Relational branding is when a company uses its relations to other companies to strengthen the brand. An example is when HP places intels logo on their products, or when McDonalds uses Heinz Ketchup. What happens is that the companies vouches for each other’s brand, and as they aren’t competing with each other they both benefit from it. Larger companies have been fairly good at exploiting relation branding, but it hasn’t been used as much by smaller companies. One of the reasons probably is that smaller companies doesn’t have as recognizable a brand as the larger multinational companies does, but that doesn’t mean it can’t be helpful, and then its cheap.
If small companies start vouching for each other they’d be better positioned in their neighborhood. Small local companies often have a larger credibility than the large ones, as the customer relationship can be more personal. If the local sandwichbar uses meat from the local butcher, and they both are respected companies, both their companies can benefit. The Sandwichbar because the local butcher stands for good quality, and the butcher because the sandwichbar only uses the best meat, and have chosen them.
It is worth mentioning that one should choose the relation partners carefully, as a relational partner that gets a bad reputation, can have a damaging effect on your brand.