What do we mean by co-branding?
Co-branding is a conscious partnership or strategic alliance between two or more brands with the intent of offering a new or improved product or service. Co-branding combines the market strength, brand awareness, positive associations, and cachet of two or more brands for the benefit of both parties and their consumers.
The idea of offering a new or improved product or service is essential, as it separates co-branding from co-marketing. Co-marketing includes joint content creation, as practised by Red Bull and Go Pro, licensing agreements, such as those undertaken by Disney and M&S or Marmite and Asda, or incentive promotions, such as online competitions run between clothing company Hush and holiday let listing platform Coolstays. Co-marketing also includes initiatives such as event sponsorship or celebrity/influencer endorsement.
For this article, we are focusing on co-branding relationships.
What are the benefits of co-branding?
Effective co-branding relationships take time and effort to identify and establish, so brands would not seek them out if there were no significant benefits.
Co-branding expands your brand’s reach. Your existing audience is added to that of your co-branding partner, so both parties benefit from increased exposure to more people. The relationship can open access to new geographic markets if each party has different distribution coverage.
Co-branding facilitates cost and resource sharing. Marketing budgets are split between both parties, and the marketing teams of both organisations can collaborate, sharing best practices to the benefit of all.
Co-branding can improve trust and loyalty. Relationships between new and established brands can benefit both; the new brand receives gravitas and a boost to its reputation and trustworthiness, and the established brand gains contemporary kudos and an innovative fillip from the newcomer. Two established brands will also gain by reputational association; the common or complementary values and behaviours of well-chosen co-branding partners amplify each other’s best features, making their joint offering more attractive and engaging to their combined audience.
At the bottom line, co-branding relationships are seen to be worth investing in because they boost sales. A bigger audience, increased trust, and reduced overhead logically combine to increase revenue. However, it may also lead to each brand being able to stretch into new areas of product or service offers that would not have been as feasible if attempted alone.
Types of co-branding relationship
We suggest there are two distinct types of co-branding relationships, ‘balanced’, with two brands of equal status, or ‘ingredient’ with a clear primary and secondary brand.
In a balanced partnership of equals, three options are available for naming and branding the joint offer. First, you can invent a new name and brand identity. Kanye West and Adidas did this in consumer goods with the Yeezy range of streetwear products. A B2B example would be when developers Taylor Woodrow and Hutchison Whampoa created a joint venture company, Circadian, to develop the Lots Road Power Station site in London. The relationship between the two equals is usually made explicit in all marketing material.
The second option is to combine elements of both party’s names and identities to make the relationship evident to their intended audience, with little further explanation necessary. For example, construction companies Mace and Willmott Dixon became MWD Healthcare when they formed a strategic alliance to compete for contracts to build hospitals under the P23 Framework. Similarly, to undertake the herculean task of digging the Crossrail tunnel under London, tunnelling and infrastructure development companies BAM Nuttall, Ferrovial Agroman, and Kier joined forces as BFK – with each brand’s key brand colour being included in joint marketing material.
The final option is to display both brands on whatever products or services result from the partnership. Adidas (again) and Gucci did this, and like many collaborations these days, they signified it with an x between their names. Always ones to ‘Think Different’, Apple and Nike separated their logos with a minimalist vertical line when co-branding watches and compatible apparel. Apple (along with several other high-profile brands) also scored another, more philanthropic hit with their Apple(Red) co-branded devices that helped to raise money for AIDS research and treatment in Africa.
Ingredient branding takes a slightly different approach. Though both partners might be well known, incorporating a product or service from one within the product or service from the other makes the primary brand offer more appealing. The ingredient brand also benefits from association with a respected brand and increases its reach and revenue.
The most famous example is Intel, renowned for the quality and performance of its microprocessors. Their enormously successful ‘Intel inside’ campaign made those computers containing their hardware more attractive to consumers. It made Intel chips the must-have processors for people who took their computing seriously.
Other examples include Spotify’s relationship with both Starbucks and Uber, where the availability of streamed music playlists can considerably enhance the customer experience of both a morning coffee and a taxi ride. Music also plays a part in the mutually beneficial relationships between audio manufacturers such as Bang & Olufsen, Bose, or Harman Kardon with automotive brands such as Audi, Bentley, BMW, and Porsche.
Other examples of famous ingredient brands – whose inclusion is beneficial enough to warranty explicit signification by the primary brand – include Gore-Tex, Microban, Teflon and Nutrasweet. Like Intel microprocessors, these brands are rarely sought after for themselves, but because of their perceived quality, their inclusion increases the appeal of the products they are incorporated into.
How to pick a good co-branding partner
Selecting the right co-branding partner is a strategic art that requires careful consideration. Irrespective of who makes the initial approach, a range of compatibility metrics need to be evaluated.
Make sure your values and objectives align
Seek partner brands that create a comfortable and understandable relationship – where you share commitment and beliefs that are mutually compatible. Both brands need to point in the same direction so that the relationship seems authentic and plausible to their combined internal and external audiences. Having a robust brand platform in place right from the outset makes this process much more straightforward.
Check that your audiences are compatible
The point is to maximise reach and sales through exposure to a larger audience likely to be interested in the offerings of both partner brands. The demographics need not be precisely the same, but they need to share a state of mind, an outlook or worldview that ensures the offerings from each partner will be perceived as relevant to all.
Evaluate each other’s reputation and reach
You need to find a partner that has a positive image, a loyal fan base, and that can potentially expose your brand to new markets, channels, or geographies. When established brands partner with emerging ones, the quality of the reputation of the new brand takes precedence. The established brand brings the reach, and both brand’s reputations are enhanced by their association.
Ensure your products or services are complementary
The point is to add value to your customers, not cannibalise each other’s market share. It should be an easy and obvious journey for potential users to understand how and why your combined efforts benefit them.
Establish clear goals, roles and responsibilities
Agree on how you and your partner will collaborate and communicate throughout your co-branding relationship right from the outset. Set the details down on paper and make it contractually official. Reliability, transparency, and equality of contribution will all help ensure the relationship’s success.
Agree on how you are going to communicate
After all the effort necessary to establish a co-branding partnership, it would be criminal not to take advantage of the opportunity. A combined marketing team, shared costs, and all the new stories that the juxtaposition of the two brands inspires should facilitate the creation of memorable collateral and experiences.
By following these principles and learning from successful examples, companies can create mutually beneficial co-branding partnerships that elevate their brand identities, facilitate the development of new products and services, and drive business growth.