Co-branding consists of combining two or more brands in a single product or service. Companies engage in co-branding to take advantage of a strong brand. It is becoming popular business practice to strive for a positive association between different brands that can develop synergy. 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 issues, 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 make economic benefits

► Respond to the expressed and latent needs of customers

► Strengthen your competitive position

► Introduce a new product with a strong image

► Create a new value perceived by the customer

► To obtain operational benefits

Co-branding is frequently practiced in the fashion and apparel industry. Some of the co-branding examples are between Nike – Phillips (electronics manufacturer) and Adidas -Porsche (car manufacturer). Co-branding can be used for promotional campaigns, to use cartoons on T-shirts, to use logos, distribute through brand name retailers, etc.

Co-Brand 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 must be carefully drafted to provide clear guidance to the parities involved.

The agreement also explains the marketing strategy, brand specifications, confidentiality issues, license specifications, warranties, payments and royalties, indemnification, disclaimers, 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 practiced by companies. Co-branding begins with endorsements from celebrities and institutions. It can improve the brand image. Sponsorship can provide ample opportunities.

Agreement with the Provider

The alliance with suppliers provides easy access to offers and long-lasting relationships, which leads to a low level of investment. Distinctiveness is very important for such co-branding, 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, both horizontally and vertically linked members of a distribution channel form an alliance. Said co-branding can be between supplier-retailer, companies that offer a similar product or service or between the product and the service provider.

Innovation

This approach offers the opportunity to grow in the existing market and explore new markets. In such an alliance, companies come together to create new offerings for customers. Risk and return are two important aspects that need to be considered. Top management cooperation and organizational collaboration are essential to a successful deal.

Co-Branding Benefits

► Increase in sales revenue.

► Exploration of new markets with a minimum 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 the added value of the additional brands associated with it.

► Better product image and credibility with another brand association.

► Increased customer confidence in the product.

► Greater coverage and exposure of joint advertising.

► Prospects for developing working relationships leading to future joint ventures

Co-branding issues

► A proper understanding between co-branding partners is imperative. The greed to get too much in a short time can spoil relationships and even result in failure.

► Once a co-brand takes hold in the market, it becomes difficult to dismantle the co-brand and even more difficult to re-brand alone.

► Companies that have different visions and cultures are incompatible for co-branding.

► If the brand does not have enough credibility in the market, it can negatively affect the other partner’s brand.

► Rebranding by one party may 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 other party’s requirements may result in termination of the co-branding agreement.

► Legal requirements.

► Mergers and acquisitions by one party may be detrimental to the other party.

► Future environmental changes such as political, legal, social and technological or changes in consumer preferences can give unexpected results.

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