5 Advantages and Pitfalls of Brand Alliances

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In the search for getting that extra edge in the market place, one option for business owners and directors to consider is partnering with other organisations.

Generically this is known in business as a joint-venture. When it comes to specifically matching brands, it is known as co-branding or brand alliances.

Growing brand equity by partnering with another brand can be an attractive option for business managers looking to expand their operations.

4 Brand Partner Considerations

There are many factors to consider when partnering with another company, here are four of the main ones.

1. Recognised Brand
Both companies have to already have a recognised brand with an existing equity value. This means that they have something of value to offer each other.

2. It Makes Sense
There has to be some meaningful or logical reason for combining their products or services. They go together well.

3. Similar Company Culture
Culturally there has to be a good fit. The companies have to have similar values, capabilities and business goals.

4. Compatible Brand Profiles
Their consumer’s brand profiles also have to be compatible. That is their respective consumer bases have to share the same or a very similar set of values and beliefs.

5 Advantages of Brand Alliances

There are several potential advantages to successful joint ventures, here are five key ones.

1. Instant Expertise
It is a way of borrowing needed expertise that the company does not have the resources or intention to develop. For example when a clothing manufacturer co-brands with the company Gore-Tex for their water-resistant fibre technology.

2. Saved Investment
The investment saving can be another consideration. The partnering companies have already done their respective investment in equity, technical expertise, marketing and other resources.

3. Reduced Costs of Production
In a similar sense, it can reduce the costs of production to have another specialist firm do it. For example, the company Rolls-Royce produces engines for aircraft manufacturers.

4. Additional Revenue Stream
And ideally, the brand partnership becomes an additional revenue stream for both companies.

5. Broader Market Exposure
It can also expand the meaning of a brand by giving it new associations and broadening its’ market exposure.

5 Disadvantages of Brand Alliances

As you can imagine, it’s not all plain sailing when it comes to leveraging brand equity through co-branding ventures. Here are five pitfalls to be wary of.

1. Loss of Control
There is an inevitable loss of control over how a brand is perceived by consumers once it is associated with another brand. Customers will form their own opinions and mental associations, which may not be what either brand owner anticipated.

2. Diluted Brand Equity
There is also a risk of a brand’s equity becoming diluted through partnerships. This can happen when a brand enters into multiple alliances. A brand can lose its’ focus in the minds of consumers if it spreads itself out too far.

3. Reputation Risk
A brand’s equity value heavily depends upon its’ reputation with consumers. If a joint venture arrangement does not deliver the required quality performance levels, it can negatively impact both brand partners.

4. Management Overhead
Negotiating and managing joint ventures takes expertise and resources. Does the company looking to enter a partnership arrangement have these? Or will a brand alliance distract them from continuing to develop, innovate and market their own in-house brands.

5. Take-Over Risk
What if the brand partner is taken over by another company. How will this impact the alliance?

Summary

The potential rewards of brand alliances makes them an attractive proposition for company directors looking to grow market share, revenue streams or both.

However, there are several downside risks which make them challenging to pull off and maintain.

Source

Keller K. L., Strategic Brand Management, 4th Edition, Pearson Education Limited.


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Digital Marketing Education.
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