COBRANDING - STAY WITHIN SPEED LIMITS
Dr. Padma Srinivasan

Introduction: The market power of brands is awe-inspiring. Branding and Co-branding are concepts greatly perused by all the service facility, be it service center or a star hotels. These concepts are greatly perused by firms for the matchless benefits they bring forth over a long period in terms of better bottom line profits to increase in market share. Some brands live long and keep the firm afloat but at times personality of such brand needs to be reoriented or reinvented. Now, cobranding comes to rescue of the firm. It is a marriage of two entities with different backgrounds, systems and values. The consensus could be relating to competitive advantage, cost efficiency, organizational system, strategy, skill, staff, style, structure and strategic significance. More so, a lot of activity is visible in this arena in recent years due to the choice of multinational Corporate as an entry mode into India in newer ventures with lesser risk concerns.

Co-branding gives them more velocity in market takeover with minimal cost. Of course, it takes considerable effort and funds to scout for a suitable partner. It has been never an easy task to pin the strategic choice. It is done systematically as if a new project is chosen with professional care and vision. The service industry in recent times has lapped up all kinds of partners to give a wholesome experience to its eager and affordable clients. Normally the cobranding alliances bring greater results than envisaged due to the ‘synergy’effect.  But at times the alliances turn sour and detoriate the market position of the partners.

The article is trying to detail the needs for more caution while cobranding alliances are looked at.

CAUSES OF RISK CONCERNS:

¨      Under or Over estimation of the partner’s potential: The partners may under or over estimate the market power of the other. If the niche is rejecting or the partnership does not improvise the value additions sought by the customers, then the alliance is unfit abinitio. For example, the Oberoi hotels ally with Hilton brand, the overseas market may accept the brand better than acceptance of Hilton brand which is relatively unknown in India.

¨      The alliance in the route/area not greatly perused by the loyal custom: At times, a firm or a hotel may enter in to an alliance in a sector, route that does not have the zeal of customers. So having an alliance to better sales in the sector may not even cover the overheads. For instance, Jet Airways may not have a good traffic in the Goa-Bangalore sector and if it tries to establish in this line by entering into alliances with a Star Hotel in Goa; it may not bring forth the customers despite good package offerings. Probably, with time it could establish itself but trying an alternate busy route is profitable.

¨      Well-established and suitable brand partners come with a glorious price tag, but to break even with this load takes more time, effort and resources. For example, in the Oberoi & Hilton deal, Oberoi needs to pay a % of room sales to Hilton, which may eat away the profits for quite some time.

¨      Lack of identification on the part of the organization as to which its brand be associated with which of the brand of the cobranding partner.

Fig-1.Mixing & Matching partners and Brands.

¨      Brand dilutions: However the value of the international brand gets diluted if a foreign entity enters an agreement with several Indian companies.

¨      Equity dilutions: At times, the cobranding could stem out of an acquisition deal. In such cases, branding concerns could be pushed to the backseat since cobranding takes place whether or not profitable.

ISSUES OF CAREFUL SCRUTINY: 

There is a emergent need for a strategic model that matches the costs & benefits of cobranding to decide accurately especially when a mix & matching of various partners for multiple service offers and outlets.

The above diagram can be translated to include the survival with success parameters namely:

§         Service diversity and life cycles of the cobranded services

§         Digitization of business and awareness levels of the custom

§         Growing market defragmentation in the service lines and niche

§         Market volatility, General economic instability and

§         Improvised distribution modes to cross the boundaries.

Fig-2 . Focus and Shoot

SO---- GO SLOW & STEADY ---- WIN:
It is worth its while to slow and steady within cobranding limits.

The 9 important ground rules are

1. Think before you leap.

2. Gauge the distance you can leap.

3. Look ahead and never sideways.

4. Never look up from landing.

5. If landed on feet, race to the destination

6. If landed on back, straighten as fast as you can.

7. Stay in control always.

8. Watch out for road blocks and seek alternates.

9. Like what you have done and take courage to pull up.

Finally, the colour of the eyes of the tiger is unimportant, so long as it catches the elusive fat deer, with minimum run.

Author:
Dr. Padma Srinivasan,
HR-Head & Company Secretary, Bangalore
Visiting Faculty, ICFAI Business School, Bangalore