Co-branding is a strategic partnership between two or more companies. It allows businesses to leverage each other’s strengths, maximize joint venture benefits, and build their brands together. Co-branding is also a way to reach consumers seeking high-quality products. Co-branding has become increasingly popular over the last decade among major brands and retailers in all sectors, such as consumer packaged goods (CPG), fashion and luxury goods, automotive and automotive parts, travel & tourism, etc.
What is co-branding?
Co-branding is a marketing strategy where two or more brands collaborate to create a new, shared category. This can be an effective way for companies to differentiate their products and expand their customer base.
Co-branding does not include licensing, so in our definition, it does not consider collaborations like toy manufacturers that license a brand and develop movie characters’ toys or fashion brands lending their brands to sunglasses or fragrances (aka Brand Extensions). Co-branding is a partnership like the one of Apple and Nike to develop the Nike+ shoes and Apple tracking devices, which have evolved since their launch in 2010. Other alliances include LG and Prada mobile phones, Milka and Philadelphia spreads, and Milka and Oreo chocolate tables, in which the brand emerges as a magic ingredient. In the first example, Milka is the magic ingredient for a particular Philadelphia product; in the second case is Oreo which plays that role for the Milka tablet.
A successful co-branding initiative requires careful planning and execution. The process begins with identifying the goals of your co-branding initiative, followed by determining what type of branding or naming you’re looking for (name, logo, or both), then finding the right partner(s) that align with those goals—and finally developing a strategic plan that will help you achieve success in your industry and position yourself for future growth.
Benefits attributed to co-branding.
When we look at the drivers of successful co-branding initiatives, three benefits stand out:
- Increased brand awareness and equity.
- Increased relevance.
- The opportunity to play in a new market or sector.
Co-branding is effective, but it does not work equally for both partners in the initiative, at least from a branding point of view.
We could say that usually, there is an Equity Lender and an Equity Borrower, in which one of the two brands elevates the status of the other. This was probably the case of LG, who needed Prada equity to play on a higher segment. At the same time, the Equity Lender gains access to technology and a route to market it would not have.
When H&M partnered with Madonna, Karl Lagerfeld, or even Balmain, it enhanced its equity. It gave them access to a significant industrial fast fashion player with a global reach of vertically integrated retail.
These underlying reasons for developing co-branding projects can be attributed to four main factors: technological convergence, rapid globalization, demographic shifts, and changing consumer behavior.
Some of these partnerships were very successful, others not: Nike developed a line of sports accessories integrated with Philips Consumer Electronics, which unwinded very fast before partnering with Apple.
Sow, what are the drivers of successful co-branding initiatives?
When are co-branding projects successful?
It is essential to understand the critical characteristics of successful co-branding initiatives.
The brands in a co-branding project must be compatible and complement each other. The idea is to create a unique bond between the two brands, so consumers perceive them as one entity offering more value than either brand could provide alone.
Another reason why brands must be compatible is that they may share similar target groups or audiences—if not at least overlapping ones—to ensure that both companies’ core audience segments are satisfied by the final product (i.e., co-branded product).
In a nutshell, the drivers of success fall into three categories: Brand Characteristics, relationships between brands, and Consumer Perception of the partnership.
1) Brand Characteristics
The first and most important driver of co-branding success is brand characteristics. These characteristics are the drivers that help build a strong relationship between the two brands and make them work together.
Which characteristics are essential to co-branding?
- Brand Attitude refers to how one perceives the brand: Is it a friend or a dream? Not all brand attitudes support co-branding initiatives.
- Brand Trust refers to how much consumers trust your brand, i.e., whether they think you are reliable and honest with them (for example, by not letting them down when they have invested in your product). Lack of Trust makes a brand a weak candidate for co-branding.
- Brand Familiarity means that most people know about what you do and how reliable your products are; conversely, a low level would mean that many people don’t know about what you do or why their lives would be more convenient by using your products instead of others.
- Perceived quality of the brand – a critical dimension of Brand Equity. Needless to point out, if any of the brands are weak in this area, co-branding is at risk.
2) Relationship between brands in a co-branding project
In the previous point, it is clear that each brand needs to have muscular fitness before entering a co-branding. But that is not sufficient. As explained earlier, the two brands need to fit or complement each other:
- The brand image fit describes how a company’s identity and values align with a partner’s. For example, if you are selling luxury products, your partners should be able to demonstrate that they have an image that is consistent with yours.
- Also important is product category fit, which refers to whether or not the two brands complement each other in their offerings or services. For example, if you are selling high-end cars and one of your co-branding partners sells high-end real estate, this might not appeal to potential customers who may not understand the fit between the two.
- Sensory fit refers to how well consumers perceive the value proposition offered by both parties. It means that when someone sees or hears about your company’s latest product offering (which includes any advertising materials shared by both brands), it aligns well with what they already know from seeing/hearing about one or more of your co-branding partners’ offerings as well—and vice versa!
3) Consumer perception of the co-branding
How do consumers’ points of view influence the partnership? Besides the acceptance or not from a transactional point of view, in the era of social media, other aspects are essential:
- Consumer perception of the co-branding initiative. If the partnership does not smell right to consumers, it is unlikely to work well. That is the case of Philips and Nike, which mark high points across all previous variables, yet failed to convince the consumers.
- The uniqueness of the proposition: intriguing enough, co-branding is unique and sufficient to convince consumers and does not require extra leg work on the product side.
Beyond the brands, key operational aspects
Beyond the brands, critical operational aspects of co-branding can make or break the partnership. These include:
- Cultural fit. Are the two companies fundamentally aligned in their values, vision, and goals? Do the partner organizations share the same sense of purpose?
- Speed vs. agility. If one company has a fast-track approach to innovation, does another have the ability to move at that pace? They may be unable to do so because of organizational culture or other factors such as their existing product portfolio or market penetration strategy. In the example of fashion and consumer electronics, one should consider that the company is working on launching new products 18-24 months in the future, whereas in CE, companies are working on launching 9-12 months in the future. Not a detail that should be easily missed.
Overall, co-branding is a powerful strategy for companies to leverage the existing equity in their brands by creating new joint ventures that benefit from the resources and knowledge of both partners. It can be used to develop new products or services and build new markets through innovation. Co-branding can ultimately lead to increased profit for both partners and customer satisfaction. When done successfully, co-branding projects increase revenue without cannibalizing sales for either brand involved in the partnership.
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