Impact of diversity, quality and number of brand alliance partners on the perceived quality of a new brand

Purpose - Co-branding is popular with partnerships between well-known and new brands. In a laboratory study, this paper aims to examine the effects of a single ally and multiple allies on quality perception of a brand. The results suggest that the quality perception of the new brand depends on the co-branding strategy. Design/methodology/approach - For dual-brand alliances, a single-factor design was used, with secondary brand quality level (high, medium and low) as the independent variable. Three advertisements were created by manipulating quality levels of the single partner. For multiple-brand alliances, a 2 x 3 between-subjects factorial design was used in the experiment. The two factors were diversification (homogeneous vs heterogeneous) and quality levels of the alliance (high-end, mixed and low-end). Findings - The results suggest that the number of brand partners significantly affected the perceived quality of the primary brand. For both dual- and multi-brand alliances, the quality level of the secondary brand positively influenced the perceived quality of the primary brand. For multiple-brand alliances, even though the highest quality perceptions of the primary brand are in the heterogeneous conditions, the heterogeneity of partners (partners across different product categories) did not affect the quality perception of the primary brand. Research limitations/implications - One limitation of the current study is that it only addresses one type of brand alliance: co-promotion. The generalization of these findings to other forms of brand alliances (e.g. ingredient branding: Intel with IBM, Dell and HP) merits further investigation. Also, in this study, respondents processed the information in a relatively low-involvement condition (note that the target ad was presented along with filler ads). They were more likely to use brand names as heuristic cues to form their judgments. Because an alliance partner also assumes risks, future research should consider the effect of the alliances on the secondary brand. Practical implications - Understanding brand alliances (especially multiple-brand alliances) is critical for new product managers and marketers. Introducing a new brand has higher risk and failure rates. Companies may lower these risks by co-branding with established brands. However, they should carefully consider the diversification and quality level of the partners. If brand managers position their product as high quality (luxury) or low quality (budget), they should choose high-(or low-) quality partners from different product categories (heterogeneous high-end or low-end alliances) because diversification strengthens the primary brand. For a single-partner alliance, the secondary brand should be of high quality. Originality/value - This paper extends the brand alliance literature beyond single-partner to multiple-partner alliances. With multiple partners, one can explore several critical aspects of an alliance, e.g. quality variance and product class diversity across the partners.