What Is Co-Branding? (With Types, Benefits, and Examples)

By Indeed Editorial Team

Published June 9, 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Brands can combine forces and launch a new offering to improve their marketing efforts and increase brand visibility. Consider understanding this process if you're looking into opportunities brand partnerships can offer. Learning about the concept and strategies of forming co-brands can help you advance in your career in business and help you make more informed marketing decisions involving brands. In this article, we explain what co-branding is, describe how it works, discuss the benefits of forming co-brands, explore common strategies used, and provide examples of brand partnerships.

What is co-branding?

Co-branding, or a brand partnership, is a strategic marketing solution involving two or more brands collaborating to create campaigns that mutually benefit all parties. Aside from putting two brands' names together on a product, the partnership extracts resources from every partner. It combines these resources with their unique identities to create new products or services for the public. They can also create new logos, colour schemes, or brand identifiers to aid the campaigns.

To create successful campaigns with these partnerships, each brand focuses on improving the value of its products or services to provide customers with the best quality available. It's an effective marketing strategy many businesses use to create synergies based on the unique strengths of each brand.

How does it work?

It typically involves independent brands of at least two companies deciding to collaborate or work together to launch a new product or service. It may also spur from a company merger or acquisition to transfer a lesser-known brand associated with a familiar manufacturer to a more prominent company and brand. Companies with similar missions, visions, values, and cultures are more likely to create successful partnerships. The individual brands partner up to create a new brand with its unique brand name and logo and help each other achieve their goals.

Each partner contributes and shares resources, such as funding, expertise, and technological advances to support the campaign. Brand partnerships combine the market strength of the unique companies to increase brand awareness, positive company relations, and healthy business competition among all parties involved. Choosing partners wisely is essential to avoid damaging your credibility and brand reputation.

Related: What Are Branding Strategies? (With Definition and Benefits)

Benefits of forming co-brands

Forming co-brands can benefit all parties, including the separate brands forming the partnership and the customers purchasing the proposed product or service. The benefits it can offer include:

Increases sales and customer base

Collaborating with another brand can help target more customers and potentially generate more product sales. The customers of individual partners can patronize the new brand based on their trust and loyalty to the existing brands. By targeting their various markets and reaching more target audiences, they can deploy their marketing strategies to gain more customers and broaden their market scope.

Enhances brand recognition

When two brands form a partnership to become co-brands, they can explore each other's market. This can increase their visibility and enhance brand recognition for both parties and they have the opportunity to invigorate the interest of their respective customers. They can also gain access to demographics they may not have had access to without the partnership, extending their reach and attracting potential customers.

Read more: What Is Brand Recognition? (Definition, Importance, and Tips)

Establishes credibility

Partnering with another respected business in an industry can enable both companies to build their brand reputation. The two or more brands forming a partnership can establish credibility by raising authority and trustworthiness among their customers. The companies can highlight and reflect each other's strengths to extend their position in that particular market or industry.

Lowers risk

If the co-brand promotion campaign is successful, it can reward both parties with more profits and a more extensive customer base, but partners share the risk equally if it's unsuccessful and doesn't earn them profits. This can help lower their individual risks and losses to the company. It's less likely for a special offered by co-brands to fail because they're combining their marketing efforts, experiences, creative employees, and individual marketing channels to work with more resources that can effectively promote the product. This can help lower the risk of failure and give the new product a competitive advantage.

Reduces financial burden

Marketing and advertising in business can be costly expenditures. All the brands in the partnership typically share this cost, which can potentially result in a greater return on investment. The profits they generate from the campaign may be a lot more than what they invested in promoting or marketing the products. This helps reduce the financial burden on partners and can allow them to develop more creative ideas and funding to promote the other products or services they offer.

Enhances innovation and value addition

Brand partnerships are essential to match the pace of innovation in the business industry. Customers are constantly searching for companies that can offer valuable solutions and innovative brand personalities. Partner brands can contribute their most exemplary creativity and innovation aspects by forming an alliance. They can strategically infuse the best of their brands to create innovative and high-quality products that can add value for consumers.

Types of co-branding strategies

Here are the types of strategies companies forming co-brands use:

Ingredient branding

This is when professionals use a well-known brand as an element in promoting a less popular brand. It involves the creation of brand equity by contributing the compatible ingredients among them. The primary aspect of ingredient branding is finding matching elements, combining the brand personalities, and promoting the new offering as a product that better solves customer problems.

The ingredient brand is usually the primary brand's biggest buyers or current suppliers. Ingredient branding allows for the creation of better quality products, admirable promotions, more profits, and access to better distribution channels.

Same company branding

Companies use this strategy to promote several subsidiary brands under one product. Large conglomerates with smaller independent entities often use the same company branding to promote their business. This strategy involves only one company, but can highlight collaborations between smaller organizations to launch and promote a new product. Similar company branding allows conglomerates to advertise their brands together simultaneously.

Joint venture or composite branding

Unlike ingredient branding, this strategy involves an alliance that two or more renowned brands form to develop a unique product or service in a way that they may not be able to offer individually. It may involve launching a new product or improving an existing one for their target audience. The success of joint ventures depends on the favourability of the individual brands and how well they can support each other to create a functional and accessible offering for consumers. Composite branding typically focuses on value addition and customer retention.

Related: Joint Ventures: Definition and How They Work

National to local branding

This occurs when a nationally recognized brand partners with small local businesses. This type of partnership typically aims to increase the revenue of small businesses and create more awareness for the national brand by targeting local audiences and interests. Since both customer bases are extreme, this collaboration aims to allow national brands to reach a local audience and local brands to reach a national audience. An example of national-to-local branding is the partnership between automobile manufacturers and local dealerships.

Multiple sponsor branding

This type of branding involves multiple companies forming a strategic alliance to promote sales, events, or share technology. Professionals use this strategy to sponsor concerts, sporting events, and tech hackathons. Multiple sponsor branding often provides the opportunity for more sales, improved brand reputation, and increased brand awareness for every company involved.

Co-branding vs. co-marketing

These are both similar yet entirely different concepts that involve brands forming partnerships to increase marketing efforts. The main difference is in the method of execution. Co-marketing involves combining the marketing effort of both partners but without creating a new product or service in the process. In comparison, co-branding develops a new product or service for consumers and promotes it to the public.

Read more: Co-Marketing: Definition, Types, and Benefits

Examples of brand partnerships

Here are helpful examples you can review to get a better understanding of how brand partnerships work:

Example 1

This is a typical example of ingredient branding and shows how two brands collaborated on a matching element of their products and used their ingredients to create better value for their audience:

Cyril Foods is a local company that specializes in the production of healthy cereals for children. Suppose they decide to form a partnership with Damplan Milk Co., a corporation that produces milk for all age groups. Cyril Foods can collaborate with a subsidiary of Damplan Milk Co. that has milk for children to fund a healthy child campaign. This can build a better brand reputation for both brands and spark customers' interest by showing their dedication to children's health and diet.

Example 2

This example depicts a collaboration between two brands to offer a service solution for their customers:

Taxiway is a globally recognized company that provides online taxi and delivery services. It established a partnership with Blues, a music streaming platform that allows its users to stream and listen to music from any device or location online. This partnership provides a solution to customers by enabling them to connect to the driver's system and choose their preferred style of music to enjoy their ride. This service can delight customers of both brands and increase future positive interactions between them.

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