What is Cobranding and How to Use It
Cobranding is when companies cooperate in branding products or join forces to offer their products or services together in the same place. The latter became a trend in the early 90’s when restaurants like Pizza Hut, Taco Bell and KFC started to unite forces by placing branches in trios and duos all over the United States. Some companies also use cobranding to save on marketing strategies by sharing advertising space thus reducing costs.
Cobranding or Brand Partnership
Cobranding or co-branding, is also known as brand partnerships, and it has been specially successful with franchises and credit services. The main benefits of cobranding are cost savings and risk aversion. But also, brand exposure in recent years has solidified co-branding as an option for brands of all industries.
In the food and beverage sector, cobranding is a very cost effective way to operate. It allows businesses the opportunity to save money in upfront costs of opening new locations, in rent and labor costs. On the other hand, it also gives them a way to introduce their products and services to new markets at a fraction of the cost they would normally have to spend. So there are very good benefits to co-branding.
However, cobranding is not a magic solution for every business. There are some things that must be analyzed before considering co-branding as an option for any business strategy. Besides compatibility of the brands, brand recognition must be examined in order to make sure there is a balance between them, so as not to run the risk of affecting brand positioning. If one of the brands is far more established than the other, it can suffer a diluting effect of its brand recognition and there is no real benefit received from the other less known brand. On the other hand, the less known brand will benefit from the other’s market recognition. That is why there must be a balance in brand positioning when considering potential cobranding opportunities.
Cobranding is Reciprocal
Cobranding should be a two way deal, so that there are reciprocal benefits to all involved. This is why most cobranding take place within corporate groups, in which there is a parent company that owns all the businesses or the cobranding takes place among clusters which use this practice to extend their networking effort.
So, how can a business know when cobranding is a good option to implement?
Managers and business owners must consider the following:
- Is the business getting a good ROI from its investment? Whether it’s from the use of space, production processes, workforce or marketing budget.
- Can the business afford to share company information? Such as processes, training procedures and know how.
- What are the pros and cons for the business and its brands?
- What level of brand recognition does it have?
- How will the company’s loyal customers react to a possible co-branding?
- How will employees be affected?
- How are business and administrative decisions going to be made under a co-branding situation?
After considering all these, it could be much easier to know if cobranding is the right option for a business. If the company is benefiting from a good ROI, then why reinvent the wheel, it should stick to what works and look for other opportunities to stay competitive or to expand its market share on its own.
Examples of Cobranding
There are many examples of ways to use cobranding in marketing to reach new segments of consumers and expand brand awareness. Some are:
- Educational materials
- Social media campaigns
- Store credit cards
Depending on each business’ brand recognition, there are many good options to cobrand with. The better its position, the more options available. That doesn’t mean that if the company doesn’t have brand recognition it can’t use cobranding, but the lower the level of recognition the less opportunities available and the higher the investment on its part, on a potential cobranding deal with a better positioned brand.
By Tony Rivera
The X Group Marketing