Co-Branding: Fit Factors between Partner Brands
©2014
Textbook
92 Pages
Summary
Firms are continuously looking for new opportunities to exploit and leverage their existing brands to achieve business growth. In the past, companies have leveraged their ‘most important asset’ (brands) through brand and line extensions. Nowadays, the most recent trend for capitalizing on brands is called ‘Co-Branding’ in which two or more brands are presented jointly to the consumer, forming a new product or service offering. This new branding strategy promises many benefits, especially for companies operating internationally with strong global brands.<br>This study is about the perception of ‘fit’ between two partner brands in a co-branding venture. Previous studies have already identified that a perceived fit between partner brands leads to a positive evaluation of the co-branded offering by consumers. But why are some brands perceived as fitting together by consumers and others are not? <br>To answer this question, this study investigates which factors (e.g. similar price level, target group, product category) lead to a perceived fit between partner brands by consumers.
Excerpt
Table Of Contents
4.3.3 Number of questionnaires ... 60
4.4 Sample and Sample Size ... 60
4.4.1 Sample vs. Census ... 60
4.4.2 Sample Type ... 61
4.4.3 Sample Size ... 63
4.5 Data Collection ... 64
4.5.1 Method ... 64
4.5.2 Time Horizon ... 66
4.5.3. Techniques for increasing the Response Rate ... 66
4.6 Validity, Reliability and Generalisability ... 67
4.6.1 Validity ... 67
4.6.2 Reliability ... 68
4.6.3 Generalisability ... 69
5. Data Analysis ... 70
5.1 Method ... 70
5.1.1 Method for Demographic (Classification) questions ... 71
5.1.2 Method for Target questions ... 72
5.2 General and demographic statistics of the survey ... 72
5.3 Analysis of the Target questions ... 75
6. Conclusions, Limitations and Future Research ... 82
6.1 Conclusions ... 82
6.1.1 Conclusions from the Data Analysis ... 82
6.1.2 Answering the Research Question... 83
6.1.3 Managerial Implications ... 84
6.1.4 Academic Implications ... 85
6.2 Limitations and Future Research ... 85
References ... 87
Table of Figures
Figure 1: Structure of the study ... 14
Figure 2: Brand Leverage Strategies based on Aaker (1996, p.275) ... 17
Figure 3: Benefits of Co-Branding ... 23
Figure 4: Drawbacks of Co-Branding ... 25
Figure 5: Success factors for a positive evaluation of a co-branded offering ... 27
Figure 6: Overview of the perceptual process ... 30
Figure 7: Tri-component attitude model / ABC-model of attitudes ... 32
Figure 8: Example of a schema ... 35
Figure 9: Types of Brand Associations based on Keller (1993) ... 41
Figure 10: Brand Personality dimensions and traits based on Aaker (1997) ... 43
Figure 11: Dimensions of Category Fit based on Simonin & Ruth (1998) ... 45
Figure 12: Theoretical Framework for the empirical study ... 46
Table of Tables
Table 1: Overview of the different views in the categorization theory ... 38
Table 2: Selected 9 co-brands for this study (product categories in brackets) ... 52
Table 3: Cover Letter of the questionnaire ... 54
Table 4: Rating scale of the target questions (six-point Likert scale) ... 55
Table 5: Target question regarding the Global Fit of the two partner brands ... 56
Table 6: Target question regarding the Price Fit of the two partner brands ... 56
Table 7: Target questions regarding the User Fit of the two partner brands ... 57
Table 8: Target question regarding the Usage Fit of the two partner brands ... 57
Table 9: Target questions regarding the Quality Fit of the two partner brands ... 58
Table 10: Target questions regarding the Brand Personality Fit of the two partner brands ... 58
Table 11: Target questions regarding the Category Fit of the two partner brands ... 59
Table 12: Text regarding the Raffle (Lottery) of the questionnaire ... 60
Table 13: Questionnaires and the containing co-brands ... 60
Table 14: Samples of similar studies ... 63
Table 15: Characteristics of the different data collection methods (based on Schiffman &
Kanuk 2009) ... 65
Table 16: General statistics of the study ... 73
Table 17: Demographic statistics of the study ... 74
Table 18: Statistics about the raffle (lottery) ... 74
Table 19: Rating scale of the target questions (six-point Likert scale) ... 75
Table 20: Example of how respondents rated the Global Fit (here btw. Apple and Nike) ... 75
Table 21: Example of how the analysis calculates the Quality Fit (here btw. Apple and
Nike) ... 76
Table 22: Questionnaire 1 Mean values of the global fit and the single fit factors ... 77
Table 23: Questionnaire 2 Mean values of the global fit and the single fit factors ... 79
Table 24: Questionnaire 3 Mean values of the global fit and the single fit factors ... 80
Table 25: Brand Fit vs. Category Fit ... 81
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1. Introduction
Firms are continuously looking for new opportunities to exploit and leverage their existing
brands for achieving business growth. In the past, companies have leveraged their "most
important asset" (brands) through brand and line extensions (Aaker 1990, James, Lyman &
Foreman 2006).
Nowadays, the most recent trend for capitalising on brands is called "Co-
Branding", in which two or more brands are presented jointly to the consumer, forming a new
product or service offering (Dickinson & Heath 2008). This new branding strategy promises
many benefits, especially for international operating companies with strong global brands
(James 2006, Dickinson & Heath 2006). Because of the high rate of product failures, the
intense competition among companies and the high costs to enter new markets, the use of
co-branded products has become increasingly important for brand managers: Because they
provide a way to take advantage of existing brand name recognition and associations
(Helmig, Huber & Leeflang 2008, Besharat 2010). Co-branding came up in the early 90's and
has recently reached an all-time high with annual growth rates estimated at 40 percentage
(Dickinson & Heath 2006).
Any form of co-branding is conducted in an attempt to transfer positive associations from
brand partners to the new co-branded offering
(Spethman and Benezra 1994). Examples are
Sony and Ericsson offering mobile phones together, Nike and Apple manufacturing a
collaborative shoe together or Häagen Dazs and Baileys creating a new kind of ice cream
together. By providing consumers the familiarity of, and knowledge about, an established
brand, reduces the financial risk of introducing a new product to the market is substantially.
Further benefits are easier access to new markets, additional marketplace exposure and
shared expenses (Dickinson & Heath 2008). But co-branding is not without risks. If the
consumer evaluation of the co-brand/co-branded offering is not favourable, it results in a
product failure (linked with high costs and wasted resources) and may also damage the
brand image of the partner brands (Roedder, Loken & Joiner 1998, Leuthesser, Kohli & Suri
2003). Consequently, a poor co-branding venture can create damaging associations, which
affect the brands involved negatively. Therefore, a positive evaluation by the consumer is
crucial. A positive evaluation improves the likelihood of purchasing the co-branded product
and is thus essential for the success of any co-branding activity (James 2006). Previous
studies have already identified three main factors that have a positive influence towards the
evaluation of a co-branded offering by consumers: Positive attitudes toward the partner
brands, perceived "fit" between the partner brands, and a high difficulty of making the co-
branded offering (James 2006, Dickinson & Heath 2006, Dickinson & Heath 2008). These
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studies have also revealed that consumers look first for a fit between partner brands when
they evaluate a co-branded offering (Dickinson & Heat 2006). Once fit is present, consumers
evaluate a co-branded offering more positive and are more intent to buy the co-branded
product or service (Dickinson & Heat 2006). Therefore, the factor "fit", which refers to the
compatibility of two brands, plays a superior role in the evaluation of a co-branded offering.
Despite the great importance of fit in the evaluation of a co-branding offering, there is still no,
or no holistic, answer under which conditions (e.g. similar price level, target group, product
category) two partner brands are perceived as compatible by consumers. The objective of
this study is to identify, based on an empirical study of international well-known brands,
factors that are important for two brands to be perceived as fitting together.
1.1 Research Purpose, Research Question and Managerial
Relevance
As mentioned in the introduction, it is already known that the perception of fit between
partner brands
is very important for the evaluation and the likelihood of purchasing the co-
branded offering by the consumer (James 2006, Dickinson & Heath 2006, Dickinson & Heath
2008). Given the importance of perceived fit between partner brands, it prompts the need for
academic research that investigates under which conditions consumers perceive two brands
as fitting together. Up to now, not much research has been conducted in this area.
Academics have examined the factor "perceived fit" in a general manner, without specifying
and examining which dimensions it consist of (Washburn, Till & Priluck 2000, James 2006).
All of their studies have focused mainly on identifying factors, which influence the evaluation
of a co-branded offering rather than investigating the concept of fit itself. That means "fit" has
never been investigated alone and in more detail.
This study investigates "fit" in more detail and tries to find out,
which
factors
lead to a
perceived fit between two brands by consumers. Given this research purpose the research
question of this study can be formulated as follows:
"Which factors lead to a perceived fit between two partner brands by consumers?"
The following sub-questions arise within the attempt to answer the research question:
"Are there any clear factors that lead to a "fit" between partner brands?", "Are some factors
more important than others?", "If yes, which?".
13
First, this study develops a theoretical framework, which includes possible factors that
influence the perception of "fit" between partner brands. Afterwards, in a second step, these
factors are tested in an empirical study. Therefore, the research approach of this study is
deductive, because data is gathered to test the theory. The opposite approach would be
inductive, in which data is gathered to develop a theory (Saunders, Lewis & Thornhill 2003).
This research is important to academics as well as to brand managers. Given that managers
spend large amounts of money investing in co-branding alliances and are at the risk of
diminishing their original brand image from a failed co-branding activity, the importance of the
right partner selection is evident. The wrong co-brand partner could create damaging
associations that may be expensive, or even impossible to change (James 2006).
If brand managers would know which factors are important for two brands as being perceived
as fitting together, it will be easier for them to select the right partner brand. The risk of
having a negative evaluation by consumers and the likelihood of a product failure as a
resulting consequence, would be drastically reduced. The results of this study have
significant impact on the choice of the co-branding partner as well as on the brands to be
used. This study is also important for academics, because it gives new insights for them why
people perceive some brands as fitting together and others not.
1.2 Delimitations
This study examines fit between brands from the angle and the perception of the consumer
and neglects possible synergies and factors from a company's point of view (e.g. financial,
managerial factors) that might also lead to a certain kind of "fit" between brands. Fits
between brands in financial, strategically or managerial terms are not under investigation and
not subject of this study.
As mentioned in the introduction, co-branding is a branding strategy in which two or more
brands are presented jointly to consumers. This study focuses on two brands and thus
investigates the fit between two brands and not between more than two brands.
Furthermore, this research does not look inside a person and examines which personal
feelings, backgrounds or values lead to a specific attitude towards a brand. That means, this
study does not consider any personal
and/or cultural factors that might affect people's
perception of fit.
In summary, this study investigates the fit between two brands from a consumer's
perspective without taking personal and cultural influences
into account.
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1.3 Structure of this study
In chapter 2, foundations of co-branding will be explained for giving the reader profound
background knowledge. The term "Co-Branding" will be defined, different forms of co-
branding explained, and benefits and risks demonstrated
.
At the end of that chapter a
literature review of co-branding will be given to the reader. Chapter 3 is all about the
theoretical framework for the empirical study. During a theoretical discussion, that chapter
identifies factors, which might influence the perceived fit between two brands by the
consumer. Basic cognitive theories, categorization theory as well as different factors of fit will
be presented. The theoretical framework of that chapter acts as a foundation for the
empirical study. In chapter 4 the methodology and research design of the empirical study
(type of research, sample, data collection method etc.) will be explained in more detail.
Furthermore, the validity, reliability and generalisation of the study will be discussed. In
chapter 5 the data from the empirical study will be analysed with the help of descriptive
statistical techniques. Results will be presented and conclusions will be drawn. In the last
chapter (chapter 6) findings from the empirical study will be summarized and managerial as
well as academic implications are discussed. At the end, limitations of the study and
suggestions for future research will be pointed out.
Structure of this study:
Figure 1: Structure of the study
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2. Foundations of Co-Branding
2.1 Brand, Co-Branding and Brand Leverage
2.1.1 Brand
A brand can be defined as "a name, term, sign, symbol, or design, or combination of them
which is intended to identify the goods and services of one seller or group of sellers and to
differentiate them from those of competitors" (Kotler 1991, p.442
). A brand is a cue that
evokes specific images and associations in the mind of the consumer, based on his past
experience with that brand (Swait et al., 1993). Therefore, it signals a particular level of
quality and represents a certain set of attributes (Park, Jun & Shocker 1996). Consumers
have more trust in well-known brands than in unknown brands (Lasser, Mittal & Sharma
1995). This is because they have a clear expectation of the underlying performance of a
familiar brand, whereas an unknown brand provides no information about its performance.
Therefore, the latter case is more risky for the consumer (Park, Jun & Shocker 1996). Due to
the reduced risk, consumers tend to favor a branded over an unbranded product and are
even willing to pay a price premium for a branded product (Aaker 1992). Thus, brands are
not just a supplement of the marketing-mix, but have a notable strategic impact on the long-
term performance of a company (Park, Jaworski, and Maclnnis 1986). For some academics,
a brand is the most powerful and important asset of a firm (Aaker 1992, Keller 2003,
Dickinson & Heath 2008).
2.1.2 Definition of Co-Branding
The term "Co-Branding" derives from the words "Cooperation" (Co) and "Brand" (Branding)
(Baumgarth 2003). For the reason that no global definition of co-branding is accepted yet, it
is often used interchangeably with a variety of terms such as co-marketing (Simonin & Ruth,
1998), multi-branding (DiPietro, 2005), joint branding (Levin & Levin 2000), or brand alliance
(Rao, Qu & Rueckert 1999, James 2005).
Broadly defined, co-branding occurs when at least two partner brands are paired together
and co-operate in a marketing context, such as advertising, product development or
distribution (Grossman & Priluck 1997, Leuthesser, Kohli & Suri 2003, Dickinson & Heath
2008). Rao, Qu and Rueckert (1999) follow this approach and define co-branding as the
situation in which "two or more individual brands are joined together in some fashion and are
presented jointly to the consumer" (p.259). These broad definitions include symbolic and
short-term alliances, such as co-advertising or joint sales promotions as well as physical and
long-term alliances such as composite branding or ingredient branding (James 2006).
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Physical alliances occur when two or more brands form a new product, whereas in symbolic
alliances brands are presented jointly to consumers for transferring their associations and
images to each other without offering a new product or service.
Other authors define co-branding in narrower terms and have their focus more on the
combination of two or more brands for creating a new product or service. Park, Jun and
Shocker (1996) define co-branding as "pairing two or more constituent brands to form a
separate and unique product -- a composite brand" (p.453). For Dickinson and Heath (2008)
co-branding is a branding strategy, in which two or more independent brands are presented
jointly to the consumer and form a new product or service offering.
Helmig, Huber and
Leeflang (2008) add a time dimension, by saying "co-branding represents a long-term brand
alliance strategy in which one product is branded and identified simultaneously by two
constituent brands" (p.360). Grossmann and Till (1998) agree with these definitions, but
emphasize the visibility and recognition of the partner brands by defining co-branding as a
"strategy when two brands jointly appear on the logo and/or the package of a new product".
In accordance to that, for Besharat (2010) the ultimate goal of co-branding is "to launch a
new product" (p.1240). Thus, in contrast to the broader definitions above, the creation of a
new product or service is an essential criterion for a co-branding activity in the narrow
definitions.
This study follows the narrow understanding of co-branding and defines three criteria, which
a co-branding activity must demonstrate:
· two or more constituent brands form a separate and new product or service
· all brands involved appear on the product, logo or product package (all brands
are clearly visible for consumers)
· the brand co-operation represents a long-term commitment
2.1.3 Brand Leverage Strategies: Co-Branding, Brand and Line Extension
Brand leverage strategies are used by managers to capitalise on existing brand equity
1
rather than building new brand equity. This is done by using existing instead of new brands
for a new offering (Dickinson & Heath 2008). Consequently, managers are able to transfer
positive associations, brand images and core competencies from an existing brand to a new
offering (Spethman & Benezra 1994). The transfer of these associations is called
1
Brand equity is "a set of brand assets and liabilities linked to a brand, its name and symbol, that add to or
subtract value to the offered product or service" (Aaker, 1991, p. 15)
17
"leveraging" (James, Lyman & Foreman 2006). Three brand leverage strategies exist,
namely Brand Extension, Line Extension and Co-Branding (Aaker 1996, Dickinson & Heath
2006):
Figure 2: Brand Leverage Strategies based on Aaker (1996, p.275)
Brand Extension,
or sometimes referred to as category extension, occurs when an existing
brand is used to enter into a completely different product category with the intention of
transferring its brand associations to the extended offering (Aaker & Keller 1990). In short,
brand extension takes place, when a company markets a new product in a new category with
an existing brand. One example is Unilever's brand Dove, which extended from soap and
body lotion into hair shampoo products (Helmig, Huber & Leeflang 2008). Another example is
the Virgin Group, which has extended its brand many times. Initially used for a record label
("Virgin Records"), its brand is now also used for its airline ("Virgin Airlines") as well as for its
games and video stores ("Virgin Megastores").
On the other hand, line extension or product extension occurs when an existing brand is
used to market a new product variation within the same product category (Aaker & Keller
1990). That means, a new product is created by modifying an existing product, e.g. by
changing the flavour, colour, ingredients or package size (Aaker 1991). Examples are
different flavours of Coke (Diet Coke, Vanilla Coke etc.) or of Cadbury Chocolate (Hazelnut,
Nougat etc.) as well as offering washing powder in different forms (Tide vs. Liquid Tide).
A sub form of line extension is "Line Stretching", in which an existing brand tries to enter a
new market segment within the same category. A company can stretch its brand throughout
the different market segments. Offering a lower-priced line is called "down-market stretch". In
contrast, offering a higher-priced line is called "up-market stretch". In addition, a combination
of both is possible (Aaker 1996). The introductions of the A- and B-Class cars by Mercedes-
Benz are good examples of a down-market stretch, because Mercedes-Benz has entered
18
with these cars a new market segment ("compact cars") within the same product category
("automobile"). Texas Instruments or Nikon give good examples of extending both ways,
offering low-end as well as high-end hand calculators and cameras respectively.
Brand extensions are more risky than line extensions, because the brand is presented in a
different product category. Thus, the brand is presented in a different context, which might
confuse the consumer (Grönhaug, Hem & Lines 2002).
Co-Branding, as mentioned above, is a brand leverage strategy, in which two or more
constituent brands form a new product or service. This can be in a different, related or same
product category (Dickinson & Heath 2008). Any form of co-branding, like in brand and line
extensions, is basically conducted in the attempt to transfer positive associations from the
partner brands to the new offering (Spethman & Benezra 1994). One key difference between
brand/line extension and co-branding is that brand/line extension typically involves only one
single brand, whereas co-branding includes at least two brands (Simonin & Ruth 1998).
Another difference is that brands in co-branding settings are coming mostly, but not
necessarily, from different companies. Whereby in brand and line extensions, brands are
only coming from one company and no co-operation with other companies is existing
(Helmig, Huber & Leeflang 2008).
According to the signalling perspective, the combination of two or more brands provides
greater guarantee about product quality, than does a single branded product (Rao &
Rueckert 1994, Erdem & Swait 1998). On the other hand, a co-branding strategy requires
higher co-ordination and transaction costs. Furthermore, the risk of negative spill-over effects
from on partner to the other is present. This is maybe why
brand and line extensions appear
far more often than co-branding in practice (Helmig, Huber & Leeflang 2008).
2.2 Types and related types of Co-Branding
2.2.1 Types of Co-Branding
By following the narrow definition (see 2.1.2), co-branding only consists of two different
types:
· Ingredient Branding, or sometimes referred to as vertical co-branding or physical
product integration, where one brand is the component or ingredient of another
brand (most often the final product). Both brands are visible on the product and
cannot be used without each other (Simonin & Ruth 1998, James 2006).
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Examples are Dell computers with Intel processors, Coca-Cola with NutraSweet
sweeteners and Adidas training shoes with Goodyear soles (James 2006).
· Composite Branding, or sometimes referred to as horizontal co-branding, where
two existing brands are combined to form a new product or service, and their
names or logos are used together in a combined format (Park, Jun & Shocker
1996, James 2006). Most of the time, partner brands have complementary skills
or images, which they transfer and combine into the new offering (James 2006).
Examples are Sony (electronics) and Ericsson (telecommunication systems)
marketing "Sony Ericsson" mobile phones together, Nike (sportswear) and Apple
(multimedia) launching the "Nike Plus sport shoe" together, and Acer (computers)
and Ferrari (automobile) producing the "Acer Ferrari One" notebook series
together (Besharat 2010).
Co-branded products can appear in product categories, in which both brands are already
established (e.g. computers from Dell and Intel), only one brand is established (e.g.
notebooks from Acer and Ferrari) or none of the brands are established (e.g. mobile phones
from Sony and Ericsson) (Helmig, Huber & Leeflang 2008). Furthermore, co-branding may
appear between domestic brands (e.g. between both American Nike and Apple) as well as
between international brands (e.g. between Japanese Sony and Swedish Ericsson)
(Besharat 2010). Although co-branding mainly appears among consumer goods, it is also
relevant for durable goods (e.g. cars) and services (e.g. credit cards) (Helmig, Huber &
Leeflang 2008).
2.2.2 Related types of Co-Branding
There are other co-operative marketing activities, which are in a narrow sense no types of
co-branding, but closely related and worth mentioning in this context. The key difference to
co-branding lies in the fact, that in these activities no new product or service is created by the
brands involved. Furthermore, there is no combined branding on a product or service. This
implies, each brand is still perceived as a separate and individual entity. These forms of co-
operation are also mostly short-term oriented (Helmig, Huber & Leeflang 2008):
· Co-advertising is simultaneous appearance of different brands in one
advertisement (Helmig, Huber & Leeflang 2008): Brands are presented jointly to
demonstrate compatibility or/and to assist the market entry of a partner brand,
which is not so established yet (Samu, Krishan & Smith 1999). Most often, all
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brands in the advertisement are communicated through a single themed message
(Park, Jun & Shocker 1996).
Examples are advertisements of Siemens washing machines with Ariel washing
powder, Kellogg's cereals with Tropicana fruit juice, or Wasa bread with Du Darfst
diet butter (Samu, Krishan & Smith 1999).
· Joint promotion is a temporary promotional activity of different brands, in which
brands are presented as complementary to one another (Helmig, Huber &
Leeflang 2008). In practice, by purchasing one brand, consumers often receive
the other brand for free (Simonin & Ruth 1998).
Examples are joint promotions of Reebok (sportswear) and Pepsi (soft drink),
Smirnoff Vodka and Ocean Spray Cranberry Juice or Campbell´s soup and
Nabisco saltine crackers (James 2006).
· Dual branding means using the same store location (shop-in-shop concept). Most
often this strategy is used when two brands/shops have the same target group
(Helmig, Huber & Leeflang 2008). A good example is Shell's gas stations which
have a Burger King restaurant inside (Levin & Levin 2000).
· Bundled products means combining different branded products in one package
with one total price (Helmig, Huber & Leeflang 2008). The objective of bundling is
to offer a greater variety and product trials to the consumer (Simonin & Ruth
1998). Examples are "variety packs" of branded cereals or branded soft drinks
(Simonin & Ruth 1998).
· Sponsorship, celebrity endorsement and cause-related marketing are different
ways of transferring specific images to the brand. By sponsoring a specific event,
a company seeks to transfer the image of that event towards its brand (Besharat
2010). Celebrity endorsement, where celebrities promote a specific brand, is
made to link the brand with endorser attributes (James 2006). And in a cause-
related marketing activity, a commercial corporation enters a partnership with a
non-profit organization in order to get the image of a social responsible company
(Dickinson & Barker 2007).
Managers have to decide whether they are following a short- or long-term partnership
strategy. Co-advertising, joint promotions and bundled products promise quick profits,
because the co-ordination and implementation costs are reduced. However, these strategies
21
might be not as sustainable and strong as a co-branding strategy, which realizes benefits
over a long period of time (Helmig, Huber & Leeflang 2008).
2.3 Benefits, Drawbacks and Success Factors of Co-Branding
2.3.1 Benefits of Co-Branding
Co-Branding has a wide range of benefits. It can lead to: i) reduced costs and ii) reduced
risks of introducing a new product, iii) to additional revenues by gaining access to new
markets, and iv) to positive spill-over effects by transferring positive associations between
partner brands and the co-branded offering as well as between the partner brands
themselves.
Companies involved in a co-branding activity have reduced costs to introduce a new product
to the market, because they are using existing brands rather than establishing and building
up new brands from the very beginning (Leuthesser, Kohli & Suri 2003).
In 1990, Aaker
already stated that the introduction of a new brand could cost up to $150 million in some
consumer markets. Nowadays, it is likely that the introduction costs are even higher than in
the past, because of the increased number of other brands in the market, the increased
media costs and the increased difficulty of obtaining distribution for new brands (Helmig,
Huber & Leeflang 2008). In addition to that, costs are reduced in a co-branding venture,
because partner companies share expenses for product development, marketing and
distribution
(Dickinson & Heath 2006).
Using a co-branding strategy to place a new product on the market leads to reduced risks for
the companies as well: Consumers trust established brands more than completely new
brands (Lasser, Mittal & Sharma 1995, Washburn, Till & Priluck 2000). By having more trust
in familiar brands, consumers are more likely to buy co-branded products than unbranded or
new products (Aaker 1992, Beezy 2005). Furthermore, by combining different competencies,
expertises and experiences from the involved companies, the likelihood of a product failure is
significantly decreased (Dickinson & Heath 2008). As already mentioned in chapter 2.1.3,
the
combination of two brands signals a greater assurance about product quality to the
costumer, than does a single brand alone (Erdem and Swait 1998). This is also confirmed by
Rao and Rueckert (1994) with stating "...because brands are valuable assets, they may be
combined with other brands to form synergistic alliance, in which the sum is greater than the
parts" (p.87). Altogether, using proven brand concepts and combining different capabilities,
the financial risk of introducing a new product is reduced.
22
Another benefit of co-branding is that it may assist companies to enter new markets. These
can be new countries or regions as well as additional market segments in their existing
market, which a company may not be able to enter
on its own (Blackett & Boad 1999).
This
implies, companies can use the associations and competencies of their branding partner for
accessing new territories and forming products, which they could not serve or offer alone
(Park, Jun & Shocker 1996). One example of how co-branding functions this way is the
product range "Weight Watchers from Heinz" of low-calorie food products. Weight Watchers
International wanted to access with its brands the highly competitive market for prepared
food, but had the handicap of having no experience in this sector. Heinz, at the same time,
had considered to develop a series of diet products on its own, but had to face the challenge
of being usually associated with canned and heavy
food. Therefore, both brands allied to
benefit from the associations and competencies of the respective partner (Weight Watchers
in diet products, Heinz in prepared and canned food). This co-branding offering enables both
companies
having access to the low-calorie prepared food market (Blackett & Boad 1999).
Co-Branding also enables positive spill-over effects by transferring positive associations
from
the partner brands
to the new co-branded offering on the one hand (Simonin & Ruth 1998),
and between the partner brands
on the other hand (Levin & Levin 2000). Furthermore,
positive associations from the co-branded product or service will be transferred back to the
partner brands, if the evaluation of the co-branded offering is favourable (Simonin & Ruth
1998). Less-known brands benefit the most of these positive spill-over effects, especially
when paired together with a strong brand, because consumers have not linked strong
associations to them yet (Washburn, Till & Priluck 2000). Thereby, a strong brand does not
suffer a reputational downgrading when paired with a weaker brand, but can even benefit if
the less-established brand owns a specific association in a niche, which the strong brand
wants to enter (Washburn, Till & Priluck 2004).
In conclusion, taking into account all mentioned aspects, co-branding can lead to a win-win
situation for all partner brands. In Figure 3 an overview of the stated benefits is shown:
23
2.3.2 Drawbacks of Co-Branding
However, co-branding comes not
without complexities, potential negative effects or risks. In
most benefits of co-branding lie potential downsides. Disadvantages involve i) shared profits,
ii) risk of brand dilution by entering too many markets, iii) risk of negative
spill-over effects,
and iv) high dependability on the partner brand.
Companies in a co-branding venture do not only share expenses and risks as mentioned
above, but also share profits. That means, if the co-branded offering is successful, partner
brands have to share the earnings among each other (Helmig, Huber & Leeflang 2008).
Thus, a company in a co-branding alliance earns less than it would earn by introducing the
product or service alone (assuming it would be similar successful and able to do it alone).
Co-Branding enables companies to gain access to new markets, but companies must
carefully consider in how many markets and in which markets they want to enter. Entering
into too many or too far away and unrelated markets may dilute the value of the brand,
because a brand may lose its distinctive associations (James, Lyman & Foreman 2006).
Furthermore, a brand loses exclusivity of its associations and competencies when allying
with another brand. That leads to a dilution of the brand as well (Blackett & Boad 1999).
Co-branding partners are affected by spill-over effects, either from the partner brand or from
the new co-branded offering. These spill-over effects might be positive (see benefits), but
can go just as well in the opposite direction, affecting the brands negatively. If the consumer
evaluation of the co-branded product or service is not favourable, it may lead to negative
Figure 3: Benefits of Co-Branding
24
spill-over effects towards the partner brands' reputation and associations (Roedder, Loken &
Joiner 1998, Leuthesser, Kohli & Suri 2003). The same happens if consumers attribute
negative experiences or associations to one partner brand and transfer them to the other
partner brand (Washburn, Till & Priluck 2000). In addition, if consumers perceive two partner
brands as not fitting together and are confused about the combination, such irritation can
damage the images of both brands too (Park, Jun & Shocker 1996).
In a co-branding venture, partner companies benefit from their partner's associations,
attributes and competencies, but are at the same time highly dependent on each other as
well. Because companies have no control of the partner's brand and action, they are
exposed to many threats. One of these threats occurs, when one of the partners decides to
change the strategy, image or positioning of its brand in its primary market. That affects the
co-branding venture directly, because a change in the image of one partner brand changes
the image of the co-branded product or service as a whole. This change might lead to a
negative response by the consumer (Blackett & Boad 1999). Another threat is the unknown
financial situation of the partner. If the partner suffers a financial crisis or even insolvency, it
can lead to an unplanned and sudden ending of the co-branding venture (Blackett & Boad
1999). The same may happen once one of the partner companies is taken over or enters into
a merger with a third party company. Both cases have serious implications for the co-
branding activity and may lead to an immediate termination of the alliance (Blackett & Boad
1999). In addition to these risks, co-branding leads to further complexity and co-ordination
efforts. This is most evident during the initial phase, because everything must be co-
ordinated and aligned with the partner brand (Helmig, Huber & Leeflang 2008).
As stated, co-branding is not only about benefits, but has its drawbacks too. Figure 4
demonstrates the main disadvantages and risks:
25
2.3.3 Success factors of a co-branded offering
The success of a co-branded offering
depends on the evaluation by consumers. Only if the
evaluation of consumers is positive, a co-branded product or service can be successful
(James 2006, Dickinson & Heath 2008). Previous studies found out three key
success
factors, which lead to a positive evaluation by consumers (James 2006, Dickinson & Heath
2006, Dickinson & Heath 2008).
The first factor is the attitude towards the partner brands. The attitude relates to the overall
evaluation of the single brands,
including the perception of brand quality/superiority and
associations
attributed to the partner brands (Dickinson & Heath 2008). A positive attitude
towards the partner brands has a positive influence on the evaluation of the co-branded
offering, because consumers who hold a positive perception of the quality and associations
of a partner brand transfer them to the new co-branded product or service (James 2006).
The second factor is the perceived fit between the partner brands
by the consumer. Fit refers
to the compatibility of two brands (Dickinson & Heath 2008). In a co-branding venture at least
two brands with different associations, and maybe also from different product categories, are
presented jointly to the consumer. If the brands are perceived as being inconsistent
regarding their associations and product categories, consumers become confused and may
question the sense of such collaboration (Simonin & Ruth 1998). Such confusion has a
negative impact on the evaluation of the co-branding offering (Dickinson & Heath 2006). In
Figure 4: Drawbacks of Co-Branding
26
turn, if consumers perceive brands as being compatible, the evaluation of the co-branded
offering will be more favourable (Dickinson & Heath 2008). Fit plays a key role in the
evaluation of co-branded products or services, because consumers look first for a fit between
partner brands when they evaluate a co-branded offering (Dickinson & Heath 2006).
Furthermore, if a "fit" is not given, positive attitudes from the partner brands will not be
transferred toward the co-branded product or service (Dickinson & Heath 2008). In summary,
if consumers have an overall perception of fit between the two partner brands, the co-
branded offering will be evaluated more positively (Dickinson & Heath 2008).
The third factor that influences the evaluation of a co-branded product or service is the level
of difficulty to make the co-branded offering. The level of difficulty relates to the perception of
the consumer whether a company has the ability to make the co-branded product or service
by itself or if it needs complementary competencies from another company (Dickinson &
Heath 2008). If a co-branding offering is perceived as "easy to make", consumers will think a
company would be able to do it alone. On the other hand, if a co-branding offering is
perceived as "difficult to make", consumers will have the feeling that a single company would
not be able to do it alone and would need the help of another company (Dickinson & Heath
2008). In consequence, if a co-branding offering is perceived as being easy to make, the co-
branding relationship might appear redundant and consumers may question the intention of
the brand alliance, because additional
competencies from a partner brand are not needed
(Dickinson & Heath 2008). In contrast, if a co-branded product or service is seen as difficult
to make, consumers will perceive a co-branding relationship as worthwhile and value adding,
because companies can share their competencies to make the product or service
(Dickenson & Heath 2008). Therefore, consumers evaluate a co-branding offering more
positive, once the co-branded offering is seen as being difficult to make (Dickinson & Heath
2006).
In summary, consumer evaluations of a co-branded offering are more favourable, in case the
attitudes towards the partner brands are positive, partner brands are perceived as fitting
together, and the co-branded product or service is perceived as difficult to make. In Figure 5
these three success factors are summarized:
Details
- Pages
- Type of Edition
- Erstausgabe
- Year
- 2014
- ISBN (eBook)
- 9783954897964
- ISBN (Softcover)
- 9783954892969
- File size
- 1.8 MB
- Language
- English
- Publication date
- 2014 (September)
- Keywords
- co-branding factors partner brands
