The world of marketing is filled with business entities that have devised innovative ways to boost their respective market share and offer goods and services more competitively than their peers. Co-branding is one of the many alternative tactics commonly used to dominate the market and improve the chances of success.
Co-branding involves the use of more than one brand name to market a product or service. This marketing strategy is alternatively referred to as a brand partnership. It provides an opportunity for forming strategic alliances for marketing products or services as one bundle. This strategy is bound to have a greater impact on the market than if every single product were to be promoted. Co-branding is aimed at combining market strength, positive association, and prestige of a number of different brands in such a way that consumers find a reason to pay more for the products or services. It is also a way of building a strong resistance against the competition.
Types of co-branding
There are two popular types of co-branding that you can consider:
- Ingredient co-branding
This is a situation where a well-known brand is promoted together with a less renowned brand, with the objective of aiding the less renowned brand to become renowned. You may use this type of co-branding when you intend to draw the attention of the market to a non-famous brand. As consumers search for branded products, they encounter the ones that are not popular. This provides an opportunity for the consumers to try the less renowned brands, thus boosting their sales volume.
- Composite co-branding
This type of co-branding aims at combining the strengths of two or more well-known brands that are usually not easy to promote individually. The combined brand names collectively give a distinctive product or service that is highly valued by customers. The combination also enables you to build equity for the brands involved.
Forms of co-branding
Different forms of co-branding are available for you to consider. Some of which are described as follows:
- Same company co-branding. It involves co-branding products from within the same company.
- Joint venture co-branding. This involves offering discounts on particular debit cards that are being used with a particular debit card. The co-branding deal, therefore, is between a merchandising company offering the discounts and the financial institution producing the debit cards.
- Multiple co-brandings. This involves several companies forming an alliance for the purpose of promoting their products. The companies involved have the opportunity to improve their public relations as well as boost sales for the co-branded products.
- Retail co-branding. This involves retailers partnering in the utilization of their resources, especially to boost their performance in the industry.
- National to local co-branding. This involves a national brand partnering with a local small business brand with the aim of targeting local market interests.
For these forms of co-branding to succeed, each brand being brought on board should have equivalent brand equity. If a product with higher brand equity is co-branded with one that has lower brand equity, then the product with high brand equity risks falling in a bad light as it will look like it is needy.
Experienced marketing and branding practitioners attest to the use of four popular co-branding strategies:
- Market penetration strategy: this strategy seeks to conserve the current brand names and market share of two partnering entities. It focuses on selling the brands in existing markets. The partners in this strategy must implement specific plans and tactics to challenge competitors and to win part of their market share.
- Global brand strategy: this strategy enables partnering firms to serve all customers with one existing global co-brand. By use of standardized global advertising, marketing professionals can build strong global brands with this strategy. The aim is to offer brands that are recognized globally. Popular examples of the use of this strategy include:
- Coca-cola: this is one of the oldest brands that has grown to claim status as a global brand.
- Starbucks: This is one of the most popular coffee houses that has managed to spread its operations to major global markets such as Brazil and China.
- Airbnb: it is one of the most successful companies around the globe. It has a universal logo “the Belo” which symbolizes belonging.
- Apple: this is another successful company in global branding. It opted for a strategy commonly referred to as “one-size-fits-all.”
- Brand reinforcement strategy: this strategy involves using a new brand name in both new and old markets. For this strategy to succeed, such marketing programs as advertising, exhibitions, showroom layout, event sponsorship, and promotions must be used aggressively.
- Brand extension strategy: this strategy entails creating a new co-brand name designed specifically for a new market. This enables the marketer to evaluate product category opportunities, identify resource requirements, lower risks and measure the relevance of the new co-brands. Popular examples of the use of this strategy include:
- This is a technology company well-known for its computer brands. It developed new brands away from computer technology that enabled it to extend to the shampoo, powder, and soap market.
- This company is not only famous for pet food, but also for human foods such as ice-cream and chocolate drinks.
Examples of co-branding
Co-branding as a marketing strategy has popular application the world over. Some examples include:
- Nike+ and Apple: these two companies have partnered in connecting activity tracking technology in athletic gear with iPhone apps and smartwatch.
- BMW and Louis Vuitton: BMW is an automobile manufacturer and Louis Vuitton is a designer. They partnered to come up with well-known traditional automobile brands that are famous for high-quality craftsmanship.
- Uber and Pandora: they collaborated to let Uber riders create Pandora playlists for use during trips.
- Red Bull and GoPro: they teamed up to work on the same field whereby GoPro camera was used during a skydiving sport in the year 2012.
- Apple pay and MasterCard: when MasterCard supported Apple pay, it landed a large number of customers and they were able to get new functionality that was good for their customers.
- Dell and Intel: Dell is a computer solutions provider and Intel is a processor renowned for its computing power. They had to come together because Intel found it hard to advertise its products alone since they are built into the Dell products.
Advantages and disadvantages of a co-branding
Just like any other strategy, co-branding has its own merits and demerits. These can be analyzed as follows:
- It enables access to new financial resources
- It promotes the sharing of resources
- Several brands share the benefits of their technology
- It opens an opportunity for the generation of royalty income
- It boosts sales, especially when both brands are renowned
- Any risks associated with the brands are always shared
- It improves the public as well as customer relations.
- If anything goes wrong with one of the brands, all parties involved are bound to be affected.
- Consumers may focus on an individual brand. This leads to failure of a co-branding
- When an alliance is sought with the wrong brands, customer value will not be provided. In this case, the partners will not be able to meet their expectations and it results in failure of co-branding.
- If consumers bundling above individual brands, then the value is bound to drop when the co-branding partnership ends.
- If one brand enters several bundles, it gets diluted. This may also lead to the dilution of the rest of the brands in the bundles.
- The consumer might take the co-branding partnership positively or negatively. This may fail to achieve the desired effect.
Considering the above disadvantages, marketing managers have to make co-branding decisions cautiously. The brands have to be aligned in such a way as to secure a positive impact on the market. The managers need to do this at the time they are planning for co-branding.
With the rise of digital media marketing campaigns, the concept of digital co-branding has come into the limelight. This is a digital marketing strategy that complies with all the basics of co-branding. It aligns the advertiser’s brand with a digital media provider that has the same target market. The digital media provider would be required to forego some editorial control relating to activating content for the brand being advertised.
This model of co-branding depends on co-branding programs specially built for the purpose. With the partnership nature of co-branding, it is possible for advertisers to place their ads on their partner’s website, which is more effective than an ordinary internet advertisement. The advertiser would be able to interact with more target consumers.
Just like any other business strategy, co-branding may have its weaknesses, but there is no doubt that it has some positive impact on businesses. It is an exercise that needs to be done with caution. Managers have to invest their time in planning and making decisions relating to product and partner selection.