Hello again, we're talking about alternative resources of funding for corporate entrepreneurs, and the next topic I'd like to talk about is co-branding. So what is co-branding? It's an informal partnership between two or more established brands that brings value to all the parties. Provides economies of scale, and also generates immediate customer recognition for all parties involved. There's a lot of different types of co-branding forms. You have financial services company had the affinity cards, where you have a Visa or MasterCard has a corporate logo attached like an airline or a car company, what have you. There's consumer-product ingredients were one product appears in the other to drive sales and cross-customer loyalty. But one called implied endorsement, it basically drives customer recognition. And a good one to reference on that particular form of co-branding is the Pizza Hut logo on tortilla chips. And then we have an actual, or a form of branding called actual composite, which means that one of the brands has its products included in another brand. And the best example I can give you is Intel Inside in all the computers that are being delivered or developed. And then there's designer driven co-branding. I don't know if they do too much of these anymore in the automobile area, but years ago there was an Oleg Cassini edition of an automobile that essentially the designer, Oleg Cassini, put his name on an automobile. Apparently, he was involved in helping to develop the color schemes and the look and feel of the automobile. And then the retail business format, anybody who's ever been to one of these Dunkin' Donuts and Baskin Robbins shops where they are in the same store, that's the best example of those. So why do you want to co-brand? Well, it helps you leverage your intangible assets, your IT. And for entering into a different, maybe product class. It's a value added experience for the customer. Because we're getting two brands versus only one. It's easier and less costly than building brand image, because building brand image take a long time. If you co-brand with a company that already has a lot of brand image, you get some immediate halo effects from that. And you can generate market interest just through the visibility of the two brands working together, people start to wonder what's that all about and maybe they say okay, well something must be good about that because they're working together. So it can change your perception of the brand, and it gives you quick access to new categories of product categories. People perceive your brand as having higher quality if you have other brand that are agreeing to work together. And you can also use what they call that you can target certain demographics to your benefit. If you're a credit card company, for example, you make an affinity card for college students or university students. Let's say, MasterCard or Visa have a University of Maryland MasterCard which is only available for university students. The advantages of co-branding are that you share costs, you can spread your marketing and expenses and you receive benefits from both of the complementary services. Like, people who've ever gone on a long trip and stop at a gas station, inside the gas station's a restaurant. It helps increase your distribution networks just because you're partnering with somebody who already has distribution. And customers tend to look at co-branded products as having as being higher quality or better just because of, again the halo effect, and it also can be convenient for the customer to co-brand. There are some disadvantages you have to worry about. To me the most important one is that, if one of the brands [COUGH] gets into trouble or has some negative event, that negative then can wear off on you. There also, sometimes the co-branding agreements are not easy to structure and you have to have pretty well developed agreements on co-marketing before you can get the agreement and agree to. And again if one brand fails or the co-branding event fails, then the consumer confidence can be lost and can diminish both of the brands. So the typical co-branding agreement has a specific territory which it applies to. They have terms, meaning this will be a one-year agreement or a two-year agreement. There are certain renewal terms. Maybe they're automatically renewed, unless one of the partners gives a notice within say 90 days. They will have cross-IP licensing agreements probably. They may have licensing fees built in. They will always want to have financial reporting and have those reports audited. So that they can be sure they're getting independent and accurate statements on how the co-branding deals are going. And also they're going to want to have basic agreements on how the quality control is maintained. In most companies probably have internal quality control standards already established, it's just a matter of agreeing in the agreement that they will maintain their quality control standards. And they often times will have non-compete clauses that say, okay, you're co-branding me, let's say Baskin-Robbins is co-branding with Dunkin' Donuts but maybe perhaps Dunkin' Donuts is going to say, okay, we'll do this co-branding deal, but you cannot now do a deal with Krispy Kreme. So that's a direct competitor of mine, so they may have non-compete clauses. Then the agreement should have some type of the wording in there about how do you go about terminating the agreement and resolving disputes that may arise. So, it's an interesting way to look at financing. An idea, a project. Again, not all of these sources of financing work with every project. But they obviously work certain types of projects. So just think about the possibilities if you have a service or a product that may lend itself to a co-branding deal.
