What is Co-Branding?

Co-branding is several companies partnering with other brands as a means to generate buzz, force reconsideration or even enter new markets. These partnerships can be a powerful tool to achieve specific brand and business objectives.

When Should You Co-Brand?

But when does co-branding make strategic sense, and what is needed to make sure you are partnering with the right brand? First, you need to have a clear objective. What are you trying to achieve from the collaboration? Here are a few examples of when co-branding could make sense:

1. Do you need help building a different brand image that is more desirable to your target?

Co-branding enables your brand to borrow equity through association with another brand. It can also create new equity for both brands. Think about Go Pro and Red Bull. Their partnership bolstered the images of both companies and reinforced the idea that they are brands that push boundaries.

2. Do you need to strengthen loyalty by enhancing the user experience in new ways?

Co-branding is an efficient way to introduce a tangible enhancement to your offer. Take Starwood Hotels and Uber, for example. By adding Uber rides as a way to earn points in their SPG loyalty program, Starwood provided a relevant value-add that further differentiated it from other programs.

3. Do you need new customers to consider buying your brand?

Co-branding allows you to showcase your brand in a new light, and convince consumers to discard previous perceptions. Look at companies Huawei and Leica. Through their unexpected partnership, Huawei was able to leverage Leica’s strong brand expertise to overcome negative associations consumers may have had about Huawei’s quality.

How to Find a Right Co-Branding Partner?

Once you have determined that co-branding is right for you, the next step is to find the right brand partner. During this process, you want to create good KARMA. That is, any future co-branding partner needs to be:

• Known– A brand that will be well recognized by your target
• Additive– A brand that brings new equities beyond what you stand for today
• Rare– A brand that is not associated with many others, so you can uniquely benefit from the association
• Matching– A brand that operates at a similar or higher price premium to bolster willingness to pay
• Attractive– A brand that is desirable enough to change your target’s purchasing behavior

“What are you trying to achieve from the collaboration?”

Our experience with Fortune 500 companies has shown that most have more brands than they need to effectively serve their customers. This is often a result of acquisitions, ingrained management beliefs and organizational silos that prevent the development of a comprehensive view of the business. Having too many brands in a portfolio means assets are underleveraged and under-resourced, leaving companies vulnerable to more focused competition. Does this sound familiar?

The solution is to identify and prioritize the most powerful brands in a portfolio, explore and select the optimal orientation for each and assign the roles and resources required for each brand to meet its objectives.

Brands vs. Brand Offerings

Unfortunately, many companies confuse offerings with brands. Offerings have a minimal level of connection with customers and can sometimes be called brand extensions. Brands, in contrast, promote an emotional connection with customers and build associations and expectations around their offerings. Examples of brands that have effectively leveraged their relationships with customers to expand their offerings include Dove (Men+Care and Baby Dove) and Tide (Tide Spin).

Step 1: Identify the Most Powerful Brands in a Portfolio

So how should marketers begin prioritizing brands in a portfolio? By looking at the strategic intent and financial performance of each.

Revisit Strategic Intent

Strategic intent usually offers the greatest insights into the future of a brand. It allows you to identify which brands have a clear, strategic role in the portfolio today, or importantly, could have one in the future too. Key questions include: Which brands have a clear target segment? Which brands have the potential to extend into other categories or markets? Which brands play a key offensive or defensive role?

Evaluate Financial Performance

Then, identify the brands that are important contributors to financial performance. Revenue figures typically help tell the story and guide the prioritization of brands from a financial perspective. For example, in a recent engagement with a leading CPG company, we found that close to 70 percent of the company’s revenues were driven by 25 percent of the brands in the portfolio. While EBITDA figures shed additional light on brand performance, they also provide input about key financial roles of secondary brands within the portfolio.

Applying both these lenses will help you identify which brands should be prioritized in the portfolio (strong financial performance and clear strategic intent), which should be rationalized (weak financial performance and lack of strategic intent) and which ones require further analysis.

The “Gray Assets”

While identifying the strong and weak brands is relatively straightforward, the real opportunity is to determine what to do with “gray assets,” those that have strong financial performance but weak strategic intent or vice-versa. The best way to understand the potential of these brands is to look at them as part of the overall portfolio, rather than as individual assets. Often, the interdependencies with other brands and the resources allocated to them or their category can explain their current performance and/or delineate their potential future role in the portfolio.

Step 2: Define Brand Portfolio Solutions

Once the most relevant brands have been identified, the next step is to establish brand portfolio solutions that respond to the needs of target customers in the market. To create these solutions, ask yourself the following questions: How are the brands aligned with customer segments? Are there customer segments that are being underserved? Are there brands that are overlapping in terms of what they offer? Are there strong brands that could expand cross-category or regionally to drive growth?

It’s true that driving commercial impact is the silver bullet in identifying the winning brand portfolio strategy. But we have found that customer preference, purchase intent, and the ability to attract new customers or increase loyalty are also metrics that can be used to determine a brand’s potential.

When you evaluate your brands and offerings as a portfolio, you may identify the need to divest brands to meet your strategic and financial objectives. This has been a traditionally difficult decision for executives, who are always concerned about the impact of giving away brands to competitors.  But consider the following: marketing behemoths such as P&G have taken significant steps to reshape their portfolios in the quest for profitable growth.

Most recently, Newell Brands announced a decision to sell off assets equal to about 10% of its portfolio, which came to about $1.5 billion of total 2015 sales. “The combination of Newell Rubbermaid and Jarden has created a unique platform for transformative value creation and the actions we are taking to reshape the company will unlock this opportunity, bringing greater investment and growth to our highest potential categories like writing, home fragrance, baby, food storage & preparation, appliances and cookware, and outdoor and recreation,” Newell President Mark Tarchetti said in a statement.

Step 3: Establish a Brand Portfolio Roadmap

Once the portfolio solution has been defined, a brand portfolio roadmap must be established to clearly outline the roles and priorities of each brand during the transition. Which brands will be invested in? Which brands will fund the growth during the implementation? What impact does this change have on the organization, both internally and externally? How will marketing investments be realigned to support the strategy?

Answering these questions requires an overarching view of the portfolio and the commitment of management teams to potentially change traditional ways of going to market. Successful efforts are often led by an empowered CMO with enough influence in the organization to make the tough decisions, and generate buy-in of the resulting brand portfolio strategy.

Organizations often have too many brands to serve their customers. An opportunity exists to do more with less by reevaluating the brand portfolio strategy.

In this series, we have laid out the marketer’s playbook for building a relentlessly relevant brand. So far, we have discussed how these brands consistently follow three critical principles: They are customer-obsessed, they know how to stay inspired, and they recognize the importance of building a culture of innovation.

Why is Pragmatism Important to a Brand?

Very few brands are able to pull off these three principles without owning a fourth–what we like to call being ruthlessly pragmatic. When a brand is ruthlessly pragmatic, it makes smart bets, takes bold steps, fails fast, and experiments consistently.

Pragmatism requires a commitment to finding and maintaining clarity across your brand’s ecosystem. When you have clarity around your brand’s vision, what you stand for (and don’t), how you want your customers to feel, employees to act, and the criteria for success, you have the blueprint through which to drive all brand decisions, strategically, tactically, and economically.

6 Principles to Become Ruthlessly Pragmatic

Being pragmatic may be the most important piece of the puzzle, but also the one that most marketers find the hardest. It’s essential because it’s the one that makes the other three possible. Using the following tenets is a good place to start when building a relentlessly relevant brand:

1. Be clear and consistent on what your brand is and is not

A strong brand vision guides every decision and action you take. When Prophet partnered with T-Mobile to help it become the “Un-Carrier” in wireless, we knew it would only be credible if T-Mobile lived up to that vision by walking away from historical practices that irked consumers, such as long-term contracts, termination fees, and predatory data plans. And it worked: T-Mobile gained 1.1 million customers after announcing the Un-Carrier strategy, quickly gaining market share from competitors.

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2. Strive for success, but be willing to fail (fast)

Brand leaders must know precisely what success looks like in every metric and key performance indicator available. With metrics in place at all levels, companies can accurately assess how well they are delivering.

Capital One conducts thousands of test-and-learn experiments and pilots every year to continue to hone in on what is resonating with customers from an offering, experience, communications, and brand perspective. It tries and limits its spending on each, succeeding or failing fast and scaling the successes even faster.

3. Empower your employees to be brand ambassadors

Creating a shared mindset across an organization enables employees to wow customers with consistent and compelling experiences. Nordstrom, Southwest Airlines, and Zappos seem worlds apart from competitors because their employee training goes beyond what to do and instead teaches how to think.

4. Have a clear, compelling message

Think about Apple, Patagonia and Disney. All three of these brands stay on message, on strategy and on-brand. They make it easy for customers to follow their plotlines and even easier for customers to want to stay connected with their brands. Clear and consistent messages lead to clear expectations, which lead to customers feeling empowered and loyal.

5. Create an experience that reflects your vision as a brand and company

The brand’s vision is a critical lens through which all business decisions should be made. Some of today’s most respected brands live this day in and day out. Think about the power of these brands’ policies and actions: Chipotle stopped selling carnitas when its sources didn’t meet its standards, eBay provides buyer protection with easy returns and money-back guarantees, and employees at Home Depot are encouraged to stay as long and as patient with every single customer as needed to make sure their home dreams come true.

“Pragmatism requires a commitment to finding and maintaining clarity across your brand’s ecosystem.”

6. Be where your customers are

One of the simplest but often most forgotten tactics, for those brands that are ruthlessly pragmatic, is that they build their brands by being there for their customers, when and where they need them, on their terms. Chick-fil-A is striving to be the brand that is creating 10 million different menus and being able to get your order to you how you want it—order online, in-store, get it delivered, have it catered, etc. They want to be present when it matters. Warby Parker found that customers still enjoy the physical experience of trying on multiple pairs of glasses, not just the five they could get by mail and are now in the process of opening some of the most successful retail operations in the U.S., rivaling Apple and Tiffany’s for sales-per-square footage. They followed their customers’ lead, replicating the best of their online experience and innovated in an “Apple-like” way to get to an in-store experience that is unique, relevant and meets customers where they are at.

Inspiration is a word companies love to throw around to describe their businesses and brands, but guess what? Most businesses and brands are not inspired or inspiring. They live in functional worlds, providing functional benefits – competing on price, features and share of voice; never truly feeling confident about their decisions.

“They surprise and delight at moments that matter, stay true to their values and turn consumers into passionate brand advocates.”

The brands that stand at the top of Prophet’s Brand Relevance Index^TM, brands like Southwest, LEGO and Starbucks, for example, are inspired brands. They strive for a higher purpose and capture our imagination. They surprise and delight at moments that matter, stay true to their values and turn consumers into passionate brand advocates. And sometimes even more importantly, they inspire the people that come to work for them every day.

5 Ways Smart Companies Find Inspiration

Look beyond your company’s walls and learn from what has worked for others.

1. Smart companies obsess about their customers and deliver what matters.

At Panera, the food is good and priced competitively, while the service is fast and friendly. But it’s the commitment to good-for-you foods—clean, simple, and healthy—that makes Panera an inspired brand. As Americans’ concerns about food and farming have expanded, Panera has led the way in education about agriculture and ingredients. (The new “No-No List” is a great example.) It has earned the credibility to cast itself in a coveted role—a trusted teacher. Customer obsession was covered deeply in our first blog in this series and remains the number one source of inspiration for companies.

2. They “thief and doctor” best practices both inside and outside their category.

We often ask the question of our clients, “If you were more like Disney or Uber or Zappos, what would you take from what they are doing to drive change in your organization?” The answers are always surprising. The best healthcare companies, for instance, aren’t just looking to the Mayo Clinic or Cleveland Clinic for inspiration. They are just as likely to be asking how they can provide amenities as luxurious as the Four Seasons, service as consistent as Nordstrom or experiences as magical as Disney. They understand that inspiration usually requires more than imitation. They infuse borrowed ideas with their own brand identity to create a distinctive offering or experience.

3. They explore their own heritage.

Consumers crave authenticity, so brand history can offer an almost endless source of lessons. We often take clients out on what we call “brand safaris” to delve into the stories of companies such as Levi Strauss and Ford Motor Co. Studying how these great American brands honor their heritage, yet still inspire customers today always sparks fresh thinking. Levi’s found its mojo again when the 529 was reinvented into the “hot skinny” jean, and Ford inspired all of us by fully reimagining its F-150. Don’t disregard the past for future inspiration simply because it’s in the past.

4. They think big and small.

Responding to large demographic changes is essential. If you don’t respect Gen Y’s demand to do everything on their phones, you won’t win. But it also means listening to the growing desire for personalization across every customer segment. That trend has inspired companies that range from Birchbox, with its curated beauty offerings, to GE Healthcare, which continues to lead the field with its innovative DoseWatch, leveraging cloud technology to individualize radiation therapy.

5. They take a stand—even a risky one—to stay true to their mission.

As a company, sometimes it’s what you don’t do that becomes the most inspirational. CVS generated a great deal of publicity for its decision to stop selling tobacco products and was in the news again when it resigned its seat on the U.S. Chamber of Commerce over the group’s pro-smoking stance. And it did so without apology: tobacco use conflicts with the company’s commitment to helping people on their path to better health.

Today’s consumers are experts at ignoring the tens of thousands of brands that don’t interest them. But for their favorites, they go above and beyond what “rational” people do. What makes these rare brands—stalwarts such as Apple and Starbucks, or emerging favorites such as Stitchfix and Snap—stand out from the competition?

These brands, as noted in our Prophet Brand Relevance Index^TM, have made it their mission to continually find new ways to engage and delight customers. We call these relentlessly relevant brands. These brands religiously commit to four big principles: customer obsession, distinctive inspiration, pervasive innovation and ruthless pragmatism.

In this blog, we’ll look at the first tenet: Customer obsession.

It’s The Customer’s World; Brands Are Simply Living in It

Today, customers respond to brands that respond to them. It’s not just about what they buy, it’s how they buy it; getting what they want, how and where they want it. And they want to buy from brands that “get” them. Brands that fail to embrace a profound customer-centric “outside-in” approach are at risk of being quickly dismissed and overtaken by challengers, potentially overnight.

Building a relentlessly relevant brand begins with adopting a customer-obsessed mindset. Being customer-obsessed requires a pervasive focus on not just what customers want, but brands must also gain a greater customer understanding, and especially, empathy for what is important in customers’ whole lives, not just the narrow slice where brands interact with them. It is with this view that a brand can make itself relevant in the moments that matter.

Three Simple Steps to Customer Obsession

1. See your customers as people, not transactions.

Most marketers approach customer insights by asking, “What will it take to get our customers to buy more?” They are using a transactional lens, making their focus too narrow. They are listening to customers but not really hearing what’s important: what customers are saying to each other online, on social media, in reviews and in context with the greater world around them. This leaves most companies deaf to the deeper conversations that can reveal opportunities to build true and profound relevance with their customers. Marketers need to understand a complete view of their customers’ world in order to gain more attention, intention, and engagement.

Marketing agility will be a term you will hear often over the next few years, forcing marketers to move from broad to focused and back again, allowing them to truly understand the whole customer, and giving them the power to inspire breakthrough innovation rather than incremental progress.

Let’s take Netflix, for example. This brand has reshaped its category by embracing customer obsession and becoming an indispensable part of customers’ lives in 50 countries with nearly 33.3 million subscribers worldwide, according to Statista. Netflix built its success on developing a keen sense of what people love to watch and how they love to watch it. The micro understanding of customers is delivered through hyper-personalization and recommendations based on behavioral algorithms.

Customer obsession allowed Netflix to create the category breakthroughs that traditional media never thought was possible. Unlike traditional media, Netflix understood its customers’ hunger to binge-watch new TV series and pivoted its content release strategy. It wasn’t long before HBO, Amazon and Hulu followed suit.

2. Seek common ground and shared interests with customers.

Most marketers approach brand building by asking, “How can we differentiate from our competitors?” Customer-obsessed marketers understand that brands have the power to create deeper connections and motivations by finding common ground – shared interests between what matters in their customers’ lives and what they do as a company.

Facing a heavy-hitting competitive set, GoPro set out to be an adventurous lifestyle brand that made technology products, rather than a tech company marketing to athletes. It created products specifically designed to equip adrenaline junkies for whom the sharing of their stories from adventures in surfing, snowboarding, sky-diving and auto racing was almost as important as doing them. GoPro ignited its customers’ desire to capture their own epic feats and bring family and friends along for the ride.

With user-generated content pouring in, the customers themselves became the marketing engine to build the brand. And it worked: The company increased its marketing cost by only $41,000 in 2013 but made $28 million more in net income than it did in 2012.

3. Embrace the change your customers demand.

Most marketers ask, “How can we sell customers what we’ve got today?” Customer-obsessed brands welcome change because they understand maintaining relevance means thinking dynamically and staying nimble to anticipate customer demand. Customer-obsessed marketers seek to anticipate where the puck is heading by asking, “What will our customers be looking for next, and how can we deliver?”

Customers’ needs and attitudes will inevitably shift, and competitors will attempt to emulate other brands’ success. Customer-obsessed brands anticipate the need for change by more actively sensing what is changing in what customers value. This obsessed focus on what’s changing in customers’ attitudes will allow brands to lean forward and act with an agile mindset, ahead of their competition.

LEGO’s focus on being customer-obsessed has enabled it to continue building relevance by imagining new possibilities for kids and their parents. Dubbed “the Apple of toys” by Fast Company, the Danish toy company knows a lot about the future of play. LEGO’s Future Lab analyzes massive amounts of global data and conducts deep ethnographic research to understand what’s next. Its diverse product portfolio has grown to keep builders engaged as they grow.

When LEGO faced increasing competition from digital entertainment, it successfully partnered with Harry Potter, Star Wars and Ninjago to keep customers engaged. LEGO puts customers at the helm of their own innovation with LEGO Ideas–an online community that invites builders to submit their own ideas for the next LEGO set. The community votes to pick their favorites and LEGO selects winners to create actual products, giving the inventor a portion of sales. With storylines, characters and humor that entertains kids and adults alike, LEGO proves when it comes to creative play, their brand will be relentlessly relevant.

Being customer-obsessed requires a pervasive focus on not just what customers want, but brands must also gain a greater customer understanding, and especially, empathy for what is important in customers’ whole lives, not just the narrow slice where brands interact with them.

This post originally appeared on CMO.com.