Final answer:
An advantage of co-branding is that it allows a firm to increase its own brand equity by leveraging another brand's equity. This strategy can improve brand reputation and helps in overcoming market barriers without high advertising costs.
Step-by-step explanation:
One advantage of co-branding is that it allows a firm to leverage the equity of another brand to increase its own brand equity. This can be particularly valuable for a firm that wants to enter new market segments or introduce new products by partnering with a brand that already has a strong presence and positive consumer perception. Through this strategy, positive perceptions of one brand can help enhance the reputation of the other, potentially creating a symbiotic relationship that benefits both.
In contrast, co-branding does not always lead to a host-parasite relationship, nor does it make a firm merely a pseudo brand. Moreover, co-branding should not be confused with market cannibalization, which occurs when a company's new product eats into the sales of its existing products, nor should it be conflated with bundling, which is selling multiple products together as one package. Given that large advertising budgets can serve as a barrier to entry for new competitors, as seen in the example with Coca-Cola and Pepsi, co-branding can be a strategic move to overcome such barriers and establish a foothold in a competitive market without the need for exorbitant marketing expenses.