Introduced in the 1980s, Co-branding refers to joining of several brands to form a single new brand. Co-branding usually falls into two categories; Ingredient co-branding and composite co-branding. Ingredient co-branding involves using a brand which is popular as an element in making another popular brand. For example, Dell computers has co-branded with Intel processors. Composite co-branding involves using two popular brands collectively to offer a distinct product or service which is impossible individually. So what are the Co-branding Pros and Cons?
Recently co-branding has gained significant rise as more and more companies have joined this form of partnership to optimise for the rising costs of advertising new products.
Here are some Co-branding Pros and Cons
Advantages of Co-branding
- Shared Costs
Individual franchises share the costs of promoting and overhead costs such as facilities, transportation, and distribution of the new brand. This leads cost-saving of a considerable amount.
- Shared reputation
Transfer of the reputation and goodwill of the consumers from the already established brands to the new brand whereby both companies will benefit from it.
- Increased Sales
Taking a new product to the market that is synthesised with the qualities from both brands generates publicity and excitement which leads to a considerable increase in the sales of the new product. The product generates interest from the target market since both brands had a significant number of consumers. The new product thus has a wider customer range.
- Shared risks
Both partners share the risks of the advertising and the marketing costs. Therefore, each company has a limited risk in the process, making it beneficial to both of them.
- Sharing of Technology
Two companies can implement their technologies respectively, to create a product that is of superior quality which cannot be matched by any of the individual companies’ particular product. All this is made possible by co-branding.
- Shared loyalty
The loyalty of the consumers to one brand is extended to its co-branding ally as a result of their collaboration to produce a single product. The consumers infer the same level of quality of the co-branded product to other products the individual company may be producing.
Established companies use their already renowned brand names to form new products and compete making new businesses stay out of the contest. These large competitors are therefore able to weed out competitors off the market.
A company can create a stronger brand through co-branding with another renowned brand. Through co-branding multiple products, the company creates a deeper public impression. This broad range of products reinforces a particular brand more than one product.
Disadvantages of Co-branding
- Financial issues
Co-branding is usually rocked by legal agreements that are complicated, and lengthy negotiations involving sharing of profits and the need for the joint venture. It is hard to balance the profits of both franchises, and making sure that none has a higher financial advantage to the other.
When a consumer is familiar with one brand and is willing to buy the product from it, the association with another brand the customer is not familiar with, may create confusion to the clients and consequently, the client may fail to purchase the product. A misalliance with a brand that has lesser quality may significantly lower the reputation of the other brand. A new brand in the market may also get damaged if it co-brands with a brand is deemed to consumers of lesser quality.
- Overshadowing of Small Businesses
A small business may get masked by a reputed brand during co-branding. The consumers will assume the product is from the renowned brand and will not focus on the small company. Consequently, the entire process may lead to loss of the personal image of the small business.
- Conflict of interests and values
A co-branding process can fail if the two companies in the process share different ethics, values, missions and visions. If the two products have entirely different markets, co-branding may fail. Also an adverse experience with the constituent brand may affect the partner brands and their individual products.
We hope you have now know some more about Co-branding Pros and Cons.
At Red Lounge Agency our business is to create inspiring branding in order to empower brands and most importantly help you leverage the power of co-branding. We have a team of dedicated professionals who are ready to assist you once you contact us.
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