30-Second Summary:

  • Co-branding is a marketing strategy where two or more companies team up to create a new product or service.

  • There are pros and cons to co-branding, and business owners should weigh the risks and benefits before partnering with another company.

  • We look at some examples of co-branding to demonstrate what works and what doesn’t work when launching a brand partnership.

  • Find out whether co-branding is a good marketing strategy for your company.

Company partnerships can be mutually beneficial to any sized company if handled correctly. Nike and Apple, two companies wildly successful on their own merits, partnered to give athletes easy access to Apple technology like in the Apple Watch Nike. The collaboration is perhaps the best example of a co-branding marketing strategy.

If you are a successful business looking for a way to increase your brand awareness and your current marketing campaigns are falling short, finding a co-branding partner may be just what you need. Keep reading to find out what co-branding is and how it can make or break your brand.

What is Co-Branding?

Co-branding, often called a brand partnership, is a marketing strategy or brand strategy where two (or more) companies combine forces to create a new product or service that is unique to the market. The companies align their resources and marketing efforts to develop not just a product or service but also a brand image for the newly branded product.

The companies work together by bringing each company’s brand equity, reputation, and unique strengths to the table. Ultimately, the companies hope to grow their sales and customer base by offering a product they couldn’t otherwise provide.

Don’t Confuse Co-Branding with Co-Marketing

Co-marketing is a strategy when a company promotes another’s unique offerings. It differs from co-branding in that instead of creating a new service, the companies promote each other’s products to their respective customers.

A good example of co-marketing is the partnership between Spotify and Starbucks. Members of both Spotify’s streaming service and Starbucks’ loyalty program can curate playlists for Starbucks stores. This strategic collaboration allows both companies to expand their demographics through rewards and incentives.

Types of Co-Branding

There are three primary types of co-branding: ingredient co-branding, composite co-branding, and sponsor co-branding.

A chocolate birthday cake iced with Betty Crocker’s Hershey’s icing, an example of ingredient co-branding

Ingredient Co-Branding

With ingredient co-branding, a primary company lends an ingredient or component to another company’s product to create a dual-branded product.

Examples of ingredient co-branding include Doritos Locos Tacos, where Taco Bell tacos are served in a Doritos nacho cheese-flavored taco shell, and Betty Crocker’s Hershey’s Milk Chocolate Frosting made with Hershey’s cocoa.

Composite Co-Branding

With composite co-branding, two well-known brands (one may be lesser-known with a unique offering, but this is not always the case) create a new service or product in composite co-branding. This type of alliance is popular with large and small businesses that complement each other and have favorable customer perceptions.

The BMW / Louis Vuitton partnership is a successful example. The companies combined their luxury brands to develop a line of luggage designed to stack and fit precisely in the BMW i8’s storage space.

Sponsor Co-Branding

For sponsor branding, two or more companies join forces to promote an event or cause. The most cited example is the GoPro and RedBull sponsorship of Stratos, a parachute jump from the edge of space. A record-breaking eight million people watched the live stream.

The Pros of Co-Branding

The most successful co-branding partnerships are with brand partners that share the same values and/or missions. Here are some of the benefits.

Improve Brand Image and Reputation

Leverage the strengths of your partner. A company’s reputation for quality and service will grow the other company’s reputation.

Increase Sales

A co-branding success can increase your sales and boost your revenue.

Reduce Financial Risk

Creating a new product in partnership with another business lets you split the development and marketing costs. Success results in a higher return and losses are minimized in the case of an unsuccessful product.

Tap into New Markets

Your co-branded marketing effort will extend into your partner’s target audience, thus increasing your brand name exposure. A successful campaign will generate a new set of consumers to the partnered brand.

The Cons of Co-Branding

Co-branding is not always a win-win for the companies. Two popular retailers, Target and Neiman Marcus, failed with their co-branded clothing line. Target’s cost-conscious customers did not want to pay for the edgy, expensive line. Here are other downsides to co-branding.

Harm to Brand Image and Reputation

While a successful endeavor can help both brands, a failed partnership could damage both brands.

Low Return

Your payoff may be small if you bring more to the table than your partner. You want a return commensurate with the amount of work and resources you expend.

Too Stressful

Without synergy between the companies, there may be conflict and stress. Have enough discussions and company interactions to get the vibe.

A business owner researches ideas for brands, products, and services to co-brand something with

Photo by Christina Morillo, Pexels

Research Your Co-Branding Options

Co-branding can give your company the boost you need to take it to the next level. Every business venture comes with some risk so plan well before settling on a co-branding partnership.

Find out more marketing, business development, and sales tips and tricks in our Learning Hub.

At Sonary, we provide the knowledge so you can make better informed and faster decisions. We offer software reviews for email Marketing, Merchant Services, POS, Payroll Services, etc.