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Co-Branding: Fit Factors between Partner Brands

Master's Thesis 2012 93 Pages

Business economics - Offline Marketing and Online Marketing

Excerpt

Table of contents

1. Introduction
1.1 Research Purpose, Research Question and Managerial Relevance
1.2 Delimitations
1.3 Structure of this Master’s Thesis

2. Foundations of Co-Branding
2.1 Brand, Co-Branding and Brand Leverage
2.1.1 Brand
2.1.2 Definition ofCo-Branding
2.1.3 Brand Leverage Strategies: Co-Branding, Brand and Line Extension
2.2 Types and related types of Co-Branding
2.2.1 Types of Co-Branding
2.2.2 Related types of Co-Branding
2.3 Benefits, Drawbacks and Success Factors of Co-Branding
2.3.1 Benefits of Co-Branding
2.3.2 Drawbacks of Co-Branding
2.3.3 Success factors of a со-branded offering
2.4 Literature Review of Co-Branding and Research Gap

3 Theory
3.1 Cognitive Theories
3.1.1 Perception and Attitude
3.1.2 Associative Network Memory Model
3.1.3 Categorization Theory
3.2 Fit Factors
3.2.1 Brand Fit
3.2.2 Category Fit
3.2.3 Theoretical Framework

4.. Methodology & Research Design
4.1 Type ofdata: Primary vs. Secondary data
4.2 Type of research: Qualitative vs. Quantitative research
4.3 Questionnaire Design
4.3.1 Brand Selection
4.3.2 Questionnaire structure and questions
4.3.3 Number of questionnaires
4.4 Sample and Sample Size
4.4.1 Sample vs. Census
4.4.2 Sample Type
4.4.3 Sample Size
4.5 Data Collection
4.5.1 Method
4.5.2 Time Horizon
4.5.3. Techniques for increasing the Response Rate
4.6 Validity, Reliability and Generalisability
4.6.1 Validity
4.6.2 Reliability
4.6.3 Generalisability

5. Data Analysis
5.1 Method
5.1.1 Method for Demographic (Classification) questions
5.1.2 Method for Target questions
5.2 General and demographic statistics of the survey
5.3 Analysis of the Target questions

6. Conclusions, Limitations and Future Research
6.1 Conclusions
6.1.1 Conclusions from the Data Analysis
6.1.2 Answering the Research Question
6.1.3 Managerial Implications
6.1.4 Academic Implications
6.2 Limitations and Future Research

References

Appendix

Abstract

This thesis 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 со-branded offering by consumers. Despite the great importance of fit between brands, it has not been investigated yet which factors (e.g. similar price level, target group, product category) lead to a perceived fit between partner brands by consumers.

For closing this research gap, a theoretical framework is developed in order to identify potential “fit factors” that have an influence on the perceived fit. Based on the categorization theory and different brand association classifications the following potential fit factors between two brands are identified: price fit, user fit, usage fit, quality fit, brand personality fit, and category fit.

To find out if these fit factors have an impact on the perceived overall (global) fit of two partner brands, an empirical study of 9 real co-brands is conducted. 180 students are asked in an online questionnaire to state their perception of the 9 co-brands, regarding the different fit factors.

Findings of the empirical study show that similarities in the price level (price fit), users (user fit), usage situation (usage fit), quality (quality fit) and brand personality (brand personality fit) seem to have a positive relationship to the overall (global) fit of two partner brands, whereas a category fit has no clear relationship to the global fit of two brands.

On the one hand, these findings help brand managers to select the right partner brand. On the other hand, it delivers first indications for academics why consumers perceive some co­brands as fitting together and others not.

The findings of this research, as well as the developed theoretical framework, can be used for future research in this area

Table of Figures

Figure 1: Structure of the Master’s Thesis

Figure 2: Brand Leverage Strategies based on Aaker (1996, p.275)

Figure 3: Benefits of Co-Branding

Figure 4: Drawbacks of Co-Branding

Figure 5: Success factors for a positive evaluation of a со-branded offering

Figure 6: Overview of the perceptual process

Figure 7: Tri-component attitude model / АВС-model of attitudes

Figure 8: Example of a schema

Figure 9: Types of Brand Associations based on Keller (1993)

Figure 10: Brand Personality dimensions and traits based on Aaker (1997)

Figure 11: Dimensions of Category Fit based on Simonin & Ruth (1998)

Figure 12: Theoretical Framework for the empirical study

Table of Tables

Table 1 : Overview of the different views in the categorization theory

Table 2: Selected 9 co-brands for this study (product categories in brackets)

Table 3: Cover Letter of the questionnaire

Table 4: Rating scale of the target questions (six-point Likert scale)

Table 5: Targetquestion regarding the Global Fit of thetwo partner brands

Table 6: Targetquestion regarding the Price Fitofthetwo partner brands

Table 7: Target questions regarding the User Fit of the two partner brands

Table 8: Targetquestion regarding the Usage Fitofthetwo partner brands

Table 9: Target questions regarding the Quality Fit ofthe two partner brands

Table 10: Targetquestions regarding the Brand Personality Fit ofthe two partner brands..

Table 11: Target questions regarding the Category Fit ofthe two partner brands

Table 12: Text regarding the Raffle (Lottery) ofthe questionnaire

Table 13: Questionnaires and the containing co-brands

Table 14: Samples ofsimilarstudies

Table 15: Characteristics ofthe different data collection methods (based on Schiffman & Kanuk 2009)

Table 16: General statistics ofthe study

Table 17: Demographic statistics ofthe study

Table 18: Statistics about the raffle (lottery)

Table 19: Rating scale ofthe target questions (six-point Likert scale)

Table 20: Example of how respondents rated the Global Fit (here btw. Apple and Nike)

Table 21 : Example of how the analysis calculates the Quality Fit (here btw. Apple and Nike)

Table 22: Questionnaire 1 - Mean values of the global fit and the single fit factors

Table 23: Questionnaire 2 - Mean values of the global fit and the single fit factors

Table 24: Questionnaire 3 - Mean values of the global fit and the single fit factors

Table25: Brand fit vs. Category fit

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 “Co­Branding”, 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 со-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 со-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 со-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 со-branded offering by consumers: Positive attitudes toward the partner brands, perceived “fit” between the partner brands, and a high difficulty of making the co­branded offering (James 2006, Dickinson & Heath 2006, Dickinson & Heath 2008). These studies have also revealed that consumers look first for a fit between partner brands when they evaluate a со-branded offering (Dickinson & Heat 2006). Once fit is present, consumers evaluate a со-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 со-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 Master’s Thesis 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 co­branded 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 со-branded offering rather than investigating the concept of fit itself. That means “fit” has never been investigated alone and in more detail.

This thesis 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 Master’s Thesis 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?”.

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 thesis 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 thesis.

As mentioned in the introduction, co-branding is a branding strategy in which two or more brands are presented jointly to consumers. This thesis 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 thesis investigates the fit between two brands from a consumer’s perspective withouttaking personal and cultural influences into account.

1.3 Structure of this Master’s Thesis

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 co­branding 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.

illustration not visible in this excerpt

Figure 1: Structure of the Master’s Thesis

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" (Kotier 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 long­term 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).

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 thesis 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 “leveraging” (James, Lyman & Foreman 2006). Three brand leverage strategies exist, namely Brand Extension, Line Extension and Co-Branding (Aaker 1996, Dickinson & Heath 2006):

illustration not visible in this excerpt

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 differentforms (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 В-Class cars by Mercedes­Benz are good examples of a down-market stretch, because Mercedes-Benz has entered 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).

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 co­operation 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 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, orWasa 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 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 со-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 со-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.

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 in this regard, 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 со-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 со-branded product or service will be transferred back to the partner brands, if the evaluation of the со-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:

transfer of positive associations btw. partner brands and new offering

Access to new markets

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Figure 3: Benefits of Co-Branding

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 со-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 со-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 со-branded product or service is not favourable, it may lead to negative 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 со-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 co­branding 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 co­ordinated 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:

Abbildung in dieser Leseprobe nicht enthalten

Figure 4: Drawbacks of Co-Branding

2.3.3 Success factors of a co-branded offering

The success of a со-branded offering depends on the evaluation by consumers. Only if the evaluation of consumers is positive, a со-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 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 со-branded products or services, because consumers look first for a fit between partner brands when they evaluate a со-branded offering (Dickinson & Heath 2006). Furthermore, if a “fit” is not given, positive attitudes from the partner brands will not be transferred toward the со-branded offering (Dickinson & Heath 2008). In summary, if consumers have an overall perception of fit between the two partner brands, the co-branded product or service 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 co­branding 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:

Difficulty of making the co­branded offering

2.4 Literature Review of Co-Branding and Research Gap

Co-Branding is a relatively new area in the scientific world. Scientific research in this context did not exist before the 90’s and although co-branding has experienced an increasing use in practice, little quantitative research has been conducted in this area (Helmig, Huber & Leeflang 2008). The first empirical studies were published between the beginning and middle of the 90’s (Norris 1992, Rao & Rueckert 1994). Norris (1992) investigated co-branding in the form of ingredient branding and formulated potential benefits as one of the first. Rao and Rueckert (1994) analysed co-branding from a signalling perspective and found that co­branded products signal higher quality than mono-branded products.

After the first empirical studies were conducted, research has followed basically two different streams: One stream has been concerned about spill-over effects between partner brands, between partner brands and the со-branded offering, and between the со-branded offering and the partner brands (e.g. Simonin & Ruth 1998, Washburn, Till & Priluck 2000, Washburn, Till & Priluck 2004, James 2005). The other stream has addressed success factors for generating positive evaluation in regard to the со-branded offering (e.g. James 2006, Heath & Dickinson 2006, Heath & Dickinson 2008). Besides these two streams, most of the literature has either explained the strategy (e.g. Spethman & Benezra 1994, Baumgarth 2003, Beezy 2005) or has discussed the advantages and disadvantages of co-branding (e.g. Farquhar 1994, Krishnan 1996, Blackett & Boad 1999). In general, most studies have used student samples, hypothetical co-branding alliances or со-branded offerings, and products from the fast moving consumer goods industry (e.g. Park, Jun & Shocker 1996, Simonin & Ruth 1998, Washburn, Till & Priluck 2000, Heath & Dickinson 2008).

Simonin and Ruth (1998) examined spill-over effects between attitudes toward the partner brands as well as the attitude toward the со-branded offering and vice versa. They found out that a consumer’s prior attitude toward the single partner brands influences his attitude toward the new со-branded offering as well as his attitude toward a со-branded offering influences his subsequent attitudes toward each partner brand. Positive as well as negative associations can be transferred from the partner brands toward the new offering and from the со-branded offering to the partner brands. They also discovered that positive associations from partner brands could only be transferred to the new offering if a “fit” between the partner brands is present. Two years later, Levin and Levin (2000) found out that associations and images are also transferred between the partner brands themselves. In case a product is branded by two brands, people tend to suppose that both brands share the same values and images (Levin & Levin 2000). Washburn et al. (2000, 2004) and Lafferty et al. (2004) proved that less known brands have weaker influence on the attitude toward the partner brand and the со-branded offering than well-known brands. However, at the same time, less known brands obtain stronger spill-over effects from the partner brand and the со-branded offering. Therefore, less familiar brands can benefit most from a co-branding venture if paired with a strong brand, because they easily absorb the positive associations of the partner brand. Whereas a strong brand does not suffer a reputational demotion, if paired together with a less familiar brand (Washburn, Till & Priluck 2004). Huber (2005) confirmed that negative information about the partner brands or the со-branded offering leads to negative spill-over effects and, the other way around, that positive information leads to positive spill-over effects.

Regarding the evaluation of a со-branded offering, Park, Jun and Shocker (1996) found out that positive attitudes towards the single partner brands lead to a positive evaluation of the со-branded product or service. Simonin and Ruth (1998) confirmed this statement and additionally identified category and brand fit as factors, which have a positive impact on the co-branding evaluation: Category fit relates to the degree to which the product categories of the partner brands are perceived as compatible. Brand fit relates to the compatibility of the brands themselves (i.e. if they share the same or similar associations). In addition to category and brand fit, Baumgarth (2003) tested how advertisement influences the evaluation by the consumer. He found that advertising can influence the attitude toward a co­branded product or service. Washburn, Till and Priluck (2004) looked at the impact of product trials towards the evaluation of a со-branded offering and came to the conclusion that

product trials have a moderating effect on the evaluation. Inspired by the seminal paper of Aaker and Keller (1990) regarding “consumer evaluations of brand extensions”, James (2006) and Dickinson and Heath (2006, 2008) found three key success factors, which have a positive impact on the evaluation of a со-branded offering. Their findings revealed that consumers evaluate a со-branded offering positive, if their attitude towards the partner brands is favorable, a “fit” between the partner brands is present, and the co-branded product or service is perceived as difficult to make. Thereby, the factor “fit” plays a superior role, because consumers look first for a fit between partner brands when evaluating a co­branded product or service. James (2006) used an overall fit, whereas Dickinson and Heath (2006, 2008) divided fit into category and brand fit, similar to Simonin and Ruth (1998, see above).

Although the importance of category and brand fit is evident, there has been conducted only little research in this area. Especially “brand fit” is still a blank paper and under researched. For example, it is still not investigated which factors lead to a brand fit. Previous studies have only used holistic and global approaches for explaining brand fit. They have missed out to investigate brand fit in more structural terms and to identify concrete factors (e.g. similar price level, target group, brand personality), which explain why consumers perceive two brands as fitting together. This Master’s Thesis aims to close this research gap and tries to find out factors that explain brand fit better and make it more clear for managers. Furthermore, this thesis looks at category fit and how it influences the perception of fit between two brands also. In addition, there has been no answer for which kind of fit, either brand or category fit, is more important when it comes to an overall perception of fit.

All in all, this thesis wants to take a holistic view on the perception of fit, by investigating which factors are important that consumers perceive two brands as fitting together. The research question, as already mentioned in the introduction, of this Master’s Thesis is therefore as follows:

“Which factors lead to a perceived fit between two partner brands by consumers?”

To answer this question, this thesis examines the “brand fit” in more detail, by identifying and testing different factors (e.g. price level, target group), as well as the “category fit” and how it influences the perception of the overall fit, also in comparison to the brand fit.

The objective of this Master’s Thesis is to provide brand managers useful insights regarding which factors are important that two brands are perceived as fitting together. Such detailed understanding of fit will help managers to select the right partner brand.

[...]


[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)

Details

Pages
93
Year
2012
ISBN (eBook)
9783656536932
ISBN (Book)
9783656539827
File size
1.1 MB
Language
English
Catalog Number
v264423
Institution / College
Copenhagen Business School
Grade
1,0
Tags
Co-Branding CoBranding

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Title: Co-Branding: Fit Factors between Partner Brands