Co-Branded Microcap Stocks

A problem most microcap companies are faced with is a lack of name recognition. Companies which have an unrecognizable name and/or product have difficulty establishing their presence in the marketplace. If you had to choose between two products, you would most assuredly buy the product with a name that you were familiar with. Research shows that consumers tend to choose the products according to names and features that they either recognize or think that they recognize. A strategy known as "co-branding" has been increasingly used by marketing experts because of this.

Co-branding, which also goes by the name of brand alliance, is a tactical measure used by companies whereby they commingle their brand names in an effort to reach improved marketability. As is typical, the superior partner in the co-branding alliance will enter the relationship for strict financial gain as royalties or a percentage of sales are often paid to the company with the more identifiable brand name. Even though financial gain is also the ultimate goal of the lesser known company in the alliance, the benefits from the relationship goes well beyond monetary matters. Up to date research has shown that the mixing of brand names generates complimentary perceptions for the co-branded product as the positive attributes of the well known product are transferred to the entity which is less known. These findings were corroborated by supplementary studies that found low recognition brands gain a significantly better evaluation when they are paired together with a highly recognizable brand.

The addition of a very well known name brand to a relatively unknown product immediately makes the lesser known entity more striking to the consumer. People have a propensity of trusting names that they know and they will buy products from companies that they are familiar with. Packaging decorated with the logo of a highly recognizable company or product assures consumers that the product is safe and of high quality. While consumers may at first obtain the product because of the highly recognizable co-branded entity, continued exposure of the product to the consumer allows them to become familiar with the lesser known company. In the end, the consumer will associate the lesser known company as an equal to the larger more recognizable company.