Co-branding alliances serve to expand the strengths of two well-respected service providers and attract new business for both of them from markets that neither was previously able to tap alone. In that sense, co-branding is merely a specialized form of commercial alliance.
Provisioning by Co-Branding
In a co-branding model of service provisioning, the two service providers serve as alliance partners in a disclosed fashion. The relationship might be a joint venture to collaborate on a case-by-case basis, a joint venture for a fixed term, or even a test to determine whether to engage in a long-term joint venture.
Risks in Co-Branding
In any service agreement, failure to perform in accordance with the agreement (and the expectations of the parties) will tarnish the goodwill and value of the brand names and trademarks of the service providers. Co-branding may be an effective tool for entering new markets, but like a joint venture it suffers from instability both on the upside and the downside.
Promotion of Partner’s Mark
In successful co-branding agreements, the parties rejoice in success. But if that success promotes the goodwill of one party more than the other, in the long-term the relationship will terminate.
Loss from Partner’s Breach
The biggest risk of a co-branding involves reputational risk, since the loss of reputation may be expected to have a much greater negative impact upon a service provider than a particular unhappy customer. In a sense, loss of reputation can occur vicariously.