Co-branding could well be the key that will unlock the door to a brand-focused Chinese industry

Even though co-branding or brand alliances have been around for many years, 50 years or more in fact, there remains no universally accepted definitions. However, there is more and more agreement on the growth and importance of co-branding to any sustainable competitive brand advantage in today's globalized marketplace.

It is also an area that many Chinese companies, with aspirations toward developing internationally competitive brands, could explore further, especially those with some form of existing joint venture or alliance with foreign companies.

Before discussing a few of the more common definitions, it is worth introducing some of the terms often used interchangeably with co-branding such as: brand alliances, symbiotic marketing, joint branding and cross-promotion. Of these, brand alliance is favored due to the range of possible types of cooperation that fit neatly inside this umbrella statement.

Early definitions of co-branding centered on an integration of two or more products and either a symbolic or physical brand alliance. More recent definitions include a slightly more refined statement the essence of which claims that, co-branding occurs when two or more (but usually only two) existing brands are combined into a joint end product or are marketed together in some way.

While an infinite number of Chinese companies are involved in alliances with foreign companies, it remains the case that precious few (if any) can boast a genuine brand alliance in which their company brand or product brand(s) benefit substantially. Most play the role of low-cost producer and little or no brand development takes place within the Chinese company and therefore little or no understanding of branding take place too.

Even when the Chinese company name appears on the final (Western) branded product, as is the case with a few automotive industry joint ventures, such representation barely registers with the market.

Knowledge co-branding

This is the weakest form of co-branding since it requires little extra financial investment. The aim here is to build brand awareness and brand image via elaborate contact with the partner's target market.

An example of this type of co-branding is provided by American Express and Delta Airlines who between them designed a Sky Miles program where they developed combined promotional activities. The objective was to reward members with bonus points while at the same time allowing them to use the credit card in stores.

This joint initiative allowed Delta Airlines to build loyalty further among its customers and enables American Express to acquire new customers. This form of co-branding is often not a long-term partnership and frequently focuses on the short-term needs of the companies involved.

Value-endorsement

co-branding

Unlike knowledge co-branding, this form of co-branding involves the explicit reference to and promotion of each brand's respective brand values and brand associations. Values endorsement of both brands together aims to create a spillover effect where both brands benefit from the joint exposure.

Ingredient co-branding

Ingredient co-branding is the most used type of co-branding. The aim of this type of co-branding is to promote each brand's respective competitive advantage thereby creating a "new", united branded offering.

An excellent example of extremely successful co-branding is the initiative between Intel and IBM. "Intel Inside" provided customers with added value combined with IBM's expertise in computer manufacture. While this represents another form of brand "alliance" it needs to be made clear that ingredient branding involves a primary brand, in this case IBM, and a secondary brand, Intel, unlike the more equal status shared by brands in the previous two examples of co-branding.

Ingredient branding simultaneously strengthens each brand from competitors and also, if successful, creates a synergy where combined brand value increases to a level beyond the sum of the individual brand's value. As a result, the primary brand is often able to charge an increased brand premium as a result of the secondary, ingredient brand's presence.

While ingredient branding often offers huge benefits to both brands there are some potential drawbacks. For example, customers may become confused when presented with two brand names and both brands may suffer a loss of control once their association becomes set in the consumers mind.

Complementary competence co-branding

This is the more advanced form of co-branding in which each brand builds on the other's brand values and competencies to create maximum brand synergy. In order to maximize the synergistic effect both participating companies agree to work together long term and share expertise and knowledge in order to build combined brand value constantly.

A good example of this type of co-branding is the alliance between Acer and Ferrari. In this case, Acer produces a laptop computer in cooperation with Ferrari with all the features and attributes of the Ferrari brand, like the typical Ferrari "red" color. In so doing, Acer built on Ferrari's brand values of "fast", "exciting" and "fun".

In contrast to ingredient branding, this form of co-branding does not involve the absorption of one brand into the other but still leads to mutual brand benefits.

Even as we look at the various types of branding it is also important to understand the important success factors in a branding exercise.

Brand image fit

Brand image refers to the perception formed by a brand's current and potential customers. If a co-branding initiative is to succeed then customers' perceptions of the individual brands involved has to be favorable and either similar or complementary.

Brand equity fit

Another factor critical for the success of any co-branding initiative is the effect on each brand's equity. Brand equity here refers to customer-perceived brand equity or overall brand value. Successful co-branding should lead to increased brand equity all round but will also probably alter each brand's equity too. Short-term gain needs to be set against any possible long-term deleterious affect on the customer-perceived brand equity here.

When two brands enter into an alliance each will have previous associations and perceptions among its customer base that will probably affect the other brand. It is, therefore, essential to consider the brand equity ramifications.

Product fit

Product fit is defined by the relatedness and compatibility of the product categories involved in the alliance. If customers do not perceive the products as appropriate partners then possibly positive attitudes will not be transferred to the alliance. Product fit can be measured by examining a complement dimension and a substitute dimension.

Products are perceived as complements if they are consumed together to satisfy a particular need. Products are considered substitutes if they are perceived as possible replacements and satisfy the same need. If there is fit here on both of these dimensions then it may well spillover to brand fit and further synergy.

Country of origin fit

For cross-border alliances country-of-origin effect or any country image is very important. Certain brands exploit a country image decisively, like French or French-sounding fashion clothes and cosmetics, Italian or Italian-sounding clothes and shoes. This definitely requires consideration when forming any alliance with a brand from a different country and possibly very different and incompatible country image.

Much has been made of the lack of any distinct China country image or the perception of any typical product association with China. Is this really a serious issue or indeed a handicap?

Not really, given China's rapid economic development and modernization. This transformation, which now includes the world's fastest trains and a leading pioneer in electric car technology, is gradually changing China's country image. However, what better way to accelerate such change than a few internationally successful brand alliances.

Chinese companies, not just those currently engaged in some form of strategic alliance or joint venture, must reconsider their business strategy and move toward a brand-development model. This may take time, quite some time, which is where co-branding offers an excellent and exciting halfway house.

Chinese brands, and not just Chinese companies, in alliance with successful (non-Chinese) brands not only allows for gradual, and therefore probably more permanent, change toward a brand-oriented culture and strategy, it also enables Chinese companies to learn from successful brands.

If China is to continue such impressive economic expansion and, in particular, wealth creation, Chinese brands have to emerge more and more internationally. Co-branding could well be the key that unlocks the door to a brand-focused Chinese industry.

Co-branding, however, does not come without risk. Extremely careful scrutiny and due diligence needs to take place of any possible brand alliance partners. In addition, cross-border brand alliances will only work if there is appreciation and understanding of very different national and corporate cultures.

The author is a visiting British professor of brand management at China Agriculture University.