Co-branding occurs when two different companies pair their brand names in a marketing context. This could include new or revived products, services or ventures as well as advertising or distribution outlets. The tactic of co-branding has been rare in the luxury goods sector mainly due to the high level of competition and brand protection among luxury brands. It is however currently gaining acceptance and popularity.
The attempt at co-branding is believed to have been started by haute couture designer Pierre Cardin in 1959, through his attempt to fuse luxury fashion and mass fashion. He fused his then highly luxurious brand name with then supermarket Printemps, where he presented his first prêt-à-porter collection to the shock of the world of high fashion. As a result, he was expelled from the French fashion governing body La Chambre Syndicale and was regarded as a sell-out.
Fast-forward to 1987 and venerable Japanese luxury fashion designer Yoji Yamamoto designed his first sportswear collection for Adidas under the brand name Y-3. This generated a buzz in the fashion press and several 'analysts' tried to understand the motive behind the collaboration apart from the commercial gains. This action was promptly termed the 'commercialization of exclusive fashion'. The partnership remains in existence and has broadened to a product range including apparel, footwear and accessories. Adidas is also collaborating with Stella McCartney in designing stylish but functional sportswear.
In the autumn of 2004, however, something groundbreaking happened in the fashion-branding arena. Respected and often revered king of the catwalk and creative director of Chanel and Fendi, Karl Lagerfeld designed a limited edition collection for Swedish mass-fashion brand H&M. Lagerfeld's reason for accepting this one-off collaboration with H&M was his desire to bring high fashion to normal people. His designs turned out to be a hit among consumers worldwide and a retail innovation for H&M. Several items in the collection were sold out within hours of their launch. H&M also experienced same-store sales increase of 12 per cent in the first month following the launch, and also higher profits.
A repeat episode occurred in the autumn of 2005 through another one-off design collection for H&M by Stella McCartney. This time, there were reported queues in front of several H&M stores all over the world, the night before the collection's launch. Some consumers were even injured in the frenzy and near-fights that ensued in the stores. Needless to say, this collaboration was a huge success not only for H&M but also for Stella McCartney who launched her high-end brand just five years ago. The third collaboration is with Viktor & Rolf in autumn 2006. H&M has also indicated its interest in working with other luxury designers.
Other examples of co-branding abound between luxury brands and other brands. Puma, another sporting goods brand, has collaborated with Japanese designer Mihara Yasuhiro in shoe designs; supermodel Christy Turlington in yoga wear through the Nuala sub-brand name; Richemont-owned Shanghai Tang in footwear through another sub-brand called Shanghai Tang Peony, and more recently in spring 2006, Alexander McQueen to create men and women's sports footwear. In addition, American music star Sean Combs signed a deal in 2004, to collaborate with Estee Lauder in the production of a fragrance line. Prada has also co-designed jewellery with Fred Leighton, the first between a jewellery company and a fashion brand. Jewellery brand Tiffany also hosted a first-ever fashion show in New York in September 2004 showing the designs of clothes designer Behnaz Sarafpour. In 2005, hosiery company, Wolford collaborated with luxury designers Zac Posen and Missoni to design a limited edition range of tights collection. Also in February 2006, American supermarket Target launched an accessories collection by British high fashion designer Luella Bartley.
There have also been co-branding activities between luxury brands and companies in the non-luxury sector. For example, British designer Ozwald Boateng redesigned the charge card of Coutts bank, United Kingdom as part of its re-imaging project in 2004. Alexander McQueen also created a new version of the American Express Centurion exclusive credit card as part of its fifth anniversary in 2004. Remarkably, Giorgio Armani designed a limited edition CLK for Mercedes-Benz in 2003 and Emilio Pucci linked up with Champagne and fine wines brand Veuve Cliquot in summer 2004 to create a limited edition packaging design for Cliquot's La Grande Dame 1996 vintage wine. Also in 2004, LVMH owned Moet & Chandon teamed up with Swarovski to design an edition of the champagne bottle decorated with Swarovski crystals. Versace also recently collaborated with private charter airline TAG Aviation to redesign the interiors of its airplanes.
In addition, Coca Cola and luxury cosmetics brand Shisheido have signed a deal to create a health drink and a new cosmetics and drinks brand. Kate Spade also took the co-branding exercise beyond the fashion arena by collaborating with stationary company Crane & Co. to create personalized stationery and wedding invitations, which were launched in January 2006. Also designers Versace redesigned the limited edition version of the Nokia 7270 mobile phone in 2005, while Dolce & Gabbana designed a limited edition version of the Motorola V3i Gold in 2006. In addition, designers Christian Lacroix, Philippe Starck and Nicole Farhi collaborated with Danish pedal bin company Vipp between 2005 and 2006 to design a special collection of bins, which were auctioned for charity. The list goes on . . .
The important strategic questions related to co-branding are the following:
What is the tactical objective behind these collaborations and what implication do they have for individual luxury brands and the luxury goods sector as a whole?
Co-branding is a new phenomenon that indicates the departure of luxury brands from the core single-brand strategy. This co-branding strategy was previously termed 'controversial and risky' and was generally unacceptable until this decade. It was viewed as having a potentially negative impact on the 'luxury' and 'exclusive' image attributes of luxury brands. However, the changing luxury market environment and democratization of luxury are factors that co-branding addresses in addition to providing competitive leverage for the brands.
There are four major methods of co-branding for luxury fashion brands:
1 Co-branding among luxury brands such as between Swarovski and Moët & Chandon.
2 Co-branding between luxury brands and mass fashion brands like Karl Lagerfeld and H&M, which has generated much discussion and analysis.
3 Co-branding between luxury brands and celebrities such as the collaboration of Sean Combs and Estee Lauder; and Samantha Thavasa and Penelope Cruz.
4 Co-branding between luxury brands and companies in other categories of goods such as Alexander McQueen and American Express.
These types of co-branding are increasingly gaining acceptance among luxury brands. However, co-branding should be approached cautiously as it could have adverse affects on the brand image and brand loyalty. The effect of co-branding on the consumer ought to be paramount in decisions concerning this strategy. The following tactical guidelines are essential in developing co-branding strategy in the luxury sector:
• There must be a strategic purpose behind the co-branding activity. In other words, brands shouldn't team up without a concrete and significant reason. When H&M collaborated with Karl Lagerfeld and Stella McCartney, it was to address the consumers' changing needs and expose them to luxury fashion in anticipation of 'trading up'.
• The co-branding should be a win-win situation for the brands involved. Again, the H&M venture had the advantages of endearing mass fashion consumers to luxury designs and embracing mass fashion brands as complementary brands of luxury brands rather than being viewed as competitors.
• The collaboration should be controlled through a limited edition or a one-off collection. Karl Lagerfeld's design for H&M was a thirty-piece one-off collection. This retains the luxury aura of Lagerfeld, which extends to his own brand and the luxury brands he designs for. It also ensures that H&M is not misinterpreted by the consumer as a luxury brand, which is not the company's objective.
• There must be a clear synchronism between the brands in the co-branding process. Co-branding sometimes involves two brands with different brand associations. However, the target audience must understand these two brand messages and be able to see their joint benefit. This benefit must be favourable otherwise the exercise is pointless.
• The co-branding activity must increase the brand equity of the brands involved. Brand equity is the effect of brand knowledge on consumer response to the brand. One of its sources is brand loyalty, which is a result of a psychological process of affiliation and attachment with a brand. Co-branding should be designed to increase this element in consumers.
Finally, to ensure the success of co-branding, the brands involved in the venture must communicate the co-brand promise and its differentiated features in a clear and consistent manner. The brands ought to also enhance the esteem and loyalty of the customer groups.
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