In the modern age of digital marketing, we are now growing more aware of certain increasing trends. One of these trends is that of co-branding. This refers to when two entities come together and work on a marketing strategy together. These parties may be two or more brands, companies, or a mixture of both.
When a company or brand decides to co-brand, they are developing and marketing products for the audiences of both parties. For example, we can now see MasterCard and Apple teaming up with the service ApplePay. This has led to Apple and other software companies joining hand with many credit card companies for a stronger hold on their consumer base.
However, co-branding does require putting a lot of effort and trust into a marketing campaign. In order to find out both the pros and cons of such a strategy, keep on reading. We’ll start with the upsides first:
Pros
- Lower Costs
The main motivating factor in co-branding is probably the outreach one gets at a much lower cost. Two brand names are on one billboard, thereby slashing the cost by at least half. Plus, both companies may be able to afford a larger billboard than they would have without co-branding.
- Doubles The Market And The Audience
When you collaborate with another brand or company, you automatically benefit from their market share as well. It’s obviously more beneficial for you if you’re the smaller fry, but both parties actually get access to different customers and different demographics.
If you tweet something from your company profile, simply tagging the other party would invoke all the focus they have as well. In this way, customers in one brand would also become loyal to the other brand. For instance, there is a line of Louis Vuitton luggage specially made to fit a BMW. This is with regards to both proportion and the feeling if luxury the two brands offer. So even when the owners of BMW may not need a new luggage set, they would get one just because it goes with their car.
- Enhances Reputation
One company may have faced a declining reputation before they co-branded with another. For instance, a clothing line may have received accusations if using real animal fur, thus leading to protests and violence against it. However, if they are known to team up with an eco-friendly company, such as The Body Shop, they could step out of that negative spot soon enough.
In this way, companies could also have more influence on the market. They could ride on the coat-tails of their well-established counterpart. They could hence gain a reputable standing much more quickly than if they were to continue working on their own.
- Picking The Best Talent
When it comes to co-branding, companies usually ten to put their best representatives forward. This obviously saves each party a great deal of money. They get a whole team of new employees without having to fix a salary for them! They hence get all the benefits without too many of the costs.
Another advantage here is that outsourcing declines. Thus, both companies can concentrate on launching a consistent product with a streamlined marketing strategy. They don’t have to depend on people who aren’t officially part of their projects.
- Enhances Consumer Experience
When two parties star co-branding, their loyal customers feel like they’ve been given something new. For instance, those who stick to Nike for their exercise items are inclined to listen to music when they play. When Nike announced its teamwork with Apple, fans of both companies were overjoyed.
One of the collaborations between these popular companies included a microchip in Nike shoes. These were connected to Apple devices that would record and display the progress achieved. Hence, the customers felt like they were being given something to their advantage. This only increased loyalty, and, of course, sales.
Cons
- Money Issues
There may be a lot of money saved by co-branding, but there is also a lot of spending required otherwise. For instance, both parties have to sign agreements and contracts, which have their own costs. At the same time, these legal proceedings are necessary in order to develop trust between the parties. If there are more than two, the legal costs would only go up.
Hence, the parties in a co-branding scheme would need to spend time and effort in managing their venture. This is a considerable factor that one should ponder upon before seeking out a co-branding option.
- Declining Reputation
A brand may enhance its reputation by being associated with another, but co-branding could have the opposite effect as well. If one company is especially successful, its ties with a lesser brand may not be appreciated. Hence, companies have to be very careful about whom they associate with. There is a reason why Louis Vuitton chose BMW to cater to and not Suzuki.
If a brand is not careful about whom they’re dealing with, they may actually be seen as upholding the other company’s values. If one company is branded with animal-testing, even The Body Shop may be seen as untrustworthy if they co-brand with it.
- Too Many Options
When consumers are faced with several new products, the result can be a lot of confusion. Even though companies try to give convenience to their consumers, not everyone may be ready to accept the updates. This would largely depend on the demographic they are targeting, and the speed at which they are launching products.
If the decision for co-branding is not made with much consideration and deliberation, it could end up confusing customers more than delighting them. They could hence pivot and choose a completely different brand. Hence, co-branding may actually decrease sales instead of increasing them.
- The Clashing Of Cultures
When two companies start collaborating, their workforces usually have to come into contact with each other. This may not be a good situation for either of them, simply because they’re not used to each other. They may tolerate the quirks of an employee in their own midst but have serious problems with anyone from a different company trying to give them orders.
Training programs may hence be necessary when you’re considering a co-branding venture. This is a good idea in order to integrate two workforces but would ultimately require additional spending.
- Not Keeping Up
Even if sales do go up as a result of co-branding, the smaller company just may not be able to keep up with the new demand. This could result in a loss of reputation and revenue for both companies.
Wrap-Up…
Keeping the main advantages and disadvantages of co-branding in mind would help you with making such important decisions in the future. Just because everyone is doing it doesn’t mean you have to as well. On the other hand, co-branding is not something reserved for the market leaders. Startups and small companies may also look towards co-branding as a way to expand their market share and grow in a safe and effective manner.
However, knowing about the pros and cons is a way for each company to weigh the decision of co-branding very carefully. If they do this before they proceed, they can avoid some serious problems and reap the full benefits when they are mature enough to do so.
Anna Marsh
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