Hand in Hand

So you have set your sights on dominating a particular consumer market segment -- say the 30-something households? Like most companies, you have conducted extensive market research to determine brand awareness for your target market. But, to your dismay, you discover that your brand scores lower than the competition's for coverage and voice quality. In marketing, where perception is everything, this is not good news.

Aside from investing in new technology, you have several choices related to branding. You can launch a multilevel marketing campaign to include TV, print and multimedia efforts. Although it is possible to boost brand awareness through these efforts, it is enormously expensive and can be an unsure and lengthy course. In a world where well-established brands, such as McDonalds, require millions of dollars a week to maintain brand awareness, gaining brand awareness can be even more expensive. And it is not always successful. Case in point: Many people instantly recognize the pink, drum-banging, battery-powered bunny but cannot correctly name the battery manufacturer associated with that campaign.

Or, you can consider re-branding. You know, the Sears/Whirlpool/Kenmore scenario, in which Whirlpool manufactures Sears appliances that are re-branded as Kenmore. You might be able to sell additional service under a different name, but your real objective is to establish awareness for your brand. So, scratch this option.

A third option that is rapidly gaining in popularity is co-branding. We have seen this with computer manufacturers and the neon space-suited Intel dancers using the tagline "Intel inside." Intel and many computer manufacturers see co-branding as a viable solution because Intel has the cachet of speed and power. Through cooperative ad dollars and initiatives as simple as Intel stickers on CPUs and shipping boxes, Intel sells its processing chips and gains market share, and the companies that want to piggyback on Intel's reputation also gain market share. It is a win-win situation, and it's not as expensive or time-consuming as any of the other options.

Instant Facade Co-branding is becoming a viable method for expanding market presence in the wireless telecom industry because it fits a market that morphs with the capriciousness and speed of a shape-shifter. Instantly, a company can acquire the kind of facade or outer appearance it needs to compete in a given market.

For example, let's say that you want to capture the 20-something market by making the wireless phone the next electronic fashion accessory -- much like the pager or CD player. So you decide to co-brand with a handset manufacturer that makes phones with neon colors, sci-fi-styled ergonomics, holographic images and whatever attributes appeal to the Gen-X user.

Next, you run co-op campaigns that suggest that the wireless phone is a "cool phone that allows you to call your friends to go shopping at the mall" or "the same phone used on the X Files." You co-sponsor events like Third-Eye Blind or Smash Mouth concerts, and you garner celebrity endorsements from people like Leonardo di Caprio and Claire Danes, or any other icon for that generation. You use whatever unique selling point or central concept that will push your phone in that market, and you do it with co-op dollars.

Sounds great in theory. But exactly how does co-branding work? Following are some guidelines on choosing and managing a co-branding effort.

First, consider the demographics of your target market. Analyze brand awareness and buying habits of the target audience for your product and similar products.

Second, determine which companies carry the market strength you need to gain market share for your target market.

"In the decision to co-brand, we chose the leading manufacturer of consumer electronics: Sony," said Tom Murphy, a Sprint PCS spokesman. "Whereas we knew we had the strength of the Sprint brand awareness for the quality of our network, we wanted to co-brand with Sony for the strength of their brand awareness in electronics. From a retail level, the consumer is buying an electronic product, and Sony carries the reputation for a high-quality electronic product."

Don't Be Overshadowed In other words, choose where you want to go with your product, and select a company that carries the right image for your target. Another initial consideration, according to the experts: Don't hook up with a co-branding partner that overshadows you.

You want a co-branding partner that ranks closely to or slightly higher than your own company in overall brand awareness. If there is a large discrepancy, decide whether that discrepancy is to your advantage. Depending on the goal and the relative rankings in focus group or market surveys, you may chase the handset manufacturer, or the handset manufacturer may pursue you.

Third, consider what each side brings to the table. Co-branding is unlike a partnership in that the parties involved do not share development or distribution costs. However, both sides do support brand awareness development and product support. So, what should you look for in a handset manufacturer in a co-branding effort? Put simply: Product support.

"There are several tangibles," said Richard Siber, Andersen Consulting worldwide managing director for the Wireless Consulting Practice. "Beyond the co-operative dollars committed on each side, you are looking for strength in distribution channels, information technology or knowledge capital developed through database marketing, excellent vendor relationships and a commitment to an aggressive increase in volume."

Then you get into the more intangible elements, such as influence on product-line management, Siber said. For example, on the retail level, you need to consider a co-branding partner that can hold its retail space.

"Retailers measure return on investment by turnover and from this develop a dollar value per square foot," he said. "This dollar value will vary throughout the retail store depending on the items sold in that area; the cost, the margin and the footprint all play a role."

What the retailer ends up with is a blended average dollar amount per square foot.

"If a manufacturer's products tend to carry a store and result in a higher blended average dollar, it will be very difficult for another manufacturer to come in and demand more floor space for their product," Siber said.

The bottom line is choosing a partner that can hold its retail space. You don't want your product shuffled to the back of the store behind the vacuum cleaner bags. Of course, this issue can be sidestepped, as Sprint PCS has with its store-within-a-store concept with Radio Shack. This, too, is considered co-branding and has allowed Sprint PCS to gain automatic center stage in a strong retail environment. According to Murphy, Radio Shack is the largest vendor of consumer electronics in the United States. Many consider this move to be brilliant, especially when the consumer often is confused by multiple messages in the marketplace. The consultative selling approach and clearly defined product line simplifies the process for many consumers.

Strong Product Support Bob Dismore, PrimeCo director of subscriber equipment, said PrimeCo looked for a handset manufacturer that could demonstrate strong product support in terms of independent advertising and co-operative advertising.

"We want to see a strong product-marketing strategy," Dismore said. "Our co-branding partner, Qualcomm, has demonstrated just that through a strong independent and co-op campaigns, as well as their presence at Qualcomm Stadium at the recent Super Bowl."

PrimeCo works in a coordinated manner with Qualcomm so that all product information -- from the pictures and logos on the product boxes and shipping cartons to the pictures in the user manual -- all support the same information and the same brand image.

"We also looked for the ability to share data and further develop our database marketing efforts," Dismore added.

For example, PrimeCo discovered through its customer service center that users wanted to be able to sort the phone book menu alphabetically as well as numerically.

"I found that on my own handset, with the numbers listed numerically, I had the same number listed three times," he said. "So, we shared this user feedback with Qualcomm, and they adjusted the software accordingly."

Another example of upgraded service based on a co-branding arrangement is PrimeCo's plan to deliver roaming lists over the air (OTA). As the demand for roaming increases, more and more users are taking their phones to retail stores to have the software upgraded.

"In a few months, these updates will be OTA," Dismore said. "Again, this was an enhancement inspired by user feedback and developed in cooperation with Qualcomm. I think it is important to work with a co-branding partner that sees this as a co-operative development effort."

Mark Lowenstein, The Yankee Group vice president of wireless research and consulting, also suggested looking for a co-branding partner that can provide product differentiation as a means of brand-building efforts.

"Ericsson had tremendous success in their fourth quarter with their James Bond campaign, showing actor Pierce Brosnan using an Ericsson phone in the movie, Tomorrow Never Dies," Lowenstein said. "Carriers and handset manufacturers alike realize that with digital, there is a need to sell the phone, meaning that with cellular the phone was a penny or a dollar or even free with activation. With digital, the marketing message must convey the value, the technology and the overall appeal of the phone. This factor and several others are going to create an ongoing trend toward co-branding, as carriers and handset manufacturers jockey for position."

Sprint's Murphy stressed the importance of reviewing the product-marketing strategy and advertising schedules of the handset manufacturer.

"We had great success with the Samsung promotion in the fourth quarter," he said. "All of this was part of Samsung's product-marketing strategy and one of the reasons we are co-branding with them. Samsung is investing strongly in promoting their product."

Pete Skarzynski, Samsung vice president of sales and marketing, noted that while Samsung has a 40% market share worldwide in wireless handsets, the company is relatively new to the U.S. market.

Mutual Benefit "Consumers have heard of us, but there are opportunities for growth," Skarzynski said. "By co-branding with Sprint PCS, we are able to mutually benefit. We offer Sprint PCS a fast time-to-market product-development cycle and diversification by distribution channel."

Samsung also is investing $10 million in advertising, both independent and co-op, according to Skarzynski.

"To add even more value, we help identify new trends and opportunities for our carriers, which include Sprint PCS, Ameritech and AT&T Wireless, based on how that carrier wants to position the product," he said.

For example, Samsung is discussing with some carriers the possibility of using the Internet as a distribution channel.

Iain Gillott, director of telecommunications research for IDC/LINK, sums it up best: "Co-branding leverages the brand awareness for both the carrier and the manufacturer, and allows for increased brand-building in new markets. Although many still confuse co-branding with re-branding or partnerships and mergers, it has predominated the wireless market because it can be rapidly deployed, is relatively less expensive than other methods and is infinitely mutable. Given the competitiveness and the rapid change in the wireless market, co-branding makes sense."