Milka chocolate bars filled with Oreo cookies, Adidas sneakers with Goodyear soles, AppleWatches with Hermes wristbands. Just three of countless examples of how more and more brands have engaged in co-operations with other brands to the advantage of both parties.
Co-branding activities can primarily serve the following three target areas:
1. Brand building/image transfer
With the aim of brand building/image transfer, the focus is on associating one's own brand with the positive attributes of the partner brand. Through the closeness of the cooperating brands, new complementary attributes of one brand are transferred to the other brand.
2. Access to technical expertise
In order to get access to technical expertise, close-knit co-operation is always required between the parties involved. Therefore, it is the rarest form of co-branding. One prominent example here is GoreTex. As an essential ingredient in high-quality clothing products, the brand’s expertise gets literally woven into the final product of its partner brand.
3. New markets/revenue growth
In order to extend your market and growth, one of the following four factors is needed: new customers, new countries' markets, new distribution channels or new price setting. This strategy was utilized for example by Western brands that did not have a global appeal when they entered new markets in Asia.
These objectives indicate why there are only a few cases of digital co-branding so far: the market conditions weren’t right yet. While digital is a growth market, co-brandings are mostly utilized in the later stages of the product life cycle and/or within saturated markets in order to get the most out of thinning margins. Furthermore, it’s also important to consider that the digital economy is to a large extent defined by a winner-takes-all mentality. A brutal competition is fought until one or a few monopolistic/oligopolistic winners dominate the market. Not exactly a set-up that favours the co-operation of equals.
Nonetheless, there are some prominent examples of digital co-branding. They can be seen as a sign of the growing maturity of the digital industry.
Facebook has recently started to endorse all of its acquired brands, namely WhatsApp and Instagram. However, first in line was the VR glasses brand “oculus” which Facebook acquired in 2014 for USD 2 billion. From very early on Facebook wanted to benefit from oculus’ image as the leading virtual reality (VR) company. While application areas of the product and the business potential of VR were still quite opaque, it was the hottest tech topic of that time and offered what Facebook’s brand needed: the image of an innovator and room to grow.