Brand collaboration & extension in the handset market

When Benjamin Holt and Daniel Best merged their respective companies in 1925, to form The Caterpillar Tractor Co., would either of them have believed that at the beginning of the 21st Century, the Caterpillar brand, would also be used on a range of footwear and subsequently clothing?

The leap from tracked diggers & dumper trucks to boots is a remarkable extension of the brand, but it both makes sense and works. It does so, because of the transferable values of the master brand and strong consumer associations with the values of durability and toughness.

As a growth strategy, extending a brand into new product categories is an obvious candidate for consideration; however such a strategy is not always feasible, either for financial or brand reasons. In such cases, businesses may chose to collaborate with another brand, leveraging their respective strengths for mutual benefit. Numerous examples exist within the Automotive Industry, of such collaborations, at both a Design and Functional level.

The relationship between Peugeot and Pininfarina, is a powerful example of Design collaboration, used to enhance a product proposition. Their relationship dates back many years, but in our view, reach a pinnacle, with the launch of the Peugeot 406 Coupe, in 1997. Designed by Pininfarina, the 406 Coupe used many of the styling cues, from Pininfarina’s work on Ferrari’s road cars. As well as winning numerous design awards, the 406 Coupe, benefited from the positioning it generated as “the poor mans Ferrari”.

Functional collaboration in the Automotive Industry, usually focuses on performance enhancement and results in such vehicles as the Vauxhall – Lotus Carlton (otherwise know in mainland Europe as the Opel – Lotus Omega), and more recently the Mercedes – McLaren SLR. The sport/racing brand usually provides the knowledge and technology necessary, to implement significant performance enhancements, in the vehicle of the volume manufacturer. This kind of relationship has potential positive effects for both brands:

  •  Bolster the performance image of the Volume Manufacturer’s vehicle, through association with a sport/racing brand, providing a top of the range performance solution, targeting a new customer segment and a halo effect on the remainder of the portfolio.
  • Provides an entry platform for the Sport/Racing brand, into their own portfolio or diversification into a vehicle configuration, with which they are not normally associated. In both cases allowing them to address different segments.

As the telecommunications market matures and businesses look for growth strategies, we are beginning to see similar behaviours amongst handset vendors. Existing players are beginning to collaborate with non telecommunications brands, in order to sub segment their product offering or strengthen their proposition. We are also seeing the first attempts by brands, without consumer electronics backgrounds, at entering the market. As in the Automotive Industry, these are driven by Design and Functional oriented product developments.

The Mobile Fashion Statement: As penetration rates rise, we are seeing a trend amongst some segments towards a more fashion oriented mobile phone purchase. This trend was first exploited by the introduction of “pink” phones. As consumers become more sophisticated in their choices, the trend is starting to be further exploited through a number of high profile collaborations between handset vendors and fashion brands, i.e., Motorola – Dolche &Gabbana; Nokia – Kath Kidston; Samsung – Ted Baker; LG – Prada. Although these collaborations have been successful in driving sales of handsets, the brand impact is usually biased towards the fashion partner. For example nobody refers to the LG Prada HE850, as it is invariably known as the “the Prada Phone”. Indeed when journalists write about the fashion phone market, they talk about Prada, Ted Baker and D&G having launched phones.

Possibly the weakest example of design collaboration, we have seen to date, is the Fly – Hummer HT1. In our view this collaboration fails to deliver for three reasons:

  • The HT1, which is an expensive, mid specification camera phone, is pre packaged with exclusive Hummer videos, ring tones and is available in the same yellow as the vehicle. However, other than these minor cosmetic elements, the product is simply a re-skinned version of an existing Fly product, and does not incorporate any of the Hummer design elements, or transfer any of the rugged values associated with the vehicle.
  • The Fly Mobile brand positioning is around the supply of high specification, high quality products at an affordable price. The Hummer HT1 shatters this positioning.
  • The Hummer brand is not held in high regard, indeed amongst motoring journalists it is universally ridiculed. The target audience is usually described as minor celebrities, footballers and would be gangsters (or collectively people with more money than taste). The HT1 doesn’t have the “bling” to appeal to the Hummer target audience.

This may explain why Fly Mobile, does not market the HT1 in the UK, instead focussing on Russia, India and other developing markets.

Interestingly Levi, soon to be followed by Tag Heuer, has taken the brand extension route, as opposed to collaboration, licensing their brand to Modelabs of France. The launch of an own brand series of products, means they take all the brand risk themselves.

The Mobile Function Statement: In our view, the most exciting developments have been in the cross over of brands into the telecommunications market, based upon brand equity in their core market, which deliver significant functional benefits in the telecommunications market.

Amongst the major handset vendors, Sony-Ericsson has focused on this functional brand extension, choosing to utilise the Sony Walkman and Cybershot brands, in order to strengthen their music and camera phone proposition. This in our view is an unsurprising winning formula, given the shared Sony heritage. There are however, two less obvious examples that are worth considering.

Nokia addressed initial consumer scepticism over camera phones and perceptions of poor image, via its collaboration with Carl Zeiss. The image quality of digital cameras is as much a function of the optics as it is the sensor. Nokia’s collaboration with Carl Zeiss, which results in the incorporation of high quality optics in their high end camera phones, immediately positions Nokia camera phones as high quality serious photography products. It also had the side effect of diluting Sony Ericsson Cybershot camera phone launch. Carl Zeiss optics is an integral element of the Cybershot proposition that could not be transferred to mobile, because of the nature of the Nokia deal.

The JCB ToughphoneTM, which extends the JCB brand into the mobile market, is one of the most exciting announcements to date. Not because it will deliver large volumes, as the target market is relatively niche, but because it is an excellent example of how a brand has transferred values between product categories. The phone aimed at Construction Workers (and Extreme Sports Enthusiasts), incorporates a number of features and benefits, such as 3 year warranty, which show that JCB have truly thought about the extension of the brand, the transfer of values and their impact on the product proposition in the new category.

Regardless of whether it is extension or collaboration that is used as the growth or entry strategy in the telecommunications market, there are a number of important considerations:

1. Transfer of Values: As consumers become more sophisticated, it will no longer be possible to simply airbrush a brand name to a product and automatically expect success. Success or otherwise, of the activity will depend upon the ability to transfer values with a strong consumer association into the product. Whether it is a Design or Functional based approach, this will depend upon the influence the respective brands have over the design of the product, whether the brand equity can be transferred during the design process and ultimately the appropriateness of the overall proposition for the audience being targeted.

2. It's still a mobile phone: It is not enough just to transfer values with strong consumer association. The resulting handset and accessories must be functional, easy to use, and of high quality. Without these three core deliverables the parent brand is prone to damage. The approach adopted by Bang & Olufsen, for the launch of its own brand of mobile phones, is interesting, in that, they made no effort to hide that Samsung were the providers of the mobile phone technology, while they focussed on their historic strengths of design, interface and acoustics.

3. Distribution: The main benefit of brand collaboration, as a market entry strategy, especially with an established handset vendor, is that there are automatic benefits in accessing an established distribution network. The issues facing the likes of JCB, Levi and Tag Heuer, are the difficulties in developing a distribution network appropriate to their brand and the product category.

 

Whether it is collaboration or extension, consideration needs to be given to the potential impact. Failure may result in significant harm to the master brand, potentially effecting perception in its core markets. Success, however, could provide fresh impetus to a brand.