When two brands form a brand partnership, they create mutual marketing and PR benefits. The brands may include retailers, car manufacturers, and restaurants, among others. The brands involved pool their resources, creativity, and existing images in order to build an offering that is greater than the sum of its parts. This leads to better customer reach, publicity, and conversions. Co-branding also boosts revenue streams and decreases risks.
Sometimes, customers who are loyal to their brands do not attempt to try different brands. In this case, co-branding helps to reach out to them and increases the acceptance and receptivity of a brand. The participating brands also get a dose of innovation and value-addition. As enumerated below, there are different types of co-branding.
a) National to local co-branding - When national brands collaborate with local brands, it benefits both brands in terms of audience. The national brand can reach a local audience and the local brand can reach a national audience. An example of this is local businesses joining into contracts with Groupon to provide special offerings to a wider audience.
b) Ingredient co-branding - Sometimes brands collaborate based on the compatible ingredients shared amongst them. This type of co-branding deals with the development of brand equity for those parts and materials that are included in other products. The underlying constituent brand is generally subordinate to that of the primary brand. For instance, Dell computers utilize a co-branding strategy with Intel processors.
c) Composite co-branding - In this type of co-branding, two renowned brands collectively provide a distinctive product or service which could have been tricky to produce individually. It focuses on value addition and retaining existing customers. Adidas and Kanye West collaborated to create Adidas Yeezy. A premium range of fashion and leisurewear, the combination of Kanye’s celebrity appeal with the Adidas street and leisurewear segment led to strong brand growth. Due to the partnership, the brand associations resonated strongly and regular Adidas products seemed cooler to fans of Kanye West.
Benefits- There are quite a few advantages of co-branding. Other than boosting sales, any risks associated with the brands are always shared. There is increased access to new financial sources. The creative personnel, experiences, and marketing channels of partner brands help both brands work with a wider set of resources. Co-branding helps target a larger customer base. When two brands come together, each of them can target each others’ markets. Therefore it results in the widening of the visibility of a brand to a market that they once may not have had access to. It might also result in increased trust of customers.
Risks- Sometimes, there are unintended negative consequences of co-branding. Companies should consider whether co-branding will be beneficial for them and their customers, as it could also alienate customers who are used to a single product identity. If two companies are different in their missions and values, they might not be able to work successfully together. If both partners do not understand the specific target audience, they won’t reach the right people.
