Standing out in today’s crowded digital marketplace requires business owners to think creatively about brands. Customer attention is a limited commodity that all brands compete for. But there may be opportunities to partner with other brands to gain consumer attention and loyalty.
Brand collaboration, or co-branding, is a strategic advertising and marketing partnership between two brands that each bring success to the other. Collaborating with another brand can help you to share costs, expand your reach, obtain new insights, and grow your business.
Brand collaboration done right can be a win-win for both companies. To keep a partnership from turning sour, however, you should think ahead and lay a strong legal groundwork for success.
When Co-Branding Goes Right
Ideally, partners should align on core values while bringing something unique to the partnership. The synergy of a brand relationship can enhance the strengths of each partner while helping them overcome limitations.
For example, when CoverGirl partnered with the Star Wars brand on a new sci-fi-inspired makeup line around the release of The Force Awakens, the campaign was a hit, allowing the makeup brand to market to female Star Wars fans—an estimated 12 million women. An extensive public relations campaign enabled the CoverGirl Star Wars collection to become the top trend on Facebook, with a 725 percent boost in retailer sell-in and over 250 million website impressions in two days.
HubSpot explains that this was a win-win because it allowed CoverGirl to tap into the Star Wars pop culture phenomenon while getting CoverGirl buyers (i.e., young women) excited about a film franchise that has traditionally been marketed to men.
In short, the collaboration allowed each company to engage with the other brand’s customer base while sticking to its individual strengths. These are hallmarks of a well-planned and executed co-branding campaign.
Hard work played a big part in this campaign’s success as well. Creative Director Sterling Sanders explains how his company set up CoverGirl to succeed using a multipronged strategy that was carefully unfolded for maximum impact.
When Co-Branding Goes Wrong
There are many examples of brand collaborations working to partners’ mutual benefit, but there have been lots of swings and misses, too. HubSpot highlights Kendall Jenner and Pepsi, Target and Neiman Marcus, Kraft and Starbucks, Forever 21 and Atkins, and Shell and LEGO as case studies in co-branding fails. The co-branding mistakes highlighted by these partnerships include
- ineffective communication,
- misaligned values and messaging,
- the partnership did not make sense for both audiences,
- problems over contracts and agreements, and
- poor execution.
Notably, some partnerships, such as Shell and LEGO, can be successful for years until they flame out. LEGO’s race car and gas station sets were long-running hits with kids. Eventually, though, the relationship became problematic for LEGO due to Shell’s poor environmental reputation and consumer sentiment turning against fossil fuel companies. LEGO failed to renew its marketing agreement with Shell in 2016 following a pressure campaign from Greenpeace.
The Value of Data Collaboration
The reasons why collaborations do not work out can be as nuanced as the reasons that they do work out. Each deal should be evaluated on the strengths of its potential benefits—and risks.
Shell and LEGO tell a tale of a partnership simply outliving its usefulness to one partner. Market conditions are constantly changing, and brands must evolve to keep up. This includes the way they evaluate collaborations.
A co-branding relationship also includes the data that is shared between companies. New data privacy regulations make data collaborations a primary benefit, not just an added perk. So-called second-party data, or marketing data obtained from another company (as opposed to the zero and first-party data that you collect directly from customers), are driving new cross-brand collaborations. Market research company Forrester defines second-party data partnerships as when a brand, publisher, marketer, or retailer “gains transparent access to the audience data of another retailer, brand, publisher, or marketer for marketing purposes—to their mutual benefit.”
A 2021 research paper found that 81 percent of US executives are already collaborating or intend to collaborate with other companies on data. Sharing data could provide a better customer experience, leading to better sales. However, if it results in a loss of user privacy, such as through a data breach, serious brand damage can occur. Other potential issues include identity resolution, cost, and a long lag in return on investment.
Conduct the same risk-benefit calculus underlying co-branding partnerships when approaching a collaboration for data-sharing purposes. Risks can be addressed in a data use agreement.
Legal Considerations Before Entering a Collaboration Deal
Many branding partnerships are doomed to fail from the start due to poor planning. To get the most out of your collaboration, pay close attention to these issues:
- Automatic renewal provisions. A co-branding agreement will likely contain language dealing with the termination of the contract. In addition to termination, it should also discuss renewal and renegotiation. Pulling out of a deal early could cost you money, but you could do what LEGO did with Shell and choose not to renew the deal. If your contract has an automatic renewal clause, you must notify the other party within the specified deadline of your wish to terminate the deal before the renewal date. For example, the automatic renewal provision may specify that notice must be given within sixty days or ninety days and that it must be in writing.
- Hidden costs. Sharing development and marketing costs with a partner can save you money. This depends in large part, however, on how those costs are shared. Many of those costs may not be immediately obvious. To cite a real example, the CoverGirl Star Wars makeup line was designed by famous makeup artist Pat McGrath. Did the companies share the development costs, or was it contractually stipulated that either CoverGirl or Lucasfilm pay McGrath? In your co-venture, you may decide to launch a focus group, hire an outside ad firm, purchase an ad on a local billboard, or build a new website. Understand all of these hidden costs up front and make sure your contracts clearly define who is paying for what.
- Payment provisions. The idea behind sharing costs on a collaborative project is to share profits. But you will only get what you negotiate for. First, identify revenue streams from the joint offering. Next, decide how that revenue will be shared. A fifty-fifty split can make sense if costs are shared equally, while an unequal split can offset unequal upfront costs or perceived brand risks. One brand could insist on a bigger slice of the pie if they think their brand carries more weight. Beyond figuring out the revenue-sharing equation, contractual payment provisions must also address when payment must be made, payment form, where payment must be sent, what happens if there are late payments, and audit rights (i.e., the right to peer into your partner’s books to ensure payment accuracy).
Partner with Our Lawyers for Small Business Success
The right business partner can magnify what you do well and fill in the gaps where you don’t do so well. The same is true of the right legal partner.
Our attorneys team up with small businesses to help them anticipate partnership trouble spots, negotiate better deals, and develop agreements that protect their interests. To get help from our business lawyers on the legal aspects of a co-branding project, please contact us to schedule a consultation.
This article is a service of Stafford Law Firm. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.