Introduction
Cobranding, or a multiple-brand strategy, is a form of close company partnership when two companies create a single product or a series of products with both of their brands. For that, they should usually find some points of connection where they have similar target audiences and can complement each other in their competencies or brand awareness. In this case, the partnership will be successful, but it can lead to losses in other cases.
Cobranding of Amazon and American Express
Amazon and American Express created a partnership to enhance their commercial products. In 2020, Amazon introduced its Business and Business Prime credit cards, which are aimed at small businesses to help them improve their performance. Both of them are under the American Express payment system (Amazon Staff, 2020). In 2021, Amazon Payment Services partnered with American Express to open its cardholders’ access to various online merchants (Abdallah, 2021).
In both cases, brands combined their expertise and audiences to provide financial services. AmEx’s target audience is cardholders, while Amazon’s includes online services and marketplace users. Their joint audience will consist of people who want to make their payments easier and receive help in opening their businesses.
Advantages
Cobranding has various benefits for both companies, as its cumulative brand awareness may enhance its performance. Seven potential cobranding benefits are expertise exchange, brand equity increase, production and marketing costs reduction, expanding brand awareness and customer base, and revenue increase (Muller, 2005).
Cobranding will probably be successful if each brand complements the other (Nguyen et al., 2020). For example, one will use new opportunities to expand its customer base, while the other will increase sales to existing customers. If they work in different industries but have contact points, their joint products can be potentially more successful due to expertise exchange, brand equity, and increased brand awareness. This is the case with the Amazon and AmEx partnership: their contact point is the finance industry, in which they create their cobranding products, such as business cards.
Disadvantages
Still, negative consequences for cobranding are possible, too: their brand awareness and revenues can fall for both. DiPietro (2005) states that such a strategy can significantly increase operational costs, dilute brand identities, and ruin performance. Brands become interconnected, and risks for one can significantly damage another (Zhang et al., 2022).
However, for the Amazon and American Express cases, brand identities will unlikely dilute, as their customer bases are different: Amazon is an online tech company, while AmEx is a payment system. Performance can be ruined if the combined marketing strategy is unsuccessful, but their cobranded products have clear aims and target audiences (Abdallah, 2021; Amazon Staff, 2020). Lastly, increasing operational costs is a possible risk, as both companies need to create a joint product and invest money in it. However, this risk is predictable and can be solved by good expense management.
Conclusion
Therefore, the Amazon and American Express partnership will likely be successful, as they have a lot of potential for mutual enhancement. At the same time, negative consequences are mostly irrelevant to their type of cobranding. Companies have different customer bases, but they have found the point of contact, the finance industry, which can enhance their success. The only relevant risk for them is the possible operational cost increase, but it can be easily handled and solved.
References
Abdallah, M. (2021). Amazon Payment Services partners with American Express. Paymentservices.amazon. Web.
Amazon Staff. (2020). Amazon and American Express extend relationship to launch new business credit cards in the UK. UK about Amazon. Web.
DiPietro, R. B. (2005). The case against multibranding strategy. Cornell Hotel and Restaurant Administration Quarterly, 46(1), 96–99. Web.
Muller, C. (2005). The case for cobranding in restaurant segments. Cornell Hotel and Restaurant Administration Quarterly, 46(1), 92–95. Web.
Nguyen, H. T., Ross, W. T., Pancras, J., & Phan, H. V. (2020). Market-based drivers of cobranding success. Journal of Business Research, 115, 122–138. Web.
Zhang, Q., Chen, J., & Lin, J. (2022). Market targeting with social influences and risk aversion in a co-branding alliance. European Journal of Operational Research, 297(1), 301–318. Web.