The dynamics of co-branding strategies within the South African retail sector

The concept of co-branding as a branding instrument has been around for many years. In the last decade, we have seen tremendous growth in the use of co-branding as a brand leverage tool.

A study by Johan Schwartz investigated brand professionals’ perceptions of co-branding within the South African retail industry. This study found that retail brand managers perceive co-branding as an effective and viable brand strategy.

Academic authors suggest that co-branding occurs when two or more existing brands are combined into a new joint product or marketed together in the same way.

Co-branding also involves two or more companies associating their brands to create superior market offerings or to participate in an effective strategic or tactical branding program. The long-standing brand relationship between Wimpy and Engen is a classic example of joint venture co-branding. Other examples of connecting brands and creating unique (or new) products or services include: McDonalds and Coca-Cola, McDonalds and Disney, Shoprite and Computicket, KFC and Cadburys, House of Coffees, and Russell Hobbs.

In recent years, the use of co-branding as a brand strategy has been highlighted. National retailers and financial institutions were at the forefront of expanding this brand leverage strategy. Pick n Pay and Nedbank’s Go banking were one of the first well-connected co-branded companies.

Other retailers and financial institutions followed suit and a wide range of cross-industry co-branded products were created. Examples of this cross-industry co-branding include, but are not limited to: Tiger Wheel & Tire and Hollard Insurance (tire insurance), Shoprite and Capitech Bank (money transfers), Edcon and FNB (mortgage lending), Pep Stores and Nedbank ( Pep Bank), Woolworths and Auto & General (Auto & Home Insurance). In this research, 112 retail brand professionals were contacted and their perception of co-branding strategies was measured through a structured survey (questionnaire).

The result indicated that that retail brand perceives managers as an important and effective brand leverage strategy. Brand managers indicated that for a co-branded company to be effective, the company must be a win-win company and synergy must be created between the brands. The potential for branding and sales enhancement, as well as the financial viability of the venture, are also considered when evaluating proposed co-branded ventures.

First, the study investigated the reasons why brand managers pursue co-branding strategies. Second, the study investigated the preferred forms of co-branding. The study also examined the top considerations brand managers make when choosing a co-branding partner. Finally, the study investigated the industries with which retail brand managers prefer to co-brand.

First, the research found that upselling is the top reason retail brand professionals pursue co-branding strategies. Second, the research found that brand enhancement is seen as a less important reason to pursue co-branding strategies.

The research also found that reaching new market segments is another suitable reason for brand professionals to co-brand. Brand extension through a shared new product or service offering is considered another appropriate reason for co-branding.

Brand managers indicated that co-marketing co-branding was perceived as the preferred form of co-branding. Value promotion and reach recognition co-branding were considered the second and third most preferred co-branding. Research indicates that the potential for upsell is the most important consideration when evaluating a potential co-brand partner.

The study also found that retailers view the fit between the two brands as an important consideration when evaluating potential co-brand partners/ventures. The research results also found that companies in the FMCG sector are the preferred sector for co-branding.

The results suggest that brand managers were not in complete agreement and imply that when it comes to co-branding, retailers do not have a particular preference towards sectors. When evaluating potential co-branded companies, it appears that retail brand managers place more emphasis on the potential for upsell and branding than on the industry with which they are co-branded.

It seems obvious that South African retail brand managers view co-branding as an effective and viable brand influence tool. Certain conditions and considerations were identified in this study. Perceived fit between brands is considered an important consideration when marketing managers evaluate potential co-branding (and partner) strategies.

Second, managers aim to improve their sales and reach a new or broader market segment when they pursue co-branding strategies. Third, the study found that co-marketing co-branding was considered the preferred form of co-branding and retailers also indicated that FMCG companies were considered the preferred industry for co-branding.