What Is Co-Branding? Tips for a Successful Brand Partnership

By Indeed Editorial Team

Updated 3 December 2022

Published 19 May 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Co-branding occurs when two or more companies work together to increase brand profits and visibility. Many companies often use this strategy to develop and create products that can attract shared target customers from each company. If you're a marketing professional, learning more about this strategy may be beneficial for you. In this article, we explore what co-branding is, discuss its advantages and disadvantages and list some tips towards achieving success for such brand partnership.

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What is co-branding?

Co-branding, also commonly known as a brand partnership or co-branding, involves two or more businesses collaborating with each other to accomplish their marketing goals. Co-branding usually combines the resources and identities of both brands to develop a new product or service, often featuring new logos and colours to help customers identify the partnership. Businesses use this strategy to increase awareness for each brand so that they can reach more customers.

This strategy can be effective when two brands that have a similar level of profit and consumer awareness use it, even if they're selling products or services in differing industries. Together, their products or services can create a unique synergy that adds value for both their customers. These products and services that the brands created together could be a speciality item or a status symbol that may be effective in attracting new customers and boosting sales.

Related: A Complete Guide to Business Partnerships (With Definition)

Co-branding vs co-marketing

While these terms may seem similar, they don't have the same meanings. Co-branding is when two companies work together to create a new product or service, but co-marketing is when two businesses align their marketing efforts but don't develop new products together. For example, a streaming service company and a cafe might collaborate during the holiday season to curate a holiday music playlist for customers to listen to based on their favourite beverages. This is an example of co-marketing in which the partnership did not produce any new product for customers.

How do co-branding happen?

Co-branding happens when two or more brands work together to develop a product or service. The more effective co-branding campaigns usually happen when both businesses have values, cultures and missions that align. Partners that co-brand often combine their resources, whether it's technology, funding or expertise from each department. The co-branded product or service created by both companies often has its own individual logo or brand name.

If the co-branding campaign is a success, both companies enjoy better profits, an increased customer base and good brand associations. Even if a campaign is unsuccessful, the risk is spread out among both partners. This helps to lessen the companies' overall losses since they don't lose an excessive amount of money from it and can simply cease the partnership to retain their reputations.

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Advantages of co-branding

Co-branding can be a beneficial strategy for businesses that are looking to grow their business by increasing their financial resources and reputation. Here are some advantages of this strategy:

Elevated brand recognition

Associating its brand with a well-known one can help to grow brand recognition and awareness for the company. During such campaigns, the company might expand its market to include followers of the other brand, increasing the potential number of visitors to its website and subscribers to its mailing list. This can also help a company target new demographics for its brand, especially if the co-branding effort is successful, leading to more brand recognition from consumers who weren't originally aware of its brand.

Increased brand credibility

Brand credibility relates to a company's perceived trustworthiness and expertise. Although an ideal co-branding campaign might involve entities with similar reputations, a company can also increase its credibility by partnering with a brand that's more popular or credible. With this co-branding strategy, customers of the more popular brand may start to trust the other brand more due to the cross-association.

Enhanced brand loyalty

A company can increase brand loyalty among regular customers by releasing new products with a partnering company. This strategy helps to create excitement and anticipation in the existing customer base by giving them new products. Customers also tend to be more loyal to companies that are constantly improving themselves and their services.

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Increased financial resources

Marketing campaigns are often expensive for companies since they require investments in various advertisement methods to raise awareness for their products or services. With co-branding, businesses can share the cost of marketing. Instead of only one brand spending its resources, multiple brands can share the costs by combining their resources, which can greatly reduce the financial risk to each entity.

A combined marketing effort can also help reduce the labour costs for each company's employees. When you co-brand with another business, employees from each company work together to develop ideas to engage their customers while forming a professional connection with each other. Co-branding allows a company access to talents from each other's company, which helps to ease workload both ways during a marketing campaign.

Challenges of co-branding

Here are some potential risks that could affect co-branding negatively:

Affects brand reputation

Partnering with a brand that's receiving negative attention, such as from a scandal being reported in the media, might affect a company negatively. This is because customers might assume that the company condones its partner's actions. To help protect its reputation, it's essential for a company to conduct thorough research on the brand it's planning to enter a partnership with, and to choose to work only with brands whose values and culture align with its own.

Creates interpersonal conflicts between professionals

To make co-branding successful, it's important for the employees in either brand to get along with each other. Partnering with a business that has a very different working culture may cause conflict, such as when the employees do not agree on various decisions. Such conflicts can affect how effective the partnership is, so it's important to build a positive relationship with the partnering company and keep an open communication so that employees from both sides can learn to work with each other well.

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Causes confusion for customers

While co-branding may seem like a good way to expose customers to new products and services, it may also affect customers who don't understand the partnership. This might be more likely to happen if the collaboration is between two very different companies, such as a technology startup and a fast food entity. Such a disparity may cause customers to become confused about the new product and the campaign's messages.

Tips for a successful co-branding

To ensure co-branding is successful, it's important that the companies involved clearly explain how the new product or service relates to the different businesses. Here are some tips you can consider following:

Specify the goals

Before embarking on co-branding with another company, it's important for your company to establish what it wants to accomplish with such a partnership. A possible goal could be expanding to include a new target audience, or boost sales and its credibility. Knowing the purpose of the co-branding can also help your company in selecting a suitable partner.

Contemplate the benefits

When your company wants to enter a partnership with another brand, it may first take some persuasion for the other brand to become willing to collaborate. You could consider how the co-branding can benefit the other company so that you can develop a persuasive pitch. It may be helpful to identify what challenges the potential partner might experience and think of ways that this co-branding may help them resolve some of these challenges.

Keep up with industry trends

Your company can ensure that its co-branding partnerships are successful by making an effort to stay updated with industry trends and happenings. It's important to know about other co-branding in the market, so that you know who not to approach and what strategies to adopt that haven't been utilised yet. It can be useful to research on these other partnerships to create products and services that are unique, which may help attract the attention of consumers and increase sales.

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