Co-branding: Reasons Why it is a Win-Win Situation for Brands

Co-branding occurs when two or more brands associate with each other when brand differentiation is the main goal of the business. The arrangement provides greater benefits to the brands involved than what is achieved by the brands acting individually. There are four distinct strategies together with market penetration, international brand, logo reinforcement, and emblem extension method.

Did you know? Co-branding partnership helps fans of Uber and Spotify alike enjoy better experiences thanks to the app.

What Is Co-branding And How It Works?

Co-branding is a broad term, and there are various definitions and explanations. Co-branding is a strategy where two or more brands join in introducing a new and unique brand. The new brand launched has the combined attributes of the brands involved in the co-branding strategy. 

The brands opt for a co-branding strategy to create and utilize the synergies, gain competitive advantage and improve the brand value by leveraging the brands by transferring the positive associations of one brand to another. People associate products or services to a company with their brands. It is also known as a “Brand alliance”. It is both a brand management strategy and a marketing strategy.

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Different Types of Co-branding

Companies can either work with the existing resources or combine them with others to achieve the objectives of co-branding. The following are the types of co-branding:

• Vertical Co-branding: 

The brands entering into the arrangement are placed at different levels of the value chain (say, one is a supplier of the other)

• Horizontal Co-branding: 

The brands entering into the arrangement are placed at different levels of the value chain and contribute similar resources.

• Cooperative Co-branding: 

Two brands which are equal in the market borrow from each other’s brand image for an advertisement.

• Complementary Co-branding: 

When a product or service is advertised together with another product or service to suggest its usage. 

• Ingredient Co-branding: 

Creation of brand equity for the brand of a part (materials, components or parts) which makes up the product or service.

• Symbolic Co-branding: 

Co-branded products are represented by adding the additional symbolic features offered by one brand (partner brand) to another (host brand).

• Same company Co-branding: 

A company promoting its brands simultaneously when it has more than one product.

• National to local Co-branding: 

A small local brand enters into an arrangement with a national brand to capture the local market.

• Joint-venture Co-branding: 

A strategic alliance formed by two or more brands to launch a new product to the intended customers.

• Multiple sponsor Co-branding: 

Two or more brands forming a strategic alliance in technology, sales, promotion, etc.

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Examples For Co-branding

Co-branding is a strategic decision which influences the brand over a long period. Co-branded products are of different forms across the market, sometimes representing some unlikely alliance partners. A few examples of co-branding are:

1. McDonald’s and BTS

McDonald’s uses Co-branding as a communication tool by entering into a partnership with BTS, a Korean boy band. It entails the creation of new meals called “BTS meals”.

2. Uber and Spotify

Uber and Spotify collaborated to create “Soundtrack for Your Ride”. While waiting for their ride, it prompts Uber users to sign in to Spotify to create or choose a playlist to listen to during the ride. This earns new or frequent users for Spotify while allowing Uber users to personalize their rides.

3. Doritos and Taco Bell

Doritos and Taco Bell entered into an arrangement that followed the co-branding strategy of “co-making” the product. Doritos sells delicious tortilla chips, while Taco Bell sells tacos made of shells. They joined to create “Doritos Locos Taco”. Taco Bell sold more than a hundred million tacos in just the first ten weeks, added additional versions, and has since sold more than a billion of these tacos.

4. Nike and Apple

Nike and Apple have been working together for a long period since the introduction of iPods. The co-branding arrangement aimed at bringing apple music to Nike customers who work out by creating fitness trackers, shoes and clothing that tracked their activities. It helps Apple establish itself in the sports field, and Nike adds value to its customers.

5. Air Sahara and Standard Chartered Bank

Air Sahara has introduced a tie-up with Standard Chartered bank for a co-branded card through which free tickets can be available. It has been a marketing initiative that Air Sahara has launched a credit card with Standard Chartered bank to improve passenger traffic and boost revenues.

6. Co-branded credit cards:

Co-branded credit cards have become popular through discounts, early alerts of new products and various other schemes for customers. Companies like Big bazaar, lifestyle, Indian Oil and several others sponsor the credit cards of Reputed Banks like ICICI Bank, Citi Bank and others. These companies get the benefits of increasing the customer base and maintaining customer-related data that helps understand customer preferences.

7. LG and SBI

Electronics and home appliances business enterprise, LG, has entered into a strategic alliance with SBI cards to launch India’s first co-branded credit card for the consumer appliances industry.

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Important Traits of Co-branding

Co-branding can be a useful way for companies to reach new audiences and to differentiate themselves from competitors. It can also help to build trust and credibility, as consumers may be more likely to trust a product or service that is endorsed by a well-known brand.There are many ways that companies can benefit from co-branding, including:

1. Need Of Co-branding

Branding has many challenges in the current competitive world, and a co-branding strategy is an alternative used to increase market share and gain a sustainable competitive advantage. It has been adopted in many industries, including tech giants, famous food brands, and banks.

2. Criteria for Co-branding

The criteria for co-branding must be extensively explored before choosing to implement it. Continuous supervision of factors affecting the success is also advised.

The brands should have the same vision, mission and philosophy. They should target the same market and audience. The management should be cordial and like-minded. 

Ultimately, co-branding should benefit all the brands in the arrangement.

3. Branding Strategy

Consumers’ tastes and preferences are rapidly changing in today's competitive world. They find the products similar, which creates a sense of boredom. This poses serious threats to companies and marketers. They employ various creative approaches to attract and retain customers. 

Brand image building is a long-term process that faces the issues of similarity, the high media cost and consumers' dynamic nature. Since branding has many challenges in the current competitive world, a co-branding strategy is an alternative used to increase market share and gain a sustainable competitive advantage. It has been adopted in many industries, including tech giants, famous food brands, or banks.

4. Selection of a Good Brand Partner

This is the most important part of co-branding, as this helps in either improving or destroying the brand image. An example is a dispute between the famous rapper Kanya west and Adidas due to his antisemitic comments. The brands chosen as partners should have well-built business connections and clients and be reliable and responsible without any scandals or public relations problems.

Advantages of Co-branding

One such approach is to build a strong brand image which helps differentiate the brand from its  competitors. Follow the list of Co-Branding advantages:

1. Entry into a new market:

Co-branding allows a company to expand its existing brand into a new market which would have otherwise been difficult for it to enter individually.

2. Sharing of resources and risks:

It enables entities to share resources and risks based on their capabilities.

3. Economies of scale:

Co-branding reduces the investment in cost, time and energy to relatively low levels due to sharing of resources.

4. Learning-curve benefit:

Co-branding helps to learn about the customers, their preferences and how the other company approaches them.

Disadvantages of Co-branding:

Co-branding is an effective marketing strategy to promote a brand with the help of the successful brand image of the other brands in the arrangement. Unfortunately there are some disadvantages as well. Follow the list below to know about Co-Branding disadvantages

1. Loss of Credibility:

The brands could lose credibility and reputation due to the negative actions of the other brand involved.

2. Harm to Brand equity:

Brand equity of one brand could be harmed due to the negative consumer experience of the other since it becomes a crisis of social trust.

3. Complex Contracts and Legal Procedures:

The participating brands need to examine the situation carefully before entering into a co-branding arrangement to protect themselves in unforeseen circumstances. This involves complex contracts and legal procedures.

4. Disparity between both Brands:

There should be trust between the brand partners in co-branding, otherwise, it would lead to disparities and affect them negatively.

Conclusion

Co-branding is not always a win-win situation, and sometimes it results in grave loss to the brand partners. Although there are various benefits, it also has its set of demerits. It all comes down to the choices made by the brands in terms of their brand partners, type of co-branding strategy opted, target markets and various other factors before deciding if it is an effective marketing strategy to achieve the business's goals.

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