CO-BRANDING

CHAPTER 7
EXPECTED LEARNING OUTCOMES
Learn the important of branding in franchising
Understand the nature of co-branding in the
franchising industry.
Learn the motivating factors behind the co-branding
phenomenon
Appreciate the different methods of co-branding
Recognize the importance of collaborating for
success.
BASIC CONCEPTS
Co-branding occurs when two brands are combined
in a business offering.
Each brand expects the other to be strong and
draw customers who have brand preference for the
other brand.
Co-branding is also called: dual branding, multi-
branding, cross-system franchising and even
strategic alliance.
WHAT IS A BRAND?
For the American Marketing Association (AMA), a brand
is a name, term, sign, symbol, or design, or a
combination of them, intended to identify the goods and
services of one seller or group of sellers and to
differentiate them from those of competition.
These different components of a brand that identify and
differentiate it are brand elements.
A brand can be a trademark, name. logo, or symbols
representing the franchise.
The Brand becomes major asset to the franchisor.
1.4
FOUR BRAND STRATEGIES
5
Line Extension
Dannon Yogurt Flavors
Multibrands
Seiko Lasalle & Pulsar
Co-branding
Brand Extension
Barbie Electronics
New Brands
Windex (by acquisition) B
r
a
n
d

N
a
m
e
Existing New
Product Category
Existing
New
CO-BRANDING
Several brands may
command more power
through customer
awareness and traffic
than a single brand-
name operations.
(Synergy effect)
20 % of all food
franchises in the UD
are co-branded units
BRAND EQUITY
Four dimensions of Brand Equity:
Brand Loyalty
Brand Awareness
Perceived Quality of Brand
Brand Association
BRAND ASSOCIATION
Brand Associations are the other information nodes that
link to the brand node in memory and contain the meaning
of brand for consumers.
BRAND ASSOCIATIONS
2.9
User friendly
Educational
Fun
Ipod
Graphics
Cool
Innovative
Macintoch
User friendly
Apple logo
Creative
BRAND AWARENESS
Brand awareness:
The consumers ability to identify the brand under
different conditions. Brand Awareness consists of Brand
Recognition and Brand Recall
Brand recognition: consumers recognize the brand in
different conditions, or when they go to stores or when
they are given a cue.
Brand recall: consumers ability to retrieve the brand
from memory when they think of a certain product
category.
Perceived Quality of Brand
Customer Value
Customer Satisfaction
IMPACT OF CO-BRANDING ON THE BRAND
EQUITY
The Halo Effect:
strong, well-known brand links with a lesser known one
and the second brand is lost in the halo of the first.
For lesser known brands, co-branding may result in
increased sales but building brand identification may not
occur.
If both parties have strong brand equity, the co-
brand relationship may result in stronger brand
equity for both if the franchise aliance is successful.
WHY CO-BRANDING?
Co-branding represents a new approach that can
helps revitalize mature units in their PLCs.
Co-branded share space and help reduce the
number of employees, reduce labor cost.
Fewer choice locations are available to support
further expansion efforts.
Convenience to the customers: one-stop- shopping
ADVANTAGES AND DISADVANTAGES OF CO-
BRANDING
Advantages:
Specialist image
Good customer choice in
one category
Specialized personnel
Customer loyalty
Disadvantages:
No one-stop shopping
Too much emphasis on one
category
More susceptible to trends
Greater efforts needed to
enlarge the size of trading
area
Advantages
Broad market
High level of customer traffic
One-stop shopping
Emphasis on convenience
customers.
Disadvantages:
Low variety within product lines
General image
Some disappointed customers
Reduced customer loyalty
Burn out among key personnel
Single Brand Offering Multi-brand offering
CO-BRANDING METHODS FOR A FRANCHISOR
Internal development of second Brand
Experiences: Yes
Resources: Yes
Sell its Brand to Acquisitor
Experiences: Yes
Resources: No
Acquisition of Second Brand
Experiences: No
Resources: Yes
External Development of Second Brand
Experience : No
Resources: No
CO-BRANDING METHODS FOR A FRANCHISOR
Internal Development of Second Brand
Creation of new Brand
Bundling of Existing Brands
Sell its Brand to Acquisitor
Sell Franchise system
Franchise units to other systems: allow franchisees to sell a
limited number of another company in their stores.
Acquisition of Second Brand
Buy Franchise system of another franchisor
Become the franchisee of other system.
External Development of Second Brand
Trade-out agreement: allow each chain to offer the menu of
the other outside.
Host Agreement: co-branding between two complementary
business fields
THE FRANCHISEES PERSPECTIVES
Do I get a competitive advantage?
Do I need to co-brand for defensive reasons?
Should I look for exclusive relationship?
EIGHT-STEP PROCESS TO EVALUATE AND
CHOOSE CO-BRANDING FOR A FRANCHISEE
Identify your positioning strategy for your local market
Contact industry insiders to learn more about the nature
of co-branding
Define exactly what you want to do in terms of your co-
branding relationship
Meet with principles from the second brand as well as
your first brand
Perform feasibility analysis to determine the potential
return on investment
Make decision to co-brand or not to co-brand
Negotiate contract with second franchise system
Renegotiate contract with your first brand if necessary.
ISSUES IN CO-BRANDING
Strategic issues
Operational issues
Purchasing issues
Price- related issues
Promotional related issues
Store design issues.
CLASS DISCUSSION
Read Case study:Little Caesars and Kmart on
page 202.
Answer the case questions