Co-branding involves combining two or more brands into a single product or service. Companies participate in co-branding to leverage a strong brand. It is becoming a popular business practice to live by a positive association between different brands that can develop synergies. A well-executed co-branding strategy can lead to a win-win situation for both co-branding partners and can help realize untapped markets or untapped opportunities. In a concise way, it is essential to handle almost all marketing matters, from initial awareness building to customer loyalty.
The companies form a co-branded alliance to meet the following goals:
► Expansion of the customer base
► To obtain economic benefits
► Respond to the expressed and latent needs of customers
► Strengthen your competitive position
► Present a new product with a strong image
► Creating a new value perceived by the customer
► For operational benefits
Co-branding is a common practice in the fashion and clothing industry. Some of the examples of co-branding are between Nike – Phillips (electronics manufacturer) and Adidas -Porsche (automaker). Co-branding can be used for promotional campaigns, to use cartoons on t-shirts, to use logos, to distribute through branded retailers, etc.
Co-branding agreements
In a co-branded alliance, both companies must have a relationship that has the potential to be commercially beneficial to both parties.
The co-branding agreement includes rights, obligations, and restrictions that are binding on both parties. It includes important provisions and should be carefully written to give clear guidelines to the parities involved.
The agreement also explains marketing strategy, brand specifications, confidentiality issues, license specifications, warranties, payments and royalties, indemnification, waivers, term, and termination. The person involved in the campaign must be very clear about these issues.
Co-branding can take the following forms:
Promotion
Promotional co-branding is the most common type of co-branding that companies practice. Co-branding begins with endorsements from celebrities and institutions. It can improve the brand image. Sponsorship can provide extensive opportunities.
Supplier Agreement
Partnering with vendors provides easy access to offerings and long-lasting relationships, leading to low investment. The distinction is very important for such a co-brand, which is possible through patent protection.
Agreement with members of the Value Chain
Their goal is to provide customers with a completely new experience and enhance customer value. In value chain co-branding, members of a distribution channel linked both horizontally and vertically form an alliance. Such co-branding can be between supplier-retailer, companies offering similar products or services, or between products and service providers.
Innovation
This approach offers opportunities for growth in the existing market and exploration of new markets. In such an alliance, companies come together to create new offers for customers. Risk and return are two important aspects to consider. Senior management cooperation and organizational collaboration are essential to a successful deal.
Co-branding benefits
► Increase in sales revenue.
► Explore new markets with minimal expense.
► Appropriate approach when the company seeks a faster response.
► Access to a new source of financing.
► Technological collaboration between two companies yields better results than could be achieved with the efforts of a single company.
► Income from royalties.
► Shared risk.
► Companies can get a higher price for added value through additional associated brands.
► Improved product image and credibility with another brand association.
► Greater customer confidence in the product.
► Greater coverage and exposure of joint advertising.
► Prospects for developing employment relationships that lead to future joint ventures
Co-branding issues
► Proper understanding between co-branding partners is a must. Greed to get too much in a short time can ruin relationships and even lead to failure.
► Once a co-brand takes a position in the market, it becomes difficult to dismantle the co-brand and even more difficult to re-establish the brand alone.
► Companies that have different visions and cultures are not compatible with co-branding.
► If the brand does not have sufficient credibility in the market, it can negatively affect the other partner’s brand.
► Repositioning of the brand by one party can negatively influence the brand or campaign of the other party.
► When two products are totally different and have different sets of customers, co-branding may not work.
► Failure to meet the requirements of the other party may result in termination of the co-brand agreement.
► Legal requirements.
► Mergers and acquisitions of one party can be detrimental to the other party.
► Future environmental changes such as political, legal, social and technological or changes in consumer preferences can produce unexpected results.
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