In order to achieve certain goals, brands sometimes unite and delve into co-branding so as to name a new product. However, for the product to be a success, brands have to be in sync and always do what’s best for it. But what is co-branding? Let us show you an example.
One of the best co-branding examples is that of Citibank and MTV. Together, they’ve created a debit card. The card allowed the customers not only to pay with it but also take advantage of the benefits at the MTV Citibank clubs.
Co-branding: types
We recognise only two types of co-branding — ingredient and composite co-branding.
Ingredient co-branding
Ingredient co-branding is one of the two co-branding types which relates to the use of a famous brand to help another not-so-famous brand gain recognition. Furthermore, it relates to the development of brand equity for parts and materials that other products also include.
However, for this co-branding to work, the primary brand has to be more powerful than the subordinate one. For example, Dell and Intel. Dell, a well-known computer manufacturer, has created a co-branding strategy with Intel, which deals with processors.
More often than not, the ingredient brands (two or more of them) are the biggest buyers of the primary brand. Nevertheless, they have to be unique, a major brand, or protected by a patent.
There are many clear benefits to ingredient co-branding, such as better quality products and access to additional distribution channels. Furthermore, the brands can also hope for superior promotions and higher profits when working together. What’s more, those who sell the ingredient brand will also get a chance to enjoy long-term customer relations. Their manufacturer can get a competitive edge, while the retailer can enjoy promotional help, courtesy of the ingredient brand.
Composite co-branding
In contrast to ingredient co-branding, composite co-branding, a.k.a. composite branding, calls for the use of two famous brand names. These brands act together to offer a unique product or service, which they wouldn’t be able to offer individually. Of course, the success of this endeavour depends on their popularity and on how much they complement each other.
The advantages and disadvantages of co-branding
As with everything business-related, even co-branding has certain pros and cons.
The advantages:
- Brands can share the risk.
- They can generate a royalty income.
- Bigger sales incomes.
- The customers would trust the product more.
- Joint advertising, which gives them a wider scope.
- Technological benefits.
- Product image enhancement, since they are associated with another renowned brand.
- More financial sources.
The disadvantages:
- If the two products that the brands are using to develop their co-branding strategy are entirely different or popular in different markets, the co-branding might be a total failure.
- If the companies don’t share the same missions and visions, composite branding is a no-go.
- Co-branding can also have an adverse effect on partner brands.
- If the customers associate bad traits and experiences with one of the brands, the total brand equity might get damaged.
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