MIT Sloan Management Review

Marketing

Brand Alliances as Signals of Product Quality

By Ashkay R. Rao and Robert W. Ruekert

October 15, 1994

WHEN TWO OR MORE BRANDED PRODUCTS ARE INTEGRATED, LIKE IBM AND INTEL OR BACARDI RUM AND COCA-COLA, THEY ARE perceived as linked, or jointly branded. The authors present a rationale for why such alliances may sometimes be an appropriate strategy. They develop a managerial decision template to analyze the costs and benefits of joint branding, and discuss the implications of such decisions for different types of allies. They conclude by calling for multidisciplinary empirical examinations of brand alliances.

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  • In 1988, Sunkist received royalties worth $10.3 million by licensing its name for use on such diverse products as soda, candy, and vitamins.
  • Goodyear claims that their tires are the recommended component of Audi and Mercedes automobiles.
  • Konica advertising has emphasized that corporations such as US Air and Kemper Securities use Konica copiers.

What do these recent developments in the brand management arena have in common? First, they suggest that brand names — such as Sunkist — are valuable monetary assets that can be traded. For instance, when Kraft was purchased by Philip Morris at a price of over $13 billion (more than 600 percent of its book value), industry observers noted that the monetary value of the brand name (not captured in a balance sheet) was probably worth a considerable sum.1 Second, perhaps because brand names are valuable assets, they may be combined with other brand names to form a synergistic alliance in which the sum is greater than the parts. Thus the joint promotion of Goodyear and Audi, or Konica and US Air, represents attempts by one or both brands in the alliance to secure corporate endorsements that will improve their market positions. Such activities may involve physical product integration, in which one product cannot be used or consumed without the other (in the case of IBM and Intel), or may simply... To read the complete article, login or sign-up using the form below.

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