Co-Branding: A Quick Fix in Tough Times?

In the current economic climate manufacturers are increasingly being called upon to make miracles happen in order to retain sales, market share, or simply just jobs.  The range of options typically discussed generally covers two angles: making things more affordable (either for consumers to buy or manufacturers to produce); or making products more attractive (e.g. through branding work or brand extensions).

Unfortunately most of these initiatives require significant capital, which is increasingly harder to come by, thus perpetuating the downward spiral.  Therefore it’s important to recognise the sometimes faster, cheaper options available to FMCG marketers.

One such option is co-branding, defined as the combination of two or more brands in order to create a new product.  This is not the same as associative branding, such as sticking a charity’s logo on your box, or sponsorship, but actually requires creating a whole new product.

Examples include:

• the Braun / Oral-B electric toothbrush
• Gull service stations and Woolworths Quickstop
• Bacardi and Coke
• Sony Ericsson
• Nike and iPod

Consider the examples above – Oral-B know about oral hygiene and the design of toothbrush heads, not electrical engines; Gull are a petrol distributor, not grocery specialists; no brand in the world could compete with Coke for a rum manufacturer looking for an advertising partner; Sony make great electronics but Ericsson know telecommunications; Nike make iconic shoes that can now have built-in iPod-delivered audio feedback.  In each of these cases, the brand partnership is combining to produce a new product that is better (or at least more cost-effectively produced) than what could otherwise be managed.  The combinations bring strong brands, intellectual property, distribution systems and more to the table, thus making the whole greater than the sum of the parts.

As well as the (supposedly) greater ease of combining successful pre-existing elements, the other attractions of co-branding to marketers are numerous. Both the brands being joined will usually have their own loyalists, positive brand associations and product strengths, and the additional offering that the co-branded product offers will in theory offer a net gain in customers and revenue.  Some cannibalisation may occur, but it remains better to compete with oneself than with others.

Other reasons for co-branding include the better brand acceptance, cut-through, pre-existing customer bases and recall that comes from using established brands; helping to increase usage occasions; increasing credibility; pooled marketing resources; and access to partners’ loyalty programmes, distribution networks and customer databases.

Two New Zealand examples of late include Tuimato Sauce and Bluebird’s “Kiwi As” chips with the flavour of Mainland Tasty Cheese.  Again, we have manufacturers of very different products combining forces to produce new products of greater worth than had generics been used, and reaching new markets as well.  For example, Delmaine Fine Foods is a semi-premium brand unlikely to get much traction amongst the more downmarket Tui drinkers, yet which when partnered with such a ‘good natured’ brand that is Tui, Delmaine is able to sell a new product to a new market without appearing to ‘slum it’. Likewise, DB Breweries are not tomato sauce manufacturers, and the wholesome family image of Watties tomato sauce is unsuitable for a beer brand.  Without the credibility of Delmaine, Tuimato sauce would just be a novel add-on to Tui beer, with doubtful longevity.

The Bluebird example is similar – most crisp varieties include cheese flavouring now, but if the international Bluebird brand is going to produce a line called “Kiwi As”, then kiwi flavours and tie-ins must be used. The Mainland brand offers significantly greater attraction than just “cheese”.

Of course, co-branding can bring challenges, and like all partnerships in life some compromise is needed and unpleasant surprises avoided.  Whilst co-branding works well when all parties bring good things to the relationship, when one party fails the other will be tarnished – just ask Fonterra about Sanlu. The brands have to be able to co-exist without raising eyebrows, and it’s worth remembering that if the co-branding has to be explained and justified, it probably isn’t meant to be. Nike + iPod is a “yes”, but builders’ boots and iPod don’t mix.  A pre-packaged wine and cheese mix would work, but not if you’re matching Montana with processed ‘plastic’ cheese.  These seem obvious examples, but mistakes are can be made, especially when one considers the unpredictability of how consumers will perceive any co-branding.  One project I have recently been involved in revealed that of two New Zealand brands being considered for a marketing match-up, one had a significant level of trust and integrity that comes from its decades as an iconic brand of consistently high performance, and the other brand has the perceived integrity of a politician selling used cars by spam.  The dodgy brand would surely win from the partnership, but probably at a net loss to the trusted one.

So marketers looking for a short-cut to better sales could do well to consider developing a new product through the co-branding route – as long as the brands will co-exist productively, there is a genuine consumer need for the product, and consumer acceptance of the brand pairing.

Jonathan Dodd