The appliance of brand alliance
Article Date: Mar 31 2006
Prizes and pitfalls
One market where tensions from co-promotion deals between companies frequently come to the fore is the drug industry, a sector where brand alliances in various forms are a familiar feature. Industry analyst Edwin Colyer says these deals provide a route for companies seeking to break into important markets, such as the USA, where commercial muscle can be crucial.
According to Datamonitor, between 2001 and 2003 there were 69 pharmaceutical companies involved in co-promotion agreements, where two companies promote a product under a single brand, such as the ‘Levitra’ alliance between GlaxoSmithKline and Bayer. During the same period, 33 companies signed co-marketing deals, using different brands for the same product.
Arguing that alliances in the pharmaceutical industry are a ‘necessity’, Colyer points out that smaller companies will often join forces with medium-sized competitors to cover ‘the large and increasingly competitive’ US market. But, though initially popular, these deals require careful management and can be beset with difficulties.’
Within five years, says Datamonitor, some 60 per cent of pharmaceutical co-promotion deals fail. Analyst Linda McNamara says the first two years of a deal are key, which is an observation that can be applied to alliances in most sectors. That is the time when the companies involved are most focused on co-operation and maximising revenues from the agreement.
Later on, however, attitudes can change, especially when initial sales growth flattens off. ‘Often the smaller partner, or the one receiving a smaller share of the revenues, wants more ownership,’ argues McNamara, ‘and it is then "encouraged", shall we say, to step away from the deal.’
Other observers suggest some of the friction between alliance partners is the result of poor ‘brand control’. When two companies are trying to sell the same product, says Colyer, ‘they have to say the same things. Mixed messages can seriously damage a brand’s success.’
A gaggle of gurus
Some large companies have even set up alliance management teams, but others fear these can be unwieldy and bureaucratic, with accountants and people not involved in creating the alliance wielding undue and often obstructive influence. Critics argue that, under co-promotion, decision-making becomes slower and the brand itself can grow weaker over time.
Most analysts agree the participants in any brand alliance should sort out as many of these potential problems at the very beginning. Says one: ‘As long as the brand strategy comes first, it should not matter who sells the product and how. It doesn’t bother Coca Cola how many different companies sell its wares.’
Some consultants have taken things further and examined the success of ‘multiple brand alliances’ between more than two partners. Here, recent surveys suggest that, although a single alliance can significantly increase perceptions of quality, pleasure and usefulness of a brand, a ‘second ally’ does not really increase them any further.
It seems experts abound in the world of brand alliances, many drawing on experiences in the US market, which is the source of most modern lore on the subject. Apart from ICLP, Teamspirit and Carruthers Coleman Priest, there are countless online brand consultancy groups, such as Marketing Interactive UK, offering advice on strategic alliances.
Elsewhere, Allergis Associates describes itself as a ‘strategic brand communications alliance’, offering its expertise to businesses and professional practitioners. Practised players, such as Mediazest’s Reel (see box left), can no doubt make up their own minds about the do’s and don’ts of alliances, but others might find it helpful to tap into the know-how some of these people claim to provide.
Case Study - A zest for alliances
One entrepreneur who is busily engaged in building up his London-based business on the back of alliances with world-famous brands is Sean Reel. A former executive of Boots’ healthcare division, he re-launched its Optrex brand 20 years ago and put the red spot on packets of Strepsil throat lozenges. He is now managing director of Mediazest, a young company that provides innovative digital in-store devices and events to grab the attention of a generation of shoppers growing blasé about TV and radio ads, poster displays and magazine promotions.Mediazest has the worldwide licence for ‘whispering windows’, which reinforce digital displays with voice and music apparently not coming from speakers but seeping from the windows themselves. Reel claims this device achieved a 40 per cent sales increase when introduced into parts of London department store Peter Jones.
Over Christmas, shoppers at German branches of troubled C&A retail chain could use the Mediazest kit to vote for what the lingerie models would do next. Another product is ‘directional talking cardboard’, used in one application for printed menus that can talk to restaurant customers about the special dishes of the day.
The company has formed two types of alliance. With clients such as Motorola, HMV, Nike, Pernod, Sainsbury and Apple, Reel argues Mediazest can boast a string of formidable ‘brand champions’, whose own promotional activities are sufficiently original to focus attention on Mediazest as supplier.
Many smaller companies are in the position of having to follow the lead of much larger brands, he maintains. But, thanks to the efficacy and innovative nature of Mediazest’s technology, Reel contends it is not dependent on any one of these champions and can ally its brand with theirs on more equal terms.
He says this has resulted in several business propositions from the likes of his old company Boots, Procter & Gamble and others, ‘without us having to do any business-to-business marketing at all’. On the other hand, Mediazest has forged formal alliances with 3M UK, a leading technological group in the fields of consumer and commercial display and graphics. This gives it access to content management, helping to tailor its displays more exactly to different stores and localities.
Reel believes allying the company’s brand with such a prominent player has enhanced Mediazest’s credibility as a ‘one-stop shop’ in the sector.
