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12 Pros and Cons of Co-Branding

Co-branding is the practice of two or more companies or brands coming together for a common marketing strategy. The goal is to market and sell new products or services for both of those companies or brands. A modern example of co-branding right now would be Finish Line shoes being sold through Macy’s Department Stores.

You can use similar marketing concepts in your one presentation to the public or you can combine multiple concepts if you prefer. Here are key points to consider when looking at the pros and cons of co-branding in today’s marketplace.

What Are the Pros of Co-Branding?

1. It costs both brands less to reach a larger audience.
In most co-branding arrangements, the brands or companies involved are sharing the marketing costs. This allows them to reach a potentially larger audience while lowering their overall expenses.

2. It increases market size.
Co-branding is most effective when two different companies come together for a marketing plan. This allows each natural customer base to be attracted to what the other company has to offer. An example of this would be the co-branding effort of Tim Horton’s with Cold Stone Creamery.

3. It can improve a brand’s reputation.
If one brand is really struggling, but the other in a co-branding situation is really successful, then the struggling brand can get a boost to their reputation from this marketing effort.

4. It creates leverage.
Small businesses can have a difficult time establishing themselves in a competitive marketplace. By utilizing co-branding, they can begin to leverage their advantages in a world where the larger companies have mature customer relationships in place. This gives them a potential opportunity to legitimately compete.

5. There is a shared pool of talent.
Each company or brand can put their best people on this type of project so there is a collaboration. This even saves manpower costs and reduces the need for outsourcing because two teams come together to create one consistent marketing product.

6. Loyal fans feel like they’ve been given more value.
People who are loyal to a brand are unlikely to let their preferred products or services go very easily. Without new offerings, however, some loyal fans might start to think about leaving. Co-branding allows a company to introduce new ideas to their most loyal customers without having to actually develop new ideas.

What Are the Cons of Co-Branding

1. There are usually financial issues that develop.
Co-branding offers profit-sharing agreements and other joint-venture scenarios that can make one brand feel like the other is taking advantage of them. This complex relationship is often government by several legal agreements that take place before the campaign goes live, which means there is the cost of negotiation to consider before this ever gets started.

2. Sharing reputation isn’t always a good thing.
A struggling franchise gets a boost from a successful franchise, but the reverse is also true. This can be especially bothersome for successful brands if the combined target demographics begin to see the two companies or brands as one combined brand instead.

3. One company or brand might not be able to keep up.
The customer response to a co-branding effort is usually positive from an overall perspective. Sometimes it is so positive that sales surge in unexpected ways. If one brand can keep up with this demand, but the other cannot, then this outcome will drag down the reputation of both demands.

4. It can create confusion.
Many consumers like to have competitive products from which they can choose. When there are too many products, however, what tends to happen to the consumer is a feeling of confusion. They lose their confidence. They enjoy the convenience of multiple choices under one campaign, but the confusion drives them over to a completely different brand.

5. Reduced risk doesn’t mean zero risk.
There will always be risks involved when marketing new products or services. Being able to combine resources through co-branding can help companies be able to reduce the amount of risk they are taking, but it won’t completely eliminate it.

6. Some cultures just aren’t compatible.
Some companies might be a good match from a product or service standpoint, but their internal cultures might not be compatible. Sometimes co-branding just isn’t a good fit, which means it takes time to develop the relationships necessary to understand the full potential of this venture.

The pros and cons of co-branding show that there is a potential benefit in introducing new products to an established marketplace, but only when a clear message has been offered. If both companies can offer a concise message to both targeted audiences, then it can be one very successful marketing campaign.

Have you participated in a co-branding effort in the past? We’d love to hear about some of the lessons you learned from that experience.

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