When 1+1 equals 3 – the power of co-branding

February 13, 2023
B2B Brand strategy Marketing communications

Co-branding, also known as a brand partnership, is the merging of two or more brands in the hopes of achieving mutual marketing benefits. At its best this strategy involves the bringing together of two separate brands to create a united offer that benefits existing clients of both brands.

Examples of this include Caltex and Woolworths, Shell and McDonalds on the same forecourt and more recently, the partnership between Adriano Zumbo and Tim Tam.

At its worst co-branding can weaken the perception of one or both brands and fail to be relevant to either of its original audiences. In this blog we are going to examine the power of co-branding alongside the risks, and determine what makes some of these endeavours profitable and others doomed to reside in the marketing hall of shame.

So why co-brand?

What are some of the potential benefits to a business when it chooses to create a brand partnership with another business or product?

1. Sharing in the halo effect

One of the most prominent reasons why co-branding can be a powerful marketing tool is the ability to share in some of the good will customers feel towards the other brand, this is especially true when a large corporate and a not for profit join forces.

A perfect example of this is the RED campaign that was launched in 2006 by The Global Fund. This saw prominent brands such as GAP, American Express and Converse, create limited edition red products, the profits of which were then donated to the prevention and treatment of AIDS. The success of this campaign is widely known, with $130million being raised for the charity. What perhaps isn’t so widely discussed is how much the brands benefitted from this charitable program.

Where huge conglomerates such as Amex, Visa and GAP are often viewed with suspicion their involvement in this campaign allowed consumers to see them in a new light, as concerned citizens of the world.

2. Increased mindshare

Another key benefit of co-branding lies in the increased saturation of brand awareness that comes from bringing two marketing budgets under one co-branded product.

Whereas Tim Tim would traditionally be limited by the marketing budget of Arnotts, by partnering with Zumbo there are now two teams invested in raising awareness of the product. This increased awareness, and therefore mindshare, also comes in to play anytime either product / brand is seen in isolation. Because we now associate Tim Tams with Zumbo, whenever we see the popular chef on a TV show or hear him on the radio, we recall his work with Tim Tam, delivering both brands more bang for their publicity buck.

3. New audiences

When BMW and Louis Vuitton created a partnership that saw the creation of the BMW i8 and an exclusive line of LV luggage designed to fit perfectly into the car’s rear parcel shelf, they were successful in expanding both brands target audience.

Whilst the owners of BMWs and the purchasers of LV designer goods both clearly have an appreciation for the finer things, by creating this co-branded enterprise the car lovers were exposed to a fashion brand that aligned to their tastes, and fashion lovers were exposed to a car the met their requirement for luxury.

The risks of co-branding

So with three very powerful benefits that come part and parcel of a successful co-brand what reasons could any business have for approaching this concept with caution?

1. Cross contamination

Similar to the halo effect, whilst co-branding allows each brand to ride on the positive coat tails of the other, so to the negativity surrounding one brand can infiltrate customer perceptions.

Whilst the risks of this contamination occurring can be limited by conducting the appropriate due-diligence: reading reviews, testing the product, conducting market-research and so on, the risk is always present. A sudden scandal, such as experience by Nike thanks to their association with Lance Armstrong’s Livestrong brand, or a number of negative customer experiences have the potential to cause untold damage.

2. Customer confusion

The strongest co-branded products or offers deliver additional benefits to both customer groups. Where customers can experience confusion is when there is no clear and relevant benefit to the relationship.

Take, for example, Terminator 3 and Toyota – what additional benefits could these brands deliver to their target audience by uniting under a co-branded product? None. Hence this endeavour left customers wondering what on earth a movie about robots had to do with their family’s Japanese car.

When deciding whether to establish a co-branded offer with another business, it can be difficult to judge with any degree of certainty whether success is on the cards. Whilst the potential benefits to your brand via the halo effect and an increase in awareness are attractive, these need to be weighed up against the likelihood of creating confusion in the minds of your customers.

To further research the concept of co-branding, visit our recent blog: 3 important points to consider when co-branding.

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