In a recent article, Bloomberg Businessweek pointed out how large and small companies alike are increasingly turning to co-branding—two brands joining forces to promote one product—to increase their sales. Two great examples were included to illustrate: Basic—Hershey’s Syrup added to Betty Crocker Brownies; and more sophisticated—Nike and Apple teaming up to create the Sports Kit.
So does this mean that there could be co-branding opportunities for your small business?
According to small business/entrepreneurial advisor and inc.com contributor Marla Tabaka, co-branding can benefit all kinds (and sizes) of businesses, including giants like Macy’s. But small business owners often have a difficult time imagining how the process works and how it could produce profitable results. One of the keys, she says, is teaming up with synergistic businesses, or those with shared values or similar target markets. You want a business that’s different from yours but one that your customers would relate to and benefit from (and vice versa). Co-branding is a way of adding real value for your customers without having to bear the entire burden yourself.
But the co-branding picture is not all rosy, says Houston Chronicle’s smallbusinesschron.com: There are distinct advantages and disadvantages to co-branding. It can strengthen participating brands by reinforcing them, creating more and deeper impressions. There’s also something called signaling, which means that a brand can gain perceived attributes just through its association with another brand. Co-branding can save companies money while enabling them to offer real added value to customers.
But for small businesses not fully established in a market, experts say, co-branding can be a disadvantage, because bigger competitors are leveraging already-popular brands. And for brands that aren’t well established or known, co-branding has the potential to confuse or even put off consumers. That’s why any business considering co-branding is urged to proceed with caution when choosing another business with which to co-brand.
But even if you’re not sure if co-branding would be an effective strategy for your business, don’t abandon the idea completely. There are examples of successful co-branding all around. Case in point: Entrepreneur.com contributor Jason Daley writes about franchisees that have teamed up to make co-branding work. In the franchising world, Daley writes, co-branding is also known as piggyback franchising or dual or combination franchising. In practice, it means putting two franchise concepts, such as Pizza Hut and Taco Bell, in the same building, which can draw more customers and sales for both. Some in the franchise industry at one point called it the biggest driver of sales and profits since the introduction of the drive-thru window!
When two franchise brands are “right” for this kind of co-branding, there are definitely benefits, from operational cost savings to evening out customer flow. The obvious one is catering to groups of customers who want different kinds of food. But the news is less than good when the brands, for whatever reason, just don’t click. This can add operational complexity and cost and even cause skeptical customers to skip the experience altogether, when the brand combination doesn’t make sense to them. So while there are challenges with co-branding, bringing two brands together must have sound strategic underpinnings.
Want to see more examples of co-branding? Bloomberg Businessweek provides 20 of them, across several different industries. Some are well-known combinations; others, not so much. But all provide food for thought for any business owner who might be part of a co-branding situation one day.
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