Co-Branding: Types, Advantages, & Disadvantages
In this ever-growing digital technology world, having an excellent online reputation and digital presence for your business is extremely important. One of the simplest ways to achieve that is by using a co-branding strategy. Co-branding is one of the most successful ways for businesses to increase their efficiency and sales potential by reaching out to a larger target audience.
Co-branding is a marketing tactic in which two or more businesses collaborate to create a single product or project and promote it together among all their target audience. With the assistance of co-branding, businesses can significantly grow their client base, market share, profitability, brand image, and customer loyalty.
This branding strategy is typically used in the automotive, electronics, restaurant, and retail industries. Apple & Nike (for smart footwear) and Mastercard & Apple Pay (for cashless transactions) are two examples of good co-branding.
Depending on the needs of the companies concerned, co-branding has nearly limitless applications. It is broadly classified into the following categories:
- Ingredient Co-Branding
One of the most popular types of co-branding is ingredient co-branding. A young or developing company use this technique to obtain recognition and increase brand equity by collaborating with well-established partnered companies. This strategy results in higher-quality products, better advertising, higher revenues, and broader distribution channel access.
- Composite Co-Branding
This form of brand strategy combines two well-known brand names to create a unique product or service that would have been extremely difficult to generate separately. The success of composite co-branding depends on the popularity of the brands serving as ingredients and the degree of complementarity between the two.
- Sponsorship Co-Branding
The entertainment industry and sports leagues most widely utilize sponsorship or Promotional co-branding. Under such branding techniques, well-known brands sponsor sports & film award functions and social events to establish their good brand image.
- National To Local Co-Branding
When national brands cooperate with local brands, this is referred to as national-to-local co-branding. The emphasis here is on the national brand reaching a local audience, while the local brand reaches a national audience. Because both client bases are extreme, the only way to reach them simultaneously is through national to local co-branding.
Advantages & Disadvantages Of Co-Branding
The business partners benefit from co-branding because they may harness each other’s strengths and share risks to maximise the value of their assets. There are numerous benefits and drawbacks that may drive you to consider or reconsider your decision to pursue co-branding.
- Establishing Credibility
People are more likely to trust a brand and its products if they are already familiar with it. Co-branding, to a large part, assists smaller businesses in increasing their authority and trustworthiness by collaborating with other well-known brands. This gives those businesses enhanced credibility, making people more inclined to test new products that further boost sales.
- Broader Customer Base
This marketing method broadens the market’s customer base for partner brands. When two well-known businesses merge, each can easily target the market of the other. Co-branding raises each brand’s prominence and allows them to reach markets it might not have been able to reach otherwise.
- Reduced Investment Risks
Co-branding enables businesses to adopt branding tactics that reduce their marketing expenditures. Brands can split marketing programme expenses among alliance partners. They may achieve twice the investment return with half the budget, which lowers the risk connected with the firm in the presence of less investment, as all the partners will share the loss equally.
- Combine Strengths To Drive Growth
This method allows partner brands to strategically infuse the best of their brands with the other, resulting in stronger growth. While forming a collaboration, brands take on the best qualities of creativity and innovation. This leads to a more effective marketing plan by partner brands, who can pitch the best of their selling points.
- Fallouts of Agreements
Brands engage in several complex agreements as part of their co-branding strategy. Partner brands may attempt to influence such arrangements in their favour. If other partner brands become aware of such tactics, there may be a backlash rather than a synergy.
- Distinctive Ideas & Values
Co-branding activities will be successful only if the partnered brands have distinct objectives, visions, and values. All brands may have completely diverse markets; merging them all becomes tough and makes creating a cohesive front an uphill struggle.
The plan may fail due to confusion or misunderstanding if the products utilised to build the co-branding strategy are unconnected or unpopular in various markets. Smaller businesses, in particular, must exercise caution in their co-branding endeavours to ensure that the brand they partner with compliments their own.
- Conflicting Issues
A co-branding strategy may cause problems among partner brands if all the involved brands don’t trust each other. When customers have unfavourable experiences with a partner brand, their perception of brands and co-branded products suffers.
This disadvantage applies to smaller businesses as they may get overshadowed by reputed brands if they have yet to establish themselves in a market. This could result in a loss of personal image for that smaller business, making it harder for them to survive as a unique brand.
Co-branding is effective for companies seeking to raise brand awareness and improve their reputation. A co-branded collaboration must be purposeful and reasonable. All businesses must share values or have some similarity in their brand image. Otherwise, there’s a possibility of brand integrity getting jeopardised.