Co-branding refers to the utilization of two or more brands so as to create a new product. This can be of the same company or from two distinct companies. The underlying brands of the new brand help each other in achieving the purpose of the newly created brand. It is important that the synchronization between the ingredient brand and the new product is determined carefully.
Co-branding tends to create an overall marketing synergy by creating a larger customer base which combines the existing customer base of the brand pairs, highlighting the best features of every brand. Businesses operating online also hold the added visibility of their business website and other properties so as to further promote the campaign.
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Co-branding can be defined as a partnership between the marketing activities of at least two or more different brands which are also independent providers of products and services. This type of marketing strategy can involve various types of marketing activities like advertisements or sponsorships. This association will be beneficial for all the brands involved when they are aligned rather than when those products are promoted individually.
Types of Co-Branding
Co-branding strategy is basically of two types – ingredient co-branding and composite co-branding.
Ingredient co-branding makes use of a popular brand to serve as an important element in the production process of the other popular brand. This basically deals with the development of brand equity for those parts and materials that are included in other products. The underlying constituent brand is a subordinate to that of the primary brand. For example, Dell computers utilize a co-branding strategy with Intel processors. Ingredient brands are normally the biggest buyers or current suppliers of the company. Through this type of branding, the company can produce products of better quality gain more access to distribution channels, implement superior promotional activities and real greater profits.
This type of brand strategy utilizes two renowned brand names in such a way that they collectively provide a distinctive product or service which could have been very difficult to produce individually. Successful composite co-branding is dependent upon the favorability of the brands serving as ingredients as well as also upon the extent of complementarities between the two.
Examples of Co-Branding
Nike and Apple
This is a very good example of successful co-branding. Nike determined that their customers who are runners like to listen to music when they exercise or want to track their progress. This led the company to form a partnership with Apple so that customers can do both. Nike also produced footwear under the title Nike and Apple manufactured a chip that is fitted within the shoes for recording the progress of the user when it is activated on their iPhone or iPod. This microchip will display user statistics like time, distance and speed along with the number of calories burned.
MasterCard and Apple Pay
Both MasterCard and Apple have joined hands in making transactions cashless. MasterCard became the first credit card company which supported Apple Pay. This provided Apple with a generous customer base along with tweaking its service along with providing MasterCard brand new feature and function which was exclusive to its customers. After this Apple has also formed an alliance with other credit card companies in order to expand the customer base.
Co-Branding Advantages and Disadvantages
There are several advantages associated with co-branding which includes:
- generation of royalty income
- sharing of risk
- increased trust of customers over the product
- increased income from sales
- technological benefits
- wider scope because of joint advertising
- increased access to new financial sources
- better image of the product through the association with other renowned brands
Like any other form of marketing, even co-branding is not free from certain limitations which include:
- Ingredient brands go about without being noticed because the communication is diluted which would have otherwise worked for the brands independently.
- If the vision, values, and ethics of the ingredient brands are different, the partnership may fail in future.
- Seeking an alliance with wrong brands will not provide customer value and will be unable to meet their expectations which will result in product failure.