Many companies want to boost their sales and update their products. One way to do this is through co-branding: a strategy that involves partnering with another brand to create a joint marketing campaign, a new product or a combined service that enhances the customer experience.
However, co-branding is not always a success story and sometimes it can backfire and harm your reputation. In this article, we will explore different types of co-branding and how to implement them, as well as share some successful examples from around the world.
What is Сo-Branding?
Let's start with the co-branding definition. If you ever wondered what the word's co-branding meaning is, this notion implies that brands combine to promote or achieve a common goal, without transferring ownership.
Co-branding projects can help you attract new customers, increase your visibility in a new market, cut down on the costs of product development and distribution and gain a competitive edge.
Pros of Сo-Branding
The word's co-brand meaning implies that many many benefits can come your way if you choose this marketing strategy and team up with another brand:
Increased marketing reach and sales. By combining brands, you can increase your exposure and attract more customers.
Enhanced customer loyalty. By partnering with a trusted brand, you can boost your reputation and share a loyal fan base. In some cases, you can also improve your service or user experience by offering more value.
Lowered production and marketing costs. By sharing an advertising campaign, you can reduce the overall cost of acquiring traffic. When creating a new product, you can also save money on components, software or partner expertise.
Cons of Сo-Branding
However, co-branding also comes with some challenges and risks, such as:
Reputational risks. If one of the partners gets involved in a scandal or violates some rules, it can tarnish the image of the other partner. Likewise, a negative experience with one of the products or services can affect the perception of the new product.
Perception risk. The offer may be overshadowed by the partner’s bigger or more flashy product. This can happen when the products have a huge price difference – for example, if you buy a Lamborghini, you may not care much about the quality of the floor mats.
Unmet expectations. The goals set for co-branding may not be achieved. The audience may not respond well to the combination of brands, the creatives may not work and the cost per lead may exceed expectations. Or the expected savings on production may be less than the cost of integrating the partner’s technical solutions.
Management failure. When working with another company and team, there may be conflicts of interest or miscommunication. This can lead to missed deadlines, disputes, misunderstandings and extra costs.
Co-Branding vs. Co-Marketing: Key Differences
Terms co-branding and co-marketing are often used interchangeably, but they do not define the same thing. Certainly, both words imply a journey for brands to leverage their unique features and define their fortes, but it does not make the notions similar in meaning.
Let's define co-branding first. Co-branding is a subset of co-marketing, if you will; this term refers to the tactics, strategic alignment of two or more brands to increase brand awareness among the general public and their target audience. Normally, brands team up, create new products and/or services and start a marketing campaign with all their logos, brand colors, and other details of corporate identities.
Co-marketing, on the other hand, may be defined as partnership marketing. In this situation, two brands unite for a mutually beneficial campaign aiming at new audiences. Here's the difference: during the co-marketing process, two brands do not create a product; they create a marketing campaign that is deemed to achieve business goals.
Types of Co-Branding
Time to elucidate on the topic of co-branding marketing. Co-branding can be classified by the forms of interaction in the creation of products and the goals of the companies in the partnership, which include timing and quality level.
By Format of Brand Participation
The format of participation depends on how the product is created and delivered within the “alliance”:
Horizontal co-branding offers the user a new product that can be either completely new and innovative or a combination of existing products. Horizontal co-branding is used by smartphone manufacturers: Samsung produces devices with designs from car companies and the Star Wars film franchise.
Vertical co-branding involves adding a component or service to a larger offering from the main brand. In this case, the component part is promoted along with the main product. For example, think of integrating a Photoshop course into a marketing profession training program from Skillshare. The smaller the difference in the size and reputation of the companies, the more effective such collaboration is. For instance, Intel processor stickers are on almost any laptop case.
By Company Goals
Co-branding implies having goals for short-term gain or achieving greater results in the future. Thus, by objectives, types of co-branding are divided into:
Tactical co-branding is used in a short-term time frame to increase sales. Brands can mention each other, create temporary products or run joint campaigns. One example would be creating special edition potato crisps, such as Pringles selling new flavours in packages with characters from the cartoon “Rick and Morty” or some smartphones being decorated with Swarovski crystals.
Strategic co-branding involves working long-term to strongly change each other’s reputation and promote each other’s products. For example, McDonald’s ads showcased Coca-Cola as one of the food chain’s staple drinks. Apple and Google also teamed up to create and promote HTML5 technology to simplify the creation of web applications, which eventually allowed them to get rid of Flash technology on mobile devices and win the competition.
Structural co-branding is needed to relaunch or merge brands to hide flaws or dramatically change the perception of companies. To an outside observer, it appears as a merger or simulated takeover of brands to forget or remove weaknesses. Structural co-branding was applied to restore the reputation of Absolut vodka. The brand was faced with a high proportion of “spoiled” products on the market and cooperated with the fashion house Versace to restore its reputation.
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How to Set Up and Manage a Co-branding Partnership
To start a co-branding partnership, you need to find a suitable partner. The criteria are as follows:
Target audience should overlap or match. Otherwise, the partnership will be pointless. The products should not compete or duplicate each other.
Brand awareness should be roughly equal in the market, unless the smaller brand benefits from being promoted by the bigger partner as an extra perk. Otherwise, the smaller brand will remain unnoticed by the customers.
Joint offer should improve the customer’s situation, solve their problems, help them save money or provide better service.
Brands should have a good reputation so that they don’t have to risk their image to increase sales.
Values, goals and management styles of the companies should be similar or compatible. Otherwise, it will be hard to achieve a smooth collaboration in marketing the joint projects.
Co-branding Examples
Co-branding can be a great way to create value and synergy for both partners. Here are some examples of co-branding programmes that have rocked the world.
Co-branded cards
Bank cards created in collaboration with other brands are widely popular around the world. For example, you can find co-branded cards from Costco and Citi, Gap and Visa, Delta and American Express and many more. These are good examples of horizontal co-branding for tactical cooperation. Cards are issued for a limited time, depending on their success, and allow both partners to expand their customer base by attracting users of the other brand.
Loyalty programmes
Loyalty programmes are aimed at customer retention and usually used by companies alone. However, sometimes companies join forces to enhance customer loyalty and offer complementary benefits. One example of such a co-branding partnership is between Kroger and Instacart, a grocery delivery service. Customers who shop at Kroger can earn fuel points and redeem them at Kroger gas stations or Shell stations. Customers who use Instacart can get free delivery on orders over $35 and access to exclusive deals and coupons. By linking their Kroger and Instacart accounts, customers can enjoy the best of both worlds: convenience, savings and rewards.
This way, despite being competitors in their respective markets, both brands were able to meet the needs of customers with different income levels and preferences and unite them with a single loyalty programme. This example is a combination of horizontal and vertical co-branding, as well as an example of strategic co-branding aimed at promoting both brands and sharing audiences.
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Joint ventures and initiatives
Sometimes companies invest money in joint development and research to create a better product, offer a revolutionary user experience or collect more data. Apple and IBM have engaged in similar co-branding partnerships. The companies have expanded their market share of B2B offerings by combining mobile products and enterprise solutions from IBM with their integrated systems.
New product launch
Asus entered the netbook market that had been dominated by Acer. The challenge was that netbooks were lightweight and compact, but the performance of these devices did not allow them to run demanding applications. To change the situation, Asus teamed up with Lamborghini.
Together they launched a high-performance netbook in a case designed by the automaker’s designers of premium racing cars. The price of the device exceeded similar models by 25%, which made the model affordable for students and businessmen. The performance was comfortable for running work applications, light games and even Photoshop. The look and sound from Lamborghini’s designers highlighted these achievements, with the roar of a racing engine at start-up. Asus managed to prove that netbooks can replace laptops for work tasks, as well as win back a significant market share.
This example can be seen as a horizontal structural co-branding, which later evolved into a strategic co-branding as the companies continue to release joint products.
Conclusion
Co-branding is a marketing strategy that has been around since the Great Depression, when fierce competition forced entrepreneurs to look for new ways to promote their products. Such partnerships are still being used successfully today – not only by related businesses, but also by completely different industries. We hope this article has helped you understand the benefits and challenges of co-branding and how to do it effectively. Co-branding can be a powerful way to use the strengths of two or more brands and create a win-win situation for both partners and customers. If done right, co-branding can help you boost your sales, improve your image and achieve a competitive advantage.
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