Title

An Analysis of B2B Ingredient Co-Branding Relationships

Abstract

The proliferation of co-branding in consumer markets has been given considerable attention in the literature, yet attention to the practice in business-to-business markets has been limited, despite the growing attention to the role of relationships in the B2B arena. In an examination of co-branding in the industrial sector, this paper discusses the use of ingredient co-branding and uses an econometric modeling approach to offer a rationale for why it occurs. The analysis provides insight into why downstream manufacturers participate in a relationship that strengthens the supplier's position in the market. We find that under the threat to the supplier of entry from a competitor whose costs are unobservable, co-branding relationships will be entered into resulting in a reduced probability of entry. This co-branding arrangement benefits both the incumbent supplier and the downstream manufacturer. The incumbent supplier benefits from the reduced probability of competitor entry, and the downstream manufacturer is rewarded with a lower price. Further, we find that the cost of the co-branded product is lower, due to a mitigation of double marginalization in a vertically-integrated solution. We examine co-branding relationships with and without advertising support and find that co-branding relationships with advertising support tend to be superior.

Department(s)

Business and Information Technology

Keywords and Phrases

Branding; Business-to-business; Ingredient co-branding; Relationships

International Standard Serial Number (ISSN)

0019-8501

Document Type

Article - Journal

Document Version

Citation

File Type

text

Language(s)

English

Rights

© 2008 Elsevier, All rights reserved.

Publication Date

01 Oct 2008

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