Co-branding – Meaning, Types and Advantages and Disadvantages

What is Co-branding

Co branding is the utilization of two or more brands to name a new product. The ingredient brands help each other to achieve their aims. The overall synchronization between the brand pair and the new product has to be kept in mind.

Example of co-branding - Citibank co-branded with MTV to launch a co-branded debit card. This card is beneficial to customers who can avail benefits at specific outlets called MTV Citibank club.

Types of Co-branding

Co-branding is of two types: Ingredient co-branding and Composite co-branding.

1. Ingredient co-branding implies using a renowned brand as an element in the production of another renowned brand. This deals with creation of brand equity for materials and parts that are contained within other products. The ingredient/constituent brand is subordinate to the primary brand.

   For instance - Dell computers has co-branding strategy with Intel processors. The brands which are ingredients are usually the company’s biggest buyers or present suppliers. The ingredient brand should be unique. It should either be a major brand or should be protected by a patent.

   Ingredient co-branding leads to better quality products, superior promotions, more access to distribution channel and greater profits. The seller of ingredient brand enjoys long-term customer relations. The brand manufacture can benefit by having a competitive advantage and the retailer can benefit by enjoying a promotional help from ingredient brand.

2. Composite co-branding refers to use of two renowned brand names in a way that they can collectively offer a distinct product/ service that could not be possible individually. The success of composite branding depends upon the favourability of the ingredient brands and also upon the extent on complementarities between them.

Advantages and Disadvantages of Co-branding

Co-branding has various advantages, such as:

1. Risk-sharing
2. Generation of royalty income
3. More sales income
4. Greater customer trust on the product
5. Wide scope due to joint advertising
6. Technological benefits
7. Better product image by association with another renowned brand
8. Greater access to new sources of finance

But co-branding is not free from limitations.

1. Co-branding may fail when the two products have different market and are entirely different.
2. If there is difference in visions and missions of the two companies, then also composite branding may fail.
3. Co-branding may affect partner brands in adverse manner. If the customers associate any adverse experience with a constituent brand, then it may damage the total brand equity.