We are well aware of the popular marketing phenomenon known as product bundling. In product bundling, products from within one brand are bundled together to promote both the products to the customer. So a new soap might be bundled with an old shampoo, which together builds the popularity for both – Soap and Shampoo.
Co branding is a similar exercise where instead of using individual products, two brands come together and form a bundle. Naturally, because brands are far more complex then products, co branding is not an easy exercise. If it were easy, we would have many more examples of co branding over the years. However, we have few and far in between.
The definition of Co branding / co-branding
As per Investopedia – Co branding is a marketing partnership between at least two different brands which are independent providers of goods or services. This co branding effort can result in various type of promotions such as sponsorships or advertisements. The association will benefit both the brands more when they come together, rather than when they are promoted individually.
Example of Co branding strategy / co-branding
A typical example of an International co branding exercise is when Dell computers or HP computers advertise with Intel (or you can count it the other way around). Intel as a processor is known for its computing power and hence is assumed to be far above the rest. Naturally, when Dell claims that it has “Intel Inside” this benefits the brand tremendously.
On the other hand, Intel itself cannot keep advertising its processor because the processor on its own does not serve any function. It needs the whole computer to advertise. Thus, this co branding exercise has existed since years and will exist for the coming years. This is because Intel and Dell when advertised alone, will have lesser advantages as compared to when advertised together.
There are various forms of co branding which are as mentioned below
- Same company co branding – Products from within the same company are co branded – HUL can promote a packet of Knorr soup with a packet of Bru coffee (both brands belonging to HUL)
- Joint venture co branding – Giving discounts on selective Debit cards being used with a brand. For example – Snapdeal offering 5% discount on HDFC debit cards.
- Multiple co branding – Wherein Multiple companies form an alliance to promote their products. This might be for a PR exercise or any form of promotion.
- Retail co branding – When retailers tie up with each other to utilize resources better. One of the common alliance is between KFC, Taco bell and Pizza hut (all belonging to Yum Brands).
One important aspect of Co branding is that both the brands should have equivalent Brand equity, otherwise it will not work. If one brand has lower brand equity, then it is affecting the higher brand equity of the other brand it is tying up with. If HUL for example ties up with a local brand, then HUL falls in bad light and seems like a needy brand. So HUL will always do co branding with an equivalent brand – a brand from which it derives benefit (this is business after all).
But the above is not true in all cases. There are cases where a brand might tie up with an inferior brand. This is known as Ingredient co branding. There are two types of co branding – Ingredient and Composite.
Ingredient co branding / co-branding
When one brand is renowned but the other is not, yet they enter co branding. The objective of such a co branding exercise is to get the latter brand renowned. Example If a new detergent brand is introduced with Rin or Tide which are both famous brands. This is Ingredient co branding.
We see such Ingredient co branding occurring regularly especially in same company co branding because the company wants to promote its other, non famous brands.
Composite co branding / co-branding
Composite co branding is what we observed in case of Dell and Intel – where both the brands are renowned and the composite result of combining the branding exercise is better then advertising the brand on its own.
An excellent example of Brand equities being developed due to Co branding was the recent tie up between BMW I8 and Louis Vuitton. BMW I8 was a concept car by BMW which was developed into a final product and was an ultra premium luxury car. Because it was ultra premium, Louis vuitton bags worth $20000 were given along with the BMW I8, thereby building brand equity for both – BMW for its ultimate product and its service of providing premium quality hand bags, Louis vuitton for the excellent quality of hand bags it gave.
Some advantages to a co branding strategy exercise include
- Shared resources
- Reduced costs and hence higher margins
- Branding boost especially if both the brands are renowned
- Shared risk – All the risk is not bourne by one brand
- Better sales and better customer relations
- Financing becomes easier as two brands are intertwined.
There are several disadvantages to a co-branding strategy exercise
- If anything goes wrong, both the brands are affected
- Brand alliance might be positive or negative in consumers mind and might not achieve the desired effect.
- If 1 brand enters too many co brand exercises, it dilutes itself, and hence the other brands it has associated itself with.
- Consumers may prefer the bundling above the individual offering, thereby dropping the value when the co branding exercise ends.
- Consumers may not focus on the individual brand altogether, thereby causing the co branding exercise to fail.
Thus, keeping the above disadvantages in mind, Managers have to take the right decision whenever it comes to co branding exercises. The brands need to be aligned in the right manner to give a positive impact in the market. This can be done in the planning and tie up stage before the implementation of the co branding exercise.