Co-Branding. Strategy to strengthen brands

Inhaltsverzeichnis

1. Introduction

2. Brands and co-branding
2.1 Brands
2.2 Co-Branding

3. Chances and risks of Co-Branding
3.1 Chances of Co-Branding
3.2 Risks of Co-Branding

4. Nike+iPod - A successful case of co-branding?

5. Conclusion

Abbildungsverzeichnis

Figure 1: Value of a brand at the rate of the whole company value

Figure 2: Nike+iPod Sport Kit 2006

1. Introduction

Nowadays, to enter a new market or to gain awareness for products is complicated. The markets are crowded with competitors and the consumer can easily decide between different options of a product. It is indispensable to stand out from the crowd and to raise the consumers awareness for the own products to be successful.¹

Most of the time, the brand is the core of a company. It reflects the image of the organisation and connects it to the products. As hard as establishing a brand is, as easy it is to destroy it with a critical headline in newspapers, selling defective products or similar. Ironically, it is even harder to regain the brand image and regaining the trust of the customers afterwards as cases like Abercrombie & Fitch and Volkswagen showed. In some cases even a regeneration is almost impossible.

Therefore, there are different strategies a company can implement to simplify the process of branding. Co-Branding is a strategy where companies work and sell their products together without giving up their own brands.² Next to advantages like gaining attention of a different market segments there are also risks and obstacles the company has to face by implying this strategy.

For this reason it is important to analyze which company is able to use the strategy and which requirements are needed to create a successful cooperation for the participating parties.

2. Brands and co-branding

A brand is a very powerful tool for a company. Using it, the company can be recognized by its customers and therefore sell more products. To gain and maintain the positive effects of a brand, the company should care for it through a defined strategy.

To understand the process of co-branding, it is necessary to define the word „brand“ first.

2.1 Brands

Because of the popularity the research around brands gained in the past years, the word itself contains various interpretations regarding its definition as well as collocations which contain the word „brand“.³ The American Marketing Association published a definition in its dictionary, which will be used throughout this assignment:

„A brand is a name, term, design, symbol, or any other feature that identifies one seller's good or services as distinct from those of other sellers.“ ⁴

In other words, a brand is a combination of unique characteristics of a company which let consumers recognize and connect products to its sellers. This also includes values and visions of the company.

A company can decide whether they want to produce products with a brand or generic products without a brand. Using a brand usually generates higher costs in production, marketing and other segments and force the company to produce a consistent quality. Otherwise the brand would earn bad reputation and damage the company.⁵

But through branding a product the company can raise the awareness for its products to differentiate from competitors and create a steady clientele. This could increase the sales of the company and may outweigh the costs of the branding process.⁶

In a study it was found out that on average, a brand accounts 67% of the company value.⁷ Figure 1 shows the results of an interrogation of 94 companies regarding their personal rating of the value of a brand. The statements were compared with a similar study of 1999 by the same author. It shows that the estimated value of a brand actually increased in the past 6 years.⁸

Figure 1: Value of a brand at the rate of the whole company value

illustration not visible in this excerpt

Source: Sattler, H. (2006), p.11

This study shows how important it is, to take care of the brand. It contains a high value for a company and should not be neglected. Therefore, there were many different branding strategies developed which a company can imply. One of them is the so-called co-branding strategy.

2.2 Co-Branding

If two or more brands are combining to create one product or a service for a medium- or long-term duration, it is called co-branding. This method became more important in the past years, especially for projects with a low net value that would not justify the high costs it would produce.⁹ Those brands share their knowledge and resources with each other to increase the consumer's awareness for them and to improve the company image.¹⁰

Contrary to the ingredient branding strategy, products of the brands which cooperate in a co-branding project can be bought and consumed separately. It does not matter whether those brands are from the same company. It is only important that those brands can be perceived unconnected by the consumer in the market. Only the product published in this cooperation links the brands, with the premise that both parties are recognizable for the consumer.¹¹

Normally, the participating brands engage in this cooperation with different functions: On the one hand, there is the strategic endorser or the main brand. Its task is to introduce the new product into its own market as a line extension. With that the co- branding product can take advantage of the market position of the strategic endorser.¹²

On the other hand, there is the strategic enabler, also called the supporting brand. The brand is new to the market of the strategic endorser. Therefore, the co-branding product is a brand extension for the enabler and uses for example a special feature of the enabler to create an innovation in the market of the endorser.¹³

The process of co-branding is especially favored by many fashion designers like Karl Lagerfeld, Alexander Wang or Louis Vuitton. Of course, this leads to various cooperations in the fashion industry.

For example, Karl Lagerfeld designed a whole collection with the retailer H&M in 2004.¹⁴ This made the brand Karl Lagerfeld purchasable for average consumers and gave H&M the opportunity of selling a more exclusive fashion collection. The retailer created similar cooperations with other designers like Roberto Cavalli (2007)¹⁵, Jimmy Choo (2009)¹⁶, Alexander Wang (2014)¹⁷ and others.

But not only the fashion industry used the method of co-branding:

In 2014 the designer brand Louis Vuitton designed together with BMW traveling bags which are fitting the new BMW i8 not only in its shape but also in its material: The bags are made of carbon fiber like the interior of the car. This cooperation should also present the similar values of both companies which are traditions, innovations and aesthetics.¹⁸

In 2010 the brand Philadelphia, which is known for its cream cheese, published a new flavour together with Milka. Cream cheese with chocolate flavour was an innovation in food trade and can still be purchased.¹⁹ In this example Philadelphia presents the strategic endorser and Milka the strategic enabler.

Another widely spread combination is the cooperation between credit cards and different companies. The owner of this credit cards can not only use them to pay. It allows him to participate in special offers depending on the company the credit card belongs to. For example a Lufthansa credit card allows the owner to collect miles, which are points that can be redeemed for discounts on plane tickets.²⁰

[...]

¹ Cf. Hollensen, S. (2011), p.481.

² Cf. Küppers, M. (2014), p.42f.

³ Cf. Welling, M. (2006), p. 22.

⁴ The American Marketing Association.

⁵ Cf. Hollensen, S. (2011), p. 483.

⁶ Cf. Hollensen, S. (2011), p. 481ff.

⁷ Cf. Sattler, H. (2006), p.10.

⁸ Cf. ibid.

⁹ Cf. Hollensen, S. (2011), p.486.

¹⁰ Cf. Burmann, Prof. Dr. C. (co-branding).

¹¹ Cf. Küppers, M. (2014), p.42f.

¹² Cf. Küppers, M. (2014), p.43.

¹³ Cf. ibid.

¹⁴ Cf. Frankfurter Allgemeine Zeitung (Karl Lagerfeld H&M 2004).

¹⁵ Cf. Elle (Roberto Cavalli H&M, 2007).

¹⁶ Cf. Herbert, T. (Jimmy Choo H&M, 2009).

¹⁷ Cf. Kepenek, J., Maier, J. (Alexander Wang H&M, 2014).

¹⁸ Cf. BMW Group (BMW Louis Vuitton, 2014).

¹⁹ Cf. Horizont Online (Philadelphia Milka, 2010).

²⁰ Cf. Miles & More (Lufthansa Kreditkarte).