While at a supermarket recently I came across Stimorol chewing gum flavoured with Halls Menthol. I’m not an avid chewing gum fan, but being an ardent lover of Halls Menthol, I couldn’t resist buying a packet. Had it not been for the Halls Menthol branding on the pack I’m sure I wouldn’t have bothered.
We’re surrounded by examples of co-branding – it has become quite prolific and, judging from my recent Stimorol/Halls Menthol experience, it can actually work. Co-branding is a marketing strategy that involves the collaboration of two or more brands to create a product or service that is representative of both. There are various forms or types of co-branding:
Ingredient co-branding: For example, the addition of Oreo cookie pieces to Cadbury Dairy Milk Chocolate, KFC Doritos crunch burgers, Intel processors in Dell computers and of course, Halls Menthol in Stimorol chewing gum.
Same-company or internal co-branding: For example, Nestlé Country Fresh ice cream with Nestlé Bar One sauce.
Joint venture co-branding: For instance, the athletic clothing range released by Reebok and Crossfit, Nike and Apple’s Nike+iPOD, and Skyy Vodka and Diesel’s swimwear range.
There are definite advantages to co-branding. It can raise awareness about the brands, allow a business to introduce or expose its products or services to the loyal users of the other brand, penetrate another market so it can benefit from the brand equity (or affection) held by another brand, and enhance the value or quality of the product or service in the minds of consumers.
By offering consumers more choices the “new” product or service increases profits while reducing the costs involved in introducing, marketing and advertising new products or services.
But brandholders should bear in mind there’s a flip side to the co-branding coin. For example, it could lead to the dilution of your brand. A smaller, new or less well-known brand risks being subsumed by the other more established or better-known brand. If one of the brandholders has a greater say or hand in the co-branding exercise, it could result in a loss of control by the other brandholder. And if the co-branding strategy doesn’t work – for instance if the product or service is of an inferior quality or one of the brandholders suffers negative publicity – it could have a negative impact on consumers’ perception of the brands and consequently their reputation and value.
When deciding to co-brand, it’s essential to keep the following in mind:
Choose your co-branding partner carefully
Get to know and gather information about your potential co-branding partner. It’s important to choose a partner that offers products or services that complement yours. There must be a natural link between the co-branding partners and at the end of the day the product or service offered under the co-branding exercise must be relevant and offer value to consumers. Furthermore, the co-branding exercise must have advantages for both parties and add value to both brands.
The brandholders must be compatible and have synergy to reduce the likelihood of conflicts and ensure a better working relationship.
It’s also vital to consider the reputation of the other brand and financial and market positions and operations of the other brandholder in relation to the reputation of your brand, and your financial and market positions and operations.
Communication and participation
There are of course circumstances where one of the parties may be more involved in the co-branding exercise than the other due to for instance its expertise and know-how.
However it’s important that both parties are involved in one way or another and they effectively communicate with each other. They should both have a say in the co-branding exercise.
Most importantly, the parties must have a carefully drafted and detailed agreement, along with guidelines or rules, in place that sets out the parameters of their relationship and governs the co-branding arrangement.
The co-branding agreement is in essence a type of co-licensing agreement and should thus include provisions relating to the use of intellectual property. It’s important that the brandholders are able to maintain their separate identities and exercise control over their respective brands to ensure their integrity.
Some issues that need to be considered include the retention of the proprietary rights by each brandholder once the co-branding arrangement is terminated so the use of the brand benefits both brandholders while maintaining the distinctiveness of each brand.
Lack of quality-control provisions and monitoring can result in dilution or loss of control by the brandholders. Other risks to consider are for instance liability for defective products. It’s therefore imperative that the agreement contains quality-control provisions. Branding specifications setting out how (in what manner and form) trademarks may be used, the scope of such use, including territorial considerations, and a marketing strategy or plan setting out how and in which mediums the product or service may be marketed and promoted and how it will be monitored are crucial.
Other provisions in the agreement should deal with the exclusivity, duration and termination of the co-branding arrangement. Grounds for termination should be widely construed to cater for a variety of circumstances, for example failure to meet targets, infringement or misuse of intellectual property, and if one of the brandholders suffers negative publicity. There should also be provisions dealing with warranties, indemnities and confidentiality. In this regard, it should be noted that entering into a co-branding arrangement may necessitate the disclosure of certain confidential or privileged information such as customer data, technology, know-how and market research data, so the agreement should ensure that this information is not disseminated to third parties or used once the co-branding arrangement has been terminated.
The agreement should also deal with any new intellectual property, such as trademarks or technology, derived from the co-branding exercise.
These are just some of the considerations to bear in mind when entering into a co-branding arrangement. Co-branding is a powerful tool and can provide a competitive edg e when properly structured. However, it’s essential that brandholders are diligent and exercise due caution when entering into such arrangements.
*Amina Suliman is a senior associate at Adams & Adams.