With billions of resources being spent on advertisement and marketing of brands, many companies have joined alliances by merging their knowledge and reputation to produce new and higher quality products and services that lead to enhanced satisfaction of customers. Successful examples include Coach and Lexus, Diet Coke and Nutra Sweet, Pillsbury Brownies and Nestle Chocolate, Crocs and Disney, IBM and Intel, Betty Crocker and Hershey, Breyers and Hershey, Lays and KC Masterpiece, Sony and Kodak, and so forth. These co-brandings have created large benefits for stakeholders.
However sometimes co-branding can pose the threat of differential advantage on one partner and generate potential competitors. Brands should decide whether they would like to co-brand or extend their brands by increasing product or service range. Many a times, co-branding effects one partner positively and the other negatively.
Successful co-branding happens only when both the brands add value to the alliance. This value prospective is gauged by analyzing how the brands would complement each other and who their potential customers would be. Research suggests, consumer attitudes do not change much when strong brand names co-brand as compared to lesser-known brand names. However, attitude is just one aspect of measurement. The true benefit of co-branding can be assessed by examining revenues, profits, and consumer base.
It is a common myth that co-branding is only suitable for large international brands. However, this is untrue, as many small businesses are linking and co-branding with giant brands like Procter & Gamble, Nike, and Starbucks. The key is to select the right brand that would effectively complement the other brand. In addition, entrepreneurs should know, that co-branding, or for that matter any branding, is an ongoing process and not a one-time event.
The reasons for co-branding vary from company to company. Some of the reasons are listed below with examples.
1. Co-branding is a means of introducing one’s products or service to the consumers of another product. For example, the Intel Inside promotion launched a brand that made consumers realize what was inside their IBM and Compaq computers. This movement led to almost 300 computer manufacturers co-branding with Intel.
2. Co-branding can reap benefits for a company from its partner’s loyal customers. In 1984, Nike got together with Michael Jordan with the rationale that all Jordan fans would feel affectionate and loyal towards Nike and choose it over its competitors. Similarly, Doritos launched a Taco Bell flavor and Pizza Hut flavor while Haagen Dazs introduced a Bailey's flavored ice cream.
Continue on to the next page to find out more about the pros and cons of co-branding.