Marketing guru Seth Godin defines a brand as “the set of expectations, memories, stories, and relationships that, taken together, account for a consumer’s decision to choose one product or service over another.” At a time when 4.4 million new businesses open yearly, branding couldn’t be more crucial.
Now think about the power of branding at least twice over. You get co-branding, a super-marketing technique that builds on the individual strengths of each co-brand and creates synergistic benefits for all partners on board.
This was precisely what happened when Spotify and Starbucks co-branded an uber-successful, groundbreaking music ecosystem shared by each brand’s market in 2015. Both were already global brands at that time, but the beauty of co-branding is it works for all business sizes. Read on to acquaint yourself with the fundamentals of co-branding and its benefits.
The Definition of Co-Branding
Co-branding is a marketing strategy that draws from two or more brands collaborating to create a new product or service with unique, separate branding. Companies usually enter into this type of agreement to combine their strengths, prestige, brand awareness, and positive reputation. Like any other marketing strategy, it ultimately increases each partner’s market share and revenue streams.
Companies with parallel missions, values, and target customers typically form co-branding partnerships. Financially, the approach is cost-effective, splitting the capital required to run a co-branding campaign and the risks involved. The setup is true for all types of branding, such as the following:
Ingredient
When a brand manufactures a product or service with one component produced exclusively by another brand, they engage in ingredient co-branding. One famous example is Dell using Intel processors in its computers.
Ingredient brands do not usually sell their products directly to consumers. Nonetheless, they are typically patented and famous on their own, even before co-branding.
Composite
In composite branding, two or more companies create one product or service for all their customers. For example, a credit card company may create a special card for the exclusive use of an airline’s premium club members.
In composite branding, the partnership may develop a product or service or improve something existing. For example, a TV brand with a model that isn’t doing well in the market may partner with a computer manufacturer to create a smart TV with many computer-like properties.
Multi-sponsor
Two or more companies collaborating to share technology and promotional events is known as multi-sponsor co-branding. Multi-sponsor co-brands don’t always have the same markets but often have similar values.
A health drink brand may collaborate with a medical alert smartwatch brand for a triathlon. These are two distinct brands, but they both appeal to people passionate about health and fitness.
National-to-local
National-to-local co-branding involves a small local business teaming up with a nationally known brand. This partnership aims to boost national brand exposure for both brands and increase revenue for the local industry.
A typical example of national-to-local co-branding is famous car makers striking deals with local car dealerships. Large department stores also usually partner with small retailers for their mutual benefit.
Subsidiary
A company can co-brand with its own subsidiary to reach new audiences. For example, a national film studio can partner with its subsidiary soda brand, treating each moviegoer with a can of the soda.
Subsidiary brands usually have their own identity unique from their parent brands.
The Benefits of Co-Branding
In 2014, Louis Vuitton designed custom luggage after the sleek lines of the BMW i8, the German brand’s most progressive sports car back then. Four years later, Amazon co-branded an American Express credit card to help small businesses sell on the e-commerce platform.
Countless brand partnerships have come before, after, and in between, and none of them had probably been cheap. But the brands must not have minded at all, knowing co-branding has a long history of benefits. The following are some of the most crucial ones:
Bigger budget, better results, and shared risk
When brands collaborate, they combine their knowledge, skills, expertise, and resources to create excellent results. For example, a brand lacking technology can benefit from a compatible brand, providing that edge. It goes back to the classic adage, “two heads are better than one.”
Moreover, brands usually invest sizable amounts to market their products and services. They know the power of branding in elevating consumer demand and, eventually, their sales. When brands decide to create an alliance, their budget balloons even larger to produce phenomenal results specific to that collaboration.
A bigger marketing budget usually means more brilliant people working on the team, higher-quality co-branding collaterals, more media channels, and a larger audience reach. While the effectiveness of co-branding lies in its planning and execution, a bigger budget makes success easier to achieve.
At the same time, any losses will be shared among all partners, reducing the financial impact of the failure on each co-brand.
Market excitement
People have favorite brands. When their favorites combine, the excitement can be enormous enough to affect purchasing decisions. It can be even more interesting when the co-brands haven’t partnered before. Of course, it all boils down to the campaign itself.
With an effective promotional approach, co-branding can seriously attract the attention of each brand’s fans, and the effect snowballs everywhere, especially on social media. People can wait on these brands to see updates on the launch day or any offer they have begun looking forward to since the beginning of the campaign.
Increased trust for the new co-branded product or service
When two or more brands create a new product or service, people generally consider it a good sign of quality. People count on the individual good name that each partner has built for itself. When these companies form a team, consumers tend to trust them even more.
Although not all co-brands are equally credible, the benefits are mutual for all partners. The stronger brand can gain additional exposure from the weaker brand’s audience, and vice-versa. As a result, each brand carries over the customer base of the other brands. Of course, a more extensive customer base automatically increases sales and revenue potential.
Royalty income
Unknown to many, brands are much more than product or company names. They stand on immense goodwill and a stellar reputation built for many years. It’s also one of the integral principles behind the benefits of co-branding.
When companies enter a marketing partnership, they are banking on the excellent reputation of each other’s brands, which comes with royalty income. Any brand that has established a name for itself in its industry can extract royalty income from its name for years.
The Ways To Do Co-Branding Right
Marketers are well aware of the benefits of co-branding, but not all such campaigns have succeeded. Specific steps and techniques can increase their chances of achieving their goals while reducing financial damage. Below are a few examples:
Set specific goals
Like any project, co-branding requires goal-setting for the individual partners and as an alliance. Whether it’s reaching a new audience, boosting credibility, or increasing revenue, it’s crucial to lay everything on the table before starting the campaign.
For each co-brand, goals can help in the selection of suitable partners. In general, goal-setting helps put everyone on the same page as far as expectations are concerned. However, co-brands don’t have to have exactly the same individual goals. Still, their partnership must ultimately help them achieve those goals respectively.
Define and prepare for potential challenges
Branding itself isn’t a walk in the park. Co-branding, which involves at least two different brands, can be challenging for unprepared marketers. Hence, making all the necessary preparations before inking a deal with a potential co-brand is crucial.
The most common example of a co-branding challenge is incompatibility. Branding makes a product or service unique. When brands with disparate missions and visions, they risk disastrous consequences, from confused markets to massive losses. In avoiding these scenarios, readiness is the key.
Choose the right brand or brands to partner with
Speaking of brand incompatibility, choosing the right brand or brands can determine the fate of a co-branding campaign from the get-go. At the same time, it’s safe to recognize how surprising markets can be.
In 2012, Red Bull launched a memorable space-jump co-branding campaign with portable camera maker GoPro. The stunt was unexpected but also phenomenal, and that’s because both brands had aligned themselves successfully with the adventurous lifestyle.
Alignment is critical for co-branding success. The goals may not be the same. Think of the national brand seeking more significant exposure and the local brand looking for a boost in revenue. But they can work together if their culture is the same.
Needless to say, a brand must partner with a company that elevates it. In 1999, Mr. Clean and Econolodge launched the Mr. Clean Housekeeping Program to distinguish the budget hotel for its clean rooms. Mr. Clean, with its virtually spotless record as a brand, created a halo effect for Econolodge. It highlights the critical role of one brand’s reputation as other brands consider a partnership.
Of course, not all co-branding ventures are successful. In 2014, after pressure from Greenpeace, Lego uncoupled with Shell after decades of co-branding partnership. Lego manufactured Shell-branded race cars and gas stations as part of the contract, while Shell sold Lego products through its stores worldwide.
While the deal was initially perfect for the two companies, it earned the ire of the environmentalist group, forcing Lego to sever ties with the oil company. The partnership was profitable for both sides, but Lego’s inner inclination toward environment preservation led it to succumb to the pressure from Greenpeace.
Had Lego even considered the possibility of the backlash, it would have saved itself and Shell from the financial damages.
Another example of a failed brand partnership was between Target, a mass-market department store, and Neiman Marcus, a luxury retailer. From the start, their markets never seemed to cross. The two brands launched a holiday collection, and the outcome was catastrophic.
The reason was simple: Neiman Marcus customers weren’t usually Target customers. The fact was easy to understand yet somehow unrecognizable to the two brands. In the end, the collection was discounted by more than 70%, leading to massive losses for the two companies.
Create an innovative product or service
There’s no overstating the importance of choosing the right brand partner. However, equally vital is the co-branded product or service itself. After all, this is what consumers will connect with. A co-branding campaign is more likely to be successful with a product or service they’ll find interesting.
This is where co-brands need to innovate. It’s insufficient to create something and simply attach each partner’s brand name to the product or service. The creation must make consumers want it, and innovators usually begin by looking for a problem that requires a solution. The co-branded product or service must be that solution.
Suppose you run a law firm. You can partner with a company that offers artificial intelligence (AI) tools or other software that could improve your processes. You can work towards creating a tool that enables your clients to initially file for divorce or draft a prenup agreement online. This will make things easier for those who live far from your office.
Keep up with the trends
People generally like trends. It’s even one of the reasons branding works, and consumers tend to navigate toward brands that keep up with their lifestyles and preferences. In every way, co-branding works in the same vein.
TikTok couldn’t be a more fitting example. According to Influencer Marketing Hub, it is the number one platform in terms of engagement today. It’s a marketing trend that co-brands are better off not ignoring. By riding the trends, they have more chances of meeting their target audience, which builds on their campaign’s success.
Maximize Your Marketing Success With Co-Branding
Among the first known co-branding projects rolled out in 1956 was between car maker Renault and jeweler Van Cleef and Arpels, both French companies. The jeweler decorated the dashboard of the then-newly introduced Renault Dauphones, and the campaign was a massive success.
The Renault-Val Cleef and Arpels project predates all other examples mentioned earlier. Many other companies have followed in its tracks. Co-branding has proven its power in producing massive gains for partners when campaigns are properly blueprinted and implemented.
