The appliance of brand alliance
Article Date: Mar 31 2006
Aligning your growing company with a larger, well-known operation can reap rewards beyond your wildest dreams. Just make sure you read the small print and remember the ups and downs of getting a helping hand from a big brand.
Brand images vary widely in the messages they convey to customers, and this variety is often size-dependent. An existing large brand may suggest reliability, power, skill and trustworthiness, while a smaller, newer one might imply inventiveness, daring, imagination and unorthodoxy. When trying to strengthen and grow a business, companies in either camp may sense that an association with the other will work to their advantage.
Benefits for both parties
Brand alliance is, of course, not a new business strategy. Companies from a host of sectors, from airlines to pharmaceuticals, have at one time or another sought to put themselves on the map through brand alliances. Stuart Evans, of ICLP (formerly International Customer Loyalty Programmes), says, ‘If a lesser-known, smaller brand wants to enhance its presence and awareness, it can do worse than align itself with a well-known brand.’ In his view, the advantages include, ‘inheriting the brand values of the larger organisation, its marketing clout and media spend’, and the ability it gives the smaller partner ‘to hit way beyond its sphere of influence’.
Jo Carr, director of financial services marketing agency Teamspirit cites the classic example of Intel, which used to be a relatively junior player in the computer sector until it formed an association with the pervasive IBM brand. Today, Intel is a multibillion- dollar enterprise, the world’s largest electronic chip-maker and a major supplier of computer networking and communication products.
As Carr puts it, ‘Intel was clever enough to form associations with larger brands but without losing sight of its own brand identity. What made it so successful was that the tie-up was part of a broader brand story. The narrative made sense to both Intel’s and IBM’s customers.’
So it seems the benefits of alliances can work both ways. From testing different potato crisp brands with consumers in the USA, brand marketing guru Martin Lindstrom found that the tests boosted approval ratings of little-known brands even more than famous brands. The impact of a new name on consumers was significant, which is something an existing famous brand could benefit from by association.
Preparation and compatibility
Making sure alliances work to your benefit, as planned, can be an arduous undertaking. ‘If an obscure brand teams up with a famous brand,’ Lindstrom argues, ‘it can increase sales and dramatically improve both brands’ images.’ But, he points out, alliances between well-known and little-known brands have ‘value and limit risk’ — a ‘constant eye’ must be kept on maintaining both brands’ quality of product or service.
Drawing on experience with brands such as Yellow Pages, Mercedes Benz and American Express, he believes a high proportion of brand alliances founder because of inadequate homework and preparation. Some are less formal than others, but all need proper agreements to protect both parties. Sorting out and maintaining agreement on financial contributions and target returns is vital.
Risks and rewards
If brand alliances can really bring big rewards and enable young companies to piggyback on the reputations of larger groups, it’s not surprising that practitioners in the world of brands have strongly differing views about how likely they are to work.
Trying to ensure a larger ally handles your brand in the way you want, neither distorting it nor forgetting about it, can present a formidable challenge. ICLP’s Evans warns that all brand alliances have risks associated with control. ‘The smaller brand will often experience a loss of control, as the larger one will generally take the campaign in its direction,’ he says. And it’s crucial to ensure that, for example, an established group whose brand you might one day challenge does not try to use a brand alliance as a way of limiting your growth and keeping you in check.
In Evans’ experience, ‘Alliances tend to be tactical rather than strategic. The smaller brand runs the risk of being further back than square one if dropped.’
He urges careful consideration before entering into an alliance. The benefits can be great to both brands, but, he maintains, ‘The negatives can outweigh the positives — 80 per cent of the effort in negotiating an alliance is dealing with contingencies for when it falls apart.’
Even if the participants have different end goals, it’s vital those aims are mutually compatible to avoid a power struggle. Ian Priest, founding partner of ad agency Carruthers Coleman Priest, argues that only alliances between equals work well. ‘The synergy between brands like 02 and Samsung [in the mobile phone field] is obvious: both are large multinational companies, in the same sector and with similar brand values.’
But it is a different story, he maintains, when burgeoning brands try to ally themselves with more powerful heavyweights, ‘believing that the latter will sprinkle some of their magic on the former. In reality, the smaller brands often become confused about their identity and lose their individual brand strengths, which makes it a dangerous game to play.’
Teamspirit’s Carr points out an altogether different danger in brand alliances – that of the smaller partner stealing a march on the larger. ‘We could be about to see bigger brands becoming wary of joining forces with smaller, innovative brands. Small brands are entrepreneurial, move fast and can be very compelling to customers. If the tie-up is right, they can steal the show.’
