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 a popular business practice to strive for a positive association between different brands that can develop synergy. A well-executed co-brand strategy can lead to a win-win situation for both co-brand partners and can help realize untapped markets or untapped opportunities. Concisely, it’s essential for handling almost all marketing issues, from building initial awareness to building customer loyalty.

The companies form a co-branded alliance to meet the following objectives:

► Expansion of the customer base

► To make economic profit

► 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

► For operational benefits

Co-branding is frequently practiced in the fashion and apparel industry. Some of the examples of co-branding 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, to distribute through branded retailers, etc.

Co-branding 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 binding rights, obligations and restrictions for both parties. It includes important provisions and should be carefully worded to provide clear guidelines 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 starts with endorsements from celebrities and institutions. It can improve the brand image. Sponsorship can provide ample opportunities.

Provider Agreement

The alliance with suppliers provides easy access to offers and long-term 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 give customers a whole new experience and improve customer value. In value chain co-branding, members of a distribution channel linked both horizontally and vertically form an alliance. Such co-branding may be between provider-retailer, companies offering a similar product or service, or between product and 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. High-level management cooperation and organizational collaboration are essential to a successful deal.

Benefits of co-branding

► Increase in sales revenue.

► Exploration of new markets with minimal expense.

► Appropriate approach when the company seeks a faster response.

► Access to a new source of financing.

► Technological collaboration between two companies gives better results than could be achieved with the efforts of a single company.

► Income from royalties.

► Shared risk.

► Businesses 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.

► Greater 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 the co-brand partners is essential. The greed to get too much too soon can mess up 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-establish the 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 changes or changes in consumer preferences may give unexpected results.

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