Academic papers
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  1. 1. 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: 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
  2. 2. 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
  3. 3. 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
  4. 4. 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
  5. 5. 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
  6. 6. 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
  7. 7. 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
  8. 8. 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
  9. 9. 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
  10. 10. 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 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 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 ( highlights that ‘cus- 44 HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 11, NO. 1, 35–47 SEPTEMBER 2003
  11. 11. 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
  12. 12. 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
  13. 13. 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