Co-Branding

Co-branding is when two or more brands put their names on the same product, service or campaign while each keeps its own name and identity. Customers see both logos and understand that both brands stand behind what they are buying.

Why do brands team up?

The most studied reason is borrowed credibility. Akshay Rao and Robert Ruekert (MIT Sloan Management Review, October 1994) argued that when customers struggle to judge quality before they buy, a partner brand’s name works like a guarantee. Their example is IBM and Intel, two branded products combined in one computer. The guarantee carries weight because the partner also loses face if the joint product turns out badly.

The second reason is reaching each other’s customers for less than it would cost to advertise alone. The third is building a product neither side could make by itself, such as a bank that has no frequent-flyer program of its own.

Common types of co-branding

A Vietnam example: the Vietcombank Vietnam Airlines American Express card

Vietcombank, Vietnam Airlines and American Express have issued a co-branded card together since 2005. In April 2012 the three added a Platinum version: cardholders earned 1.5 Golden Lotus (Lotusmiles) miles for every VND 21,000 spent and were greeted as VIP customers at Vietcombank branches (VnEconomy, April 2012). The earn rate has changed several times since, so those figures only held at launch.

Each partner gets something different out of it. The bank has a reason for frequent flyers to choose its card. The airline keeps members engaged through their everyday spending on the ground. American Express gets more cards in circulation in Vietnam through a large bank’s branch network. Co-branding lasts when the benefit to each side is this clear.

Risks and what to put in the contract

• Spillover crises: if one brand gets caught up in a scandal, the other is dragged along. Include a clause allowing early termination if the partner breaches the agreement.
• Audience mismatch: a mass-market brand teaming up with a premium one can make the premium brand look “cheaper” to its existing customers.
• Customer data: spell out which party owns the buyer data and who is allowed to use it.
• Logo rules: size, placement and color, following each partner’s brand identity guidelines.

Co-branding vs. sponsorship and licensing

Sponsorship means one party pays to have its logo appear at the other party’s event or program, and no joint product comes out of it. Brand licensing means renting your name to another company to put on its products, and the licensor usually has no hand in making them. Co-branding requires both brands to put their names on the product and answer to the customer together.

Frequently asked questions

Should a small brand co-brand with a big one?

Yes, if you bring something the bigger brand does not have yet: a niche audience, local materials, a new story. The small brand gains more credibility from the deal, so it usually carries more of the production cost. Before you pitch, get clear on what your brand stands for.

How do you measure co-branding results?

Give each partner its own discount code or link, count the new customers who come from the partner’s audience, and compare branded search volume before and after the campaign.

If you are looking for a partner, or need a framework to evaluate a co-branding proposal against your current brand strategy, contact Adtek to talk it through.