The Pros and Cons of Co-Branding

The moment Roger Penske announced his planned acquisition of the Saturn brand from GM, Saturn dealerships around the country initiated a spontaneous and organic co-branding campaign, erecting banners and billboards to celebrate the alliance.

Saturn of Wichita's advertising proudly proclaimed: "Finally, a car guy owns a car company." Scott Davies, owner of the dealership, explained the resulting traffic increase by saying: "People want to buy from someone they like. A lot of customers won't buy a car from GM, but they will buy a car from Roger Penske." That's why Davies – and many other dealers like him – were so eager to associate Saturn with Penske.

It was an odd and unintentional (at least from GM's perspective) co-branding effort, but it paid off. Saturn's marketing director, Kim McGill, said the Penske announcement led to a 35% sales jump in June over the prior year.

Co-branding is nothing new, and it's something that we as consumers take somewhat for granted. Visit a grocery store and you'll see dozens of examples, from the ice cream aisle (Breyer's and Hershey) to the snack aisle (Lay's and KC Masterpiece) to the cereal aisle (Kellogg's and Healthy Choice) to the dessert aisle (Cinnabon and Mrs. Smith's). You can also find co-branding examples in the automotive world (Coach and Lexus), the hospitality industry (Bulgari and Ritz-Carlton), the footwear business (Disney and Crocs, the franchising world (Tim Hortons and Cold Stone, the airline industry (Southwest and SeaWorld), and even in product catalogs stuffed into airplane seat pockets ("Order your Braun Oral-B Plaque Remover today").

Why Co-Brand?
There are a number of reasons companies embark on co-branding programs. To begin with, they're a powerful way of introducing one company's products and services to the loyalists of another. Perhaps the best example of this is the now-legendary "Intel Inside" campaign, which launched a brand that few consumers had ever heard of into the stratosphere by piggybacking on the equity of big computer makers such as IBM and Compaq. Within a year of the program's launch, Intel was co-branding with some 300 computer manufacturers.

Co-branding also enables one brand to benefit from the "halo of affection" that belongs to another. That was the rationale behind Nike's original 1984 alliance with Michael Jordan, and the effort has done wonders for both. Similar (if more mundane) is the co-branding EconoLodge has done in its housekeeper-certification program with Mr. Clean in an effort to leverage the importance hotel guests place on tidiness.

Another benefit of co-branding is cost savings, something that can't be overlooked during tough economic times. That's one reason you increasingly see fast-food restaurants like Pizza Hut and Taco Bell sharing the same building—and sometimes the same counter, menu boards, and staff. In some cases, companies co-brand in order to charge a premium, such as Ford's two-decade partnership with Eddie Bauer and its more recent creation of the "450 horsepower supercharged Ford F-150 Harley-Davidson Super Crew" with an MSRP of more than $42,000.

It's Not Just for Big Companies
Co-branding is not just for giant national or international brands. While a small business may have difficulty linking up with Nike or Procter & Gamble, there are an increasing number of off the shelf co-branding opportunities of which many businesses can avail themselves. Programs have been developed by credit-card companies such as Visa and MasterCard, retailers including Starbucks and Barnes & Noble, and even shipping companies—the U.S. Postal Service offers a service by which you can add your company logo to its priority mail packaging.

Beyond these, there are bound to be dozens of custom co-branding partners for just about any type of small business, whether you serve a local geographical area or a national vertical market. The key is to think creatively about products or services that complement yours in some way and that will enhance the appeal or credibility of your offering.

For example, a restaurant could co-brand with a local packaged-foods maker to create a new menu item, an accounting firm could co-brand with an information-technology provider to create a new consulting offering, or a physician might co-brand with a hospital on a new service line. A good place to start generating ideas is by thinking about other types of companies that do a good job serving your target market. You might even ask your customers to identify other companies with which they do business and see if you come across any patterns.

Develop Your Own Guidelines
Be careful, however—co-branding is not without its risks. First, it tends to have a dilutive effect, since it spreads the credit for a positive experience across two brands where normally there's only one. And if the experience isn't positive – even if it's the other brand's fault – it may reflect negatively on you. (Not to pick on the Postal Service, but if your company's name is on the side of a Priority Mail package, how does it reflect on you if it arrives late or damaged?) Further, while in a well-conceived co-branding program the whole should be greater than the sum of the parts, you can't get away from the fact that you are to some extent relying on another brand's equity. That can, in some cases, make your brand look weak or secondary.

It's important, therefore, to carefully consider your own co-branding principles before you enter the fray. Develop guidelines that are right for your business that will enable you to objectively assess opportunities that arise. Many large corporations have set out formal guidelines for this purpose—AT&T even put a Co-Branding Decision Tool on its intranet to help guide managers through a variety of decision factors related to co-branding opportunities.

One of our clients developed three criteria that have (by design) somewhat limited their co-branding options. First, they will co-brand only with companies that share complementary values. Second, they will co-brand only with products that (as they do) hold best-in-class status. Third, they will co-brand only in situations where they can retain full review and approval rights on all elements of communications. That narrows the company's co-branding possibilities, but it also reduces its risk.

Create a proposal and reach out
Your criteria may differ based on what's most appropriate for your situation, but "fit" should be a prime consideration. While many brands share similar characteristics, no two are exactly alike. Co-branding ice cream and root beer is a natural; co-branding sports cars and computers less so (though that didn't prevent Ferrari from linking up with Acer). Ecco Shoes co-branding with the World Wide Fund for Nature makes intuitive sense; Chanel and Hello Kitty is a bit more of a head-scratcher. Look for brand fit not only from the perspective of attributes and benefits but also with respect to core values and corporate philosophies.

As a starting point, examine existing co-branding examples and ask yourself how good of a fit they appear to be and why. Beyond that, seek out other companies and ask them to share their co-branding guidelines. Then divine the co-branding principles that are right for your company. Once they're in place, you can brainstorm potential partners who may be a good match and consider the benefits of linking up from their perspective as well as yours. Then put together a proposal and reach out to them.

Co-branding is an often-overlooked strategy by which the whole can truly be greater than the sum of the parts. While it should be used sparingly and judiciously, it could generate a new level of interest and excitement around your products and services.

For more on co-branding, read a Q&A with Tim Hortons' David Clanachan and Cold Stone Creamery's Dan Beem on their ongoing co-branding partnership.