and complex marketplace, by
standing for certain benefits and value. Legal name for a brand is trademark
and, when it identifies or represents a firm, it is called a brand name. 

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Brand
A brand consists of one or more of the following: Name, Term, Sign,
Symbol, or Design
Used to:
Identify goods or services
Differentiate one company from another
“A brand is a name, term, design, symbol, or any other feature that
identifies one seller’s good or service as distinct from those of other
sellers” (American Marketing Association).
The original brand name is familiar among the customers whereas the
co-branded brand is still new. 

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Reasons to Develop a Brand Image

Market Identity

Customer loyalty

Brand Identity

Customer Demand

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Branding

 Branding is the process of giving a meaning to specific

company, products or services by creating and shaping a brand
in consumers’ minds.
 It is a strategy designed by companies to help people to quickly
identify their products and organization, and give them a reason
to choose their products over the competition’s, by clarifying
what this particular brand is and is not.
 The objective is to attract and retain loyal customers by
delivering a product that is always aligned with what the brand
promises.

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7 Franchising: An Enterpreneur’s Guide 4e
 It was important to the company that its brand not be diluted by
other companies using the same name; therefore it was
compelled to sue its competitors to prevent them from doing so.

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Brand equity

 Brand equity' is a phrase used in the marketing industry which

describes the value of having a well-known brand name, based on
the idea that the owner of a well-known brand name can generate
more revenue simply from brand recognition; that is from products
with that brand name than from products with a less well known
name, as consumers believe that a product with a well-known
name is better than products with less well-known names.
 Brand equity is a competitive advantage that results in higher
sales, higher revenues, and lower costs.
 It is the difference in price that a consumer pays when they
purchase a recognized brand’s product over a lesser known.

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Brand Equity

A business depends upon its uniqueness for its competitive

advantage in the marketplace.
Four Dimensions:
1)Brand Loyalty
2)Brand Awareness
3)Perceived Quality of Brand
4)Brand Association
Emergence of Co-Branding

Co-Branding has proven to be a useful strategy in the following

situations:
Mature Markets
Labor Shortages
Land Shortages
Declining Consumer Demand

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Co-Branding

Co-branding, is a marketing strategy that involves strategic alliance

of multiple brand names jointly used on single product or service.
Co-branding (also known as dual branding) occurs when two or
more brands are combined in a business offering.
Co-branding, also called brand partnership, is when two companies
form an alliance to work together, creating marketing synergy.
The typical co-branding agreement involves two or more companies
acting in cooperation to associate any of various logos, color
schemes, or brand identifiers to a specific product that is
contractually designated for this purpose.

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Competitive Advantage of Co-Branding
Several brands can command more power through customer awareness
and traffic than a single brand-name operation.
This coming together of brands, called co-branding, has become a
popular strategy for introducing and generating interest in a new
company, product, service or event. 
A co-branding arrangement can be appealing because it allows
(i) brands to benefit from each other’s brand equity, loyalty and credibility.
(ii) can create a perception of exclusivity and allow brands to charge a
premium while pooling resources to reduce costs.
(iii) provide exposure to new audiences and markets, which can lead to
new revenue streams and more widespread brand awareness..

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The objective are:
 (i) to combine the strength of two brands, in order to increase
the premium consumers are willing to pay,
 (ii) make the product or service more resistant to copying by 
private label manufacturers, or
 (iii) to combine the different perceived properties associated
with these brands with a single product.

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Co-branding

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Forms of Co-branding
There are many different sub-sections of co-branding.
(i)Companies can work with other companies to combine resources and leverage
individual core competencies, or
(ii)they can use current resources within one company to promote multiple
products at once.
The forms of co-branding include: ingredient co-branding, same-company co-
branding, national to local co-branding, joint venture co-branding, and multiple
sponsor co-branding.
(iii) Another form of co-branding is same-company co-branding. This is when a
company with more than one product promotes their own brands together
simultaneously.
No matter which form a company chooses to use, the purpose is to respond to
the changing marketplace, build one’s own core competencies, and work to
increase product revenues.

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Examples:
Betty Crocker’s brownie mix includes Hershey’s Chocolate Syrup
Pillsbury Brownies with Nestlé Chocolate
Dell Computers with Intel Processors
Kellogg Pop-tarts with Smucker’s fruit

Think Taco Bell and Doritos, Intel and IBM, or Nike and Michael
Jordan.

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From the Franchisor’s Perspective

When a franchisor decides to start co-branding, it must consider

two important factors:
1)Does the franchisor possess the in-house expertise to create
and establish a second brand?
2)Does the franchisor have the resources to create and establish
a second brand?
The answers to these two questions will determine the appropriate
strategy that the franchisor should use

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From the Franchisee’s Perspective

Before beginning a co-branding project, a franchisee should

consider the answers to the following questions:
1)Do I get a competitive advantage?
2)Do I need to co-brand for defensive reasons?
3)Should I look for an exclusive relationship?

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From the Franchisee’s Perspective

Once a franchisee has decided to begin the co-branding process,

it should follow this 8-step process:
1)Identify your positioning strategy for your local market
2)Contact industry leaders to learn more about co-branding
3)Define your explicit co-branding goals
4)Meet with principles from both of your brands

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From the Franchisee’s Perspective

5) Perform feasibility analysis

6) Make the decision to co-brand or not to co-brand
7) Negotiate contract with second franchise system
8) Renegotiate contract with your first brand, if necessary

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Advantages of Product-based Co-branding
(i) Value addition and differentiation
(ii) Access to new customers
(iii) Better integrated communication
(iv) Positioning
(v) Reduction of product introduction cost
Disadvantages of Product-based co-branding
(i) Loss of control
 Poor performance of co-brand

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Disadvantageous

Even if co-branding is successful, it can result in the dilution of

both brands.
Also, if something negative happens to one brand, there is a risk
that it could impact the other brand. One brand’s negative publicity
or scandal can affect both brands, resulting in a damaged
reputation and sales declines.
Brand equity can be damaged by pairing up with a brand
which may have negative image in future.

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Single Franchisee/Single Franchised Brand/Additional Non-
Franchised Brand
This occurs when a single franchisee obtains the rights to
distribute a second (non-franchised) brand, or vice versa.

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Single Franchisee/ Dual Franchised Brands

This occurs when a single franchisee obtains rights to franchise a

second system.

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Dual Franchisees/ Dual Franchised Brands

This occurs when two local franchisees decide to co-exist and

build their stores together.

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There are many challenges to co-branding. Make sure that you
take the following issues into account:
Equal representation
Aesthetics
─ Integrative Graphics
─Uniforms
Operational Issues

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 Of course, not all partnerships go smoothly, and when problems
or disputes arise, co-branding can turn into a legal headache. 
 There can be disputes about who owns what intellectual property or
underlying technology.
 Disputes about cost are common in co-branding relationships as
brands will often argue about whose responsibility it is to pay for
research and development, legal and licensing fees, supply chain
management, or customer service. For example, improper use of one
brand’s trademark on a website can result in infringement claims.
 If the quality control standards aren’t aligned, one brand could claim
that its reputation is being tarnished by the other brand.

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 Lastly, your co-branding guidelines should include a termination
clause that allows you to walk away with your brand intact if the
relationship just isn’t working. Without the ability to terminate
the partnership, another brand can continue to profit from your
brand.
 Importance before entering such a partnership, do your
research and consider having an attorney draft or review your
agreement and co-branding guidelines.

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