Everything you need to know about Dual Branding

The recent takeover of Hamburg Sud by Maersk Line is a much talked about topic and analysts all over the world are busy figuring out how this planned dual branding strategy will shape out.

Here is my 2 cents on the topic, some challenges and some opportunities await.

A brand is defined as: “an identifiable product, service, person or place augmented in such a way that the buyer or user perceives relevant, unique values which match their needs most closely” (de Chematony, 1998). When talking about dual branding strategy which is also called co-branding, one needs not to mistake it with Company Mergers. Mergers typically involve two relatively similar companies making the beneficial mutual decision to become a single legal entity. They are different from acquisitions, which usually requires a more significant company absorbing a smaller company, sometimes against the will of the smaller company’s management.

However, Dual branding/co-branding is a strategic marketing and advertising partnership between two separate organizations or brands who come together to generate unique values for their respective consumers wherein the success of one brand brings success to its partner brand, too. It involves the presentation of multiple brands and product to the public under a single marketing strategy. Co-branding can be an efficient way to build a business, boost awareness, and break into new markets, and for it to indeed work, it has to be a win-win for all players in the game. Citing examples from companies that have used dual branding strategy to see their successes and failures, I can think of following:

1)BMW & Louis Vuitton: The Art of Travel

Car manufacturer BMW and designer Louis Vuitton may not be the most obvious of pairings. But if you think about it, they have a few essential things in common. If you focus on Vuitton’s signature luggage lines, they’re both in the business of travel. They both value luxury and they have a positive brand equity. And finally, they’re both well-known, traditional brands that are known for high-quality craftsmanship. These shared values are precisely why their co-branding strategy makes much sense.

In their partnership, BMW created a sports car model called the BMW i8, while Louis Vuitton designed an exclusive four-piece set of suitcase and bags that fit perfectly into the car’s rear parcel shelf.

The complementary nature of their prices, design, appearance, and quality is an indisputable fact that makes them unique. The cost-effectiveness and customer-centric strategy are made evident with the BMW i8 being sold for $135,700 while the four-piece luggage case goes for $20,000.

2)Sony & Ericsson: SonyEricsson

This is another good example of companies that have adopted the dual branding strategy in the past, though they have fallen apart. Sony Ericsson was a famous and successful cell phone manufacturing company known all over the world. Sony is a leading Japanese electronic product company, and Ericsson is a leading provider of mobile networks and mobile devices from Sweden.

Sony and Ericsson made good use of their resources and technologies to develop a series of successful products with Sony’s popular Cyber-shot and Walkman technologies. However, at the end of October 2011, Sony and Ericsson announced that they would go separate ways as Ericsson sells its 50% stake in mobile phone maker “Sony Ericsson” to Sony for $1.46 billion. Sony Ericsson is an excellent example of the failure of dual branding. Some reasons caused the separation of this leading mobile phone companies which will I will try to addressed herein.

Some of the companies that have adopted this strategy are:

• Nike & Apple: Nike+
• CoverGirl & Lucasfilm: Light Side and Dark Side Makeup
• Alexander Wang & H&M
• Uber & Spotify: Soundtrack for Your Ride
• Bonne Belle & Dr. Pepper: Flavored Lip Balm
• Casper & West Elm: Test a Casper Mattress
• Pottery Barn & Sherwin-Williams: Color Your Room
• GoPro & Red Bull: “Stratos” 

Advantages of Dual Branding Strategy

As challenging as it is, dual branding/co-branding has a lot of benefits some of which are:

Cost Reduction—a dual-branded company can reduce many of is expenses. The budget for things like marketing might be trimmed while the company enjoys higher purchasing power, which lowers the cost of raw materials and other necessities.

Market Penetration—by dual branding, the company is theoretically provided with access to more customers. This is more realistic if the individual companies had been demonstrably successful in separate markets, as opposed to roughly equally competing in the same one. For example, dual branding between a company in North America and One in Europe will allow the dual-branded company to access markets both in Europe and North America.

Diversification— the dual-branded company, can offer a more excellent range of products and services. With complementary products and services and a positive brand equity, the dual-branded company may be able to capture more consumers than they would as individual brands.

Skills and Knowledge—the company can make use of the very best of minds from both companies and make up for shortfalls in the individual companies’ skill-sets. For example, the combined skills of marketing departments in the company will be able to sell their products more efficiently than otherwise and thereby increasing shareholders value.

Some Challenges of Dual Branding Strategy are:

• Difference in Vision and Mission
• Lack of Communication
• Internal Competition
• Brand Equity dilution
• Negative feedback effects
• Organizational Distraction
• Confusion 

Solutions and Best Practices

1.Internal competition

Internal competition is the most significant challenge found in a situation where two companies/organizations offering the same product or service co-brand or merge as the case may be. The intra-competitive nature of such partnership is transaction oriented rather than interaction oriented. Each player wants to outshine the other in the system subtly. Formality-wise, corporation and the mutually beneficial relationship are expected, but there is always this natural competitive feeling that one partner will take over the market share of the other. The internal competition spans through all the management and operational components of the supposed collaborative system. The customers’ preference and feedback are among the factors that foster internal competition in co-branding. In a situation where a brand is preferred to the other, there would be a zeal to update to meet the customers taste and thereby bringing about a friction or resemblance in quality. Also, the unstoppable quest to gain an individual positive brand equity even while in partnership makes internal competition unavoidable. Traditionally, there is supposed to be a certain percentage of incremental value when in a co-branding business relationship which according to research should be at least on a 45% average. In a situation where there is an infinitesimal percentage of incremental value then the purpose of co-branding has been jeopardized.

However, Dr. Ivan Misner (The Founder of BNI) said: “the competitor to be feared is the one that doesn’t bother about you at all but goes on making his/her own business better all the time.” Success in business is about continually improving your product or service and making it better all the time. The process is a journey and not a destination. Therefore, focus on the fundamentals of your brand, know the metrics of your brand and work towards perfecting it even while in co-branding business relationship. When both parties work with this ideology, success and sustainability await them.

Also, another best practice is for the co-branded firm who offer same product to have a well-strategized market division. It will help each party to know its market segment and stronghold and work towards having a substantial brand equity in that area. When both companies do same, they will move forward and perform better even with their similarity in product and services.

2.Difference in Vision and Mission

Dual branded company that has a discrepancy in their vision or mission works on a cross purpose and as such, finds it very difficult to uphold one value proposition to the market. This hiatus is created when two incompatible companies decide to go into co-branding without first of all doing a feasibility study of the viability of their purpose. To avoid this, the company should employ the service of a business analyst to analyze their brands, brand equities, market penetration and compatibility. The management should also come up with a unified business plan and strategy to pursue one goal and objective.

3.Lack of Communication

The research shows that adequate communication is a proactive measure to settle a dispute. This is what most dual branded companies lack. For such company to overcome conflict, there should be an adequate communication and mutual understanding between the management. Internal settlement and dialogue should be in the companies’ contingency measures as should be contained in their business plan therein.

4.Brand Equity Dilution

Brand equity is a marketing term that describes a brand’s value which is determined by consumers’ perception of and experience with the brand. Brand equity dilution is a situation where a stronger and famous company with significant market share and loyalty goes into co-branding with a weaker one with an inferior performance and market acceptance. It results in the company losing its market loyalist due to the perception that their standards have been reduced by the weaker company. Most times, the purpose of dual branding is to elevate a weaker company with the market strength of the famous one, but the reverse is always the case. The best solution to this according to the research is for companies to go into dual branding with others that have a positive brand equity and if otherwise, they should work jointly to develop the others brand equity by using the best marketing strategy. Also, there should be a thorough market testing to suggest changes through feedbacks before the joint pursuit.

5.Negative Feedback Effects

It is more like brand equity dilution but not the same. Research makes it crystal clear to understand that business is all about recommendation. This recommendation is what is affected when there is a negative feedback of the brand presented by a dual-branded company. The best practice here is for the company to adopt consistent market testing and enhance change using the feedback they get. Note: This strategy should and must be adopted at the initial stage of the partnership to determine the best fit for the dual-branded company. It should also be done intermittently to know how the market is faring and to surmount external competitors.

6.Organization Distraction

This is one of the neglected aspects of the challenges faced by dual branded companies. There exist a lot of distractions from different areas of the workforce, management, marketing department, etc. It is advised to consider a layoff of some employees to avoid redundancy. However, this should be skillfully done to retain nothing but the best hands in the company. The management should also try as much as possible to instill the companies’ unified goals and objectives into the employees and even create a pleasant working environment for them.

7.Confusion

 For brands that are less well-known, co-branding may confuse. A consumer may be familiar with one brand and inclined to buy it, but then be put off by its combination with another that he is not as familiar with. The best practice is for smaller companies, in particular, to be cautious with how they combine brands and take care to be sure that they are indeed complementing each other because association with a product of lesser quality can damage a new brand.

In conclusion, co-branding/dual branding is one of the leading strategies in the market today as it has helped a lot of startups to gain market awareness and also reduced competition for the more prominent companies who leverage on their partnership with a complementing startup company to gain competitive advantage. As good as it is, the best practices should and must be adopted for sustainability.