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Dispensing Strategies: Frankenbrands


June 17, 2008
By Michelle Brisebois

Topics

Co-branding is a little bit like two people having a child together. It starts with a plan to create something new, having the best of both parents – his quick wit, her easy way with people.
However, more than one parent has found themselves a few years later looking at their offspring and wondering if perhaps those stories about a crazy uncle locked in the attic may just be true. Herein lays the challenge around effective co-branding. What you think you’re going to get may not play out in the real world.
Co-branding is defined as the combining of two or more brands into a single product. If it’s done properly, the result is a sort of business alchemy where the sum is greater than the two parts. It’s not something to be done without careful consideration about why you’re co-branding with another company, who you’re co-branding with and what the business objectives are.
Brands don’t exist on the physical plane. Brands exist in the minds of consumers – brands are perceptions about values, quality and reputation. It’s important to be clear about this because the seeds for glory or ruin are imbedded in the fact that a brand isn’t about us – the business community – it’s about them, the consumer.

Reaching in
Co-branding can be a wonderful tool to accomplish many different objectives. If you wish to increase market penetration within your existing market then a “reaching in” co-branding strategy may be the ticket. This is often accomplished by using another brand as a component or ingredient in your product. Examples of this include Dell computers utilizing Intel microprocessors or Diet Coke using Aspartame artificial sweetener.
Ideally, you will have exclusive rights to use the component in your co-branded product. Often however, component brands will not offer exclusivity for the use of their ingredient so, beware that your competitors may knock off your co-branded product using the same component.
It will be important to differentiate your brand in other ways. Dell delivers top-notch service and customer satisfaction and this is what makes them unique in their own right.

Reaching out
If you wish to tap into a new market, it makes sense to choose a branding partner to access each other’s customer base. We’re seeing more and more of this in retail where brands offer different aspects of one experience. The Starbucks alliance with Chapters here in Canada is a perfect example of a reaching out co-branding strategy. The experience of having an upscale coffee flows seamlessly into shopping in an upscale bookstore.
This type of co-branding taps into the customer need for convenience – you get two experiences out of one trip. Although they are very different products, the books and coffee pair well together and the brands target similar markets.

Reaching up
If your strategy is to access the favourable image of your co-branding partner, then often it makes sense to co-brand with someone who can have a “halo effect” on your brand. On line businesses will often choose Pay Pal as a means of handling Internet sales transactions. Consumers who are nervous about e-commerce security are more likely to complete an on-line transaction if they see the Pay Pal logo displayed. Partnering with a widely recognized trusted brand such as this allows smaller retailers to compete with larger Internet retailers.
If the halo effect is what you’re after, make sure you keep close tabs on how your branding partner is doing in that department. Henry Ford and Harvey Firestone forged one of the first co-branding initiatives going back to the model T. These two strong brands complemented each other beautifully until people started dying in Ford Explorers. Both Firestone and Ford were left pointing the finger at one another, making their split nastier than a Hollywood divorce. Your partner’s attention to quality now affects you too. Make sure you know how things are going.

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Reaching beyond
This co-branding exercise combines the reaching out and up strategies. Reaching beyond will allow you to tap into new markets and benefit from your partner’s image. Credit card companies regularly employ this strategy. It’s estimated that together, MasterCard and Visa have more than 20,000 co-branded programs. Affinity cards, which are credit cards linked to universities and charities, often donate a portion of the transaction fees so the user is supporting a cherished cause with their card use.  These cards have a much lower rate of attrition than other credit cards – about 20 per cent less.
If you’ve ever purchased a garment that has a sticker that says “We recommend Woolite for fine washables” then you’ve encountered a “reaching beyond” co-branding effort. The garment maker gets one sale – Woolite presumably gets many sales over the life of the garment.
Studies have shown that when co-branding is done properly, the consumer will have an even higher perception of the new “über brand” than of the two brands individually. The key is to know why you’re doing it and with whom. Once your co-branding initiative is launched, keep close tabs on your creation and how it’s relating to the changing market place.
Remember, the monster only turned on Dr. Frankenstein after he was rejected by society.  o