2. Ensuring Successful Business Partnership
Partnerships with other companies in or outside of one’s own sector are often
frowned upon by companies, due to their complexity, risk, and time
consumption. Yet, the right partnerships can provide significant benefits for
companies, helping them gain a competitive advantage against their
competitors. Companies need to follow a set of guidelines in ensuring they build
relationships with the right partners…
Partnering with other companies is a practice that has been around for centuries.
Driving the concept of partnerships is a simple fact – no one company can do it
all. Companies need partners for a variety of reasons – to give them access to
new potential clients, to offer certain products or services to their own customer
base, to enhance their image – among others.
Some examples of the types of partnerships that are the focus of this article
include:
Bundling-Related Partnerships: This relatively underutilized type of
partnership is one which results in the offering of a bundle of complementary
products or services. An example of this is a partnership between Qwest (a
telecommunications company that provides high speed internet and
residential phone services) and DIRECTV (a satellite television services
company). These two companies have an agreement whereby Qwest offers
DIRECTV services to its residential customers. The integrated services are
provided as a product bundle with discounts. Qwest maintains marketing
efforts of the partnership and DIRECTV installs equipment and provides
technical support to the customers.
Alternative Sales Channel Partnerships: This method of partnering allows
one company to utilize the sales channels of another company, in a
complementary beneficial manner. An example of this is a partnership
between 2degrees (a mobile operator in New Zealand) and RED Group Retail (a
leading book and stationery retailer in Australia and New Zealand). Thanks to
this partnership, customers can now buy 2degrees SIM cards and top-up
vouchers from all of the RED Group stores. 2degrees thus expands its
distribution footprint, and RED Group gains significant footfall to its retail
locations.
Loyalty Program Partnerships: This partnership model is one in which a
company aligns itself with several other companies in its loyalty program, so as
to offer a variety of benefits to its program members. An example of this is
evident in the Qitaf loyalty program launched by Saudi Telecom Company in
2006, with dozens of partners (such as McDonalds and Panda Hypermarkets)
from various sectors. Such partnerships allow Saudi Telecom to offer benefits
beyond traditional free minutes and SMS’, and drive footfall to the
participating retailers.
Sponsorship Partnerships: In these types of partnerships, a company teams
up with globally recognized / admirable brands to boost public perception and
gain media attention. A very recent example of this type of partnership is one
3. in which Turkish Airlines announced their sponsorship of football giants
Barcelona and Manchester United, tying the matchup to their “globally yours”
branding campaign. These sponsorships have brought significant attention to
the carrier in its effort to become a European powerhouse in the airline sector.
Campaign Partnerships: This type of partnership is promotion driven, made
to support specific marketing initiatives. An example of this is mobile operator
Orange UK’s tie up with Pizza Express restaurants in its “Orange Wednesdays”
campaign, allowing its subscribers to get 2 entrees for the price of 1 along with
complimentary appetizers at Pizza Express restaurants.
Not all partnerships are as fruitful or successful as the ones listed above. More
often than not, partnerships end up yielding little to no benefits for the
engaged parties, and result in significant waste of resources. Some examples of
such failed partnerships include:
Tivo & BSkyB – TiVo, a digital video recorder, was launched in the United
Kingdom in 2001 with a partnership with BSkyB – only 35,000 units were sold
over the next 18 months. The partnership was abandoned in early 2002
because BSkyB launched its own digital video recorder for subscribers of
BSkyB’s satellite TV service.
Starbucks & Hershey’s Chocolate – The two strong brands decided to team
up in partnership to leverage each others’ success through launching a
premium chocolate for sales through Starbucks coffee stores. The partnership
ended in less than two years due to poor sales performance.
GLG & Weider – These two companies teamed up to sell sweeteners. The
partnership was intended to take advantage of Weider’s expertise in marketing
and distribution of nutritional products, and GLG’s knowledge of stevia, a
natural sweetener. Within one year, one entity was suing the other, claiming it
was breaching contractual terms around sales activities. The partnership ended
before any benefits were realized by either entity.
Before entering into any short or long term partnership, companies need to
conduct a thorough vetting process regarding their potential partners. We
recommend this process include the following key steps:
1.) Fit Assessment – A fit assessment needs to be conducted initially to ensure
that the potential partner is a proper fit in terms of culture, brand, customer
perception, etc. Essentially, this means ensuring that there are no skeletons in
the closet of the potential partner, that the perception of one’s own customers
regarding the potential partner is positive, and that the corporate culture of the
potential partner is aligned with one’s own corporate culture. Factors to examine
include:
Brand image in the marketplace
Fit of the company and its culture to one’s own
The maturation of the company relative to one’s own
The past performance of the company in any partnerships it has had
The overlap of customers / target customer groups
4. Positive / negative coverage of the company in media
The perception of one’s own customers regarding the company
2.) Piloting – Once a potential partner has been thoroughly vetted, the next
step should be to conduct pilots before entering into a full-blown partnership
agreement. Piloting of the partnership will allow a company to ensure that the
potential partner will deliver the benefits expected of the partnership – if the
pilot is unsuccessful and does not generate the intended benefits (be it new
customers, additional revenues, added press coverage, etc.), then a company can
easily look for an alternative partner without having entered into a long-term
undesirable relationship). In terms of the type of piloting to be conducted, the
scenario will vary based on the type of partnership being entered into. As an
example of how piloting would work in a product bundling scenario, the
following activities would need to be conducted in the pilot engagement:
Identify various retail locations to utilize for piloting purpose
Design the product bundles to be tested in the pilot
Quantify anticipated benefits
Conduct product bundling activities, supported by localized marketing
communications support
Measure performance of pilot activities
Quantify realized benefits & compare to control groups and past
performance
Extrapolate results to determine if anticipated benefits can be realized
Make go / no-go decision around partnership
3.) Contractual Stipulations – Now that a potential partner has been vetted
and tested through piloting activities, the next step is to engage for the long-
term. To ensure the partner lives up to the desired expectations, the partnership
contract should address all factors which can influence the overall success of the
partnership. Such factors include:
Human resources to be allocated to the partnership
Capital to be allocated to the partnership (particularly around
communications and promotion of the partnership)
Service level agreements
Risk management processes
Contractual breach alleviation process
Exit strategy for contractual breach or other reasons
Threshold benefits (tying financial benefits to be realized by the partner to
the overall success of the partnership)
By using the above listed approach, a company can significantly increase the
likelihood it teams up with the right partner for any given initiative. Failure to go
through these steps in entering into a partnership can prove disastrous, resulting
in little to no impact on the bottom line, wasting time and money, and possibly,
most importantly, driving a company away from future partnerships that could
generate positive results.
5. About Forte Consultancy Group
Forte Consultancy Group delivers fact-based solutions, balancing short and long term
impact as well as benefits for stakeholders. Forte Consultancy Group provides a variety
of service offerings for numerous sectors, approached in three general phases -
intelligence, design, and implementation.
For more information, please contact
info@forteconsultancy.com
Forte Consultancy Group | Istanbul Office
www.forteconsultancy.com
