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Pros and Cons of Co-branding

Co-branding is like a double-edged sword; it can work wonders for your business or fail completely. This Buzzle article will enlist the pros and cons of co-branding for you.
Pros and cons of co-branding
Tip
Using co-branding wisely can help diversify the risks, increase sales, generate brand awareness, and get cost benefit.

Co-branding has gained immense importance in the recent years. It is a synergistic marketing partnership between two or more companies which allow the use of their logo, brand identifiers, etc., for a new product. Let us see an everyday example for better understanding of the concept. Betty Crocker's brownie mix has Hershey's chocolate syrup in it. This helps combine the best qualities of both the brands, thus, creating an excitement among consumers. This ensures that customers flock to the stores to buy it immediately.

It is a wise move, indeed, as it discourages other private players from copying the product or coming up with a similar design. Sometimes, such strategic partnerships take place to mark a special occasion; for example, Mattel and Fiat got together on the occasion of Barbie's 50th birthday to create a pink-colored 500 Barbie car. Sometimes, such arrangements can take place between an individual and a company. For example, Michael Jordan and Nike came up with Air Jordan, a brand of shoes and athletic clothing. Hence, it can result in a win-win situation when co-branding takes place within the right brands. However, it also comes with its share of disadvantages. Here's an elaborate look at its pros and cons.

Pros

Shared Consumer Loyalty
One of the key benefits is that loyal customers of one brand may display the same affection for the other. This will earn the product a good number of patrons.

Reputation
As the established brand already enjoys a considerable amount of goodwill and reputation, it gets transferred to the new product, and both companies benefit from it.

Customized Product
A good co-branding can help deliver a better product which will cater to the needs of the customers in a better way. This also helps boost the sales.

Shared Risk
The risk of a high marketing and advertising cost gets shared between both partners. This leads to a limited risk for each of the companies; hence, it will prove beneficial to both.

Cost-effectiveness
As the advertising costs, manpower, facilities, transportation, distribution, etc., are shared between both parties, it leads to a considerable amount of cost saving.

Increase in Sales
By giving the target market a new product which is fused with qualities of both the brands, it creates excitement, generates publicity, and often leads to a significant boost in the volume of sales.

Brand Awareness
Co-branding works wonders for brand awareness for both companies. As people like to know more about this collaborative product, it results in an increased level of brand awareness for both.

Product Awareness
Due to collaborative advertising and marketing, the product receives a vast coverage. This leads to better product awareness among customers.

Technology Sharing
Often, two mighty companies implement their respective technologies to create a product which proves to be stronger than their individual products. This can even lead to world-class state-of-art technology.

Portraying the Right Image
Often, co-branding helps establish both the brands in positive light. They come across as companies who believe in the benefits of collaboration, are ready to experiment, and incorporate innovation.

Wide Range of Consumers
As the product enjoys the interest of a target market for both the brands, it is able to reach out to a wide range of consumers.

Cons

Dilution of Communication
One of the greatest drawbacks is that both the brands go without being noticed. This is because of the dilution of communication, that would have otherwise worked for the brands independently. This may render the entire co-branding initiative to be pointless.

Impact on Brand Equity
Just imagine what will happen when a brand which enjoys a good reputation co-brands with one that people associate with substandard quality. It will cause people to lose their trust in the good brand and even think that it also offers below-par products.

Business Ethics
It is important that you enter into co-branding with a company that shares your organization's values, ethics, and vision. Else, the partnership may fail in future.

Small Businesses May Not Get Noticed
If a small business is collaborating with a well-known big brand, it will do little to focus on the small business. They may even lose their personal image in the entire process.

Large Businesses May Get Affected
Usually, loyal customers of a well-known brand will buy their product; however, they may get confused with their association with a lesser-known brand. This may lead them to be skeptical when buying the co-branding product.

Fear of Misalliance
If you seek alliance with the wrong company, you will not be able to provide value to the customers and meet their expectations. This may lead to product failure.

Examples

The Successful Ones
The English luxury car maker, Aston Martin joined hands with Nokia for making the Nokia 8800.
Procter & Gamble's Downy fabric softener has the scent of Febreze Fresh Air aroma.
The Kellogg's Pop-Tarts come with Smucker's real fruit inside it.
Virgin Atlantic collaborated with MasterCard for coming up with a prepaid card (Virgin Prepaid MasterCard) for people with low credit scores or no bank accounts.
Kmart has been housing the Martha Stewart Everyday line since a long time.

Not-so-succesful Ones
Walmart partnered with Kathie Lee Gifford for the Kathie Lee clothing line only to stop after it was reported that sweatshop labor was used to create it.
BlackBerry appointed pop star Alicia Keys as their global creative director, only for her to tweet from her iPhone (She later claimed her Twitter account was hacked!).
British Telecom collaborated with AT&T to form Concert Communications Services which failed in a short span of time.
Target co-branded with Neiman Marcus department stores to come up with The Target + Neiman limited-edition holiday collection, which did not gain much popularity because of its high price range.
Accenture had to drop Tiger Woods' name from their co-branding after his infamous dalliances became public.

Factors Affecting Its Workability

Brands involved in co-branding
How the brands complement each other
Reputation of the brands
The value they provide to the consumer
Timing of the co-branding
Packaging of the product
Marketing of the product
Price of the product
Benefits it will offer to consumers

Finally, ensure that you find the right partner and strategy to make co-branding work for both the parties. Proponents of this strategy vouch that it can immensely benefit both the companies. However, opponents are skeptical about the same, as the not-so-good reputation of one company can spoil that of the other. Remember that if you want to come up with a co-branding product that clicks, it needs to have the best of both worlds.
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Published: December 23, 2013
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