8 Ways to Turn Partnerships into Profits
Every potential partnership has two customers and every successful partnership delights them both.
Very few companies have the resources and know-how to successfully produce products and also distribute them. While this constraint weighs most heavily on cash strapped start-ups, even a behemoth like Microsoft sells through distributors and Heinz relies on Kroger to pump out its best-selling ketchup.
In a marketplace gone global, productive partnerships are more crucial than ever. Partnering has become so critical that the word “coopetition” had to be coined to describe companies that partner in some areas while competing in others. Yet very few partnerships ever deliver on their symbiotic promise. Why?
The single biggest mistake we make in our partnership efforts is selling potential partners as if they were end users. While the interests of partners and end-users must overlap they are seldom if ever identical
Back in the 1980s, Data Broadcasting Corporation (DBC) developed a product called MarketWatch to deliver real time stock quotes to a PC via cable television. Customers loved it, margins were eye-popping, and as a subscription serviceMarketWatch delivered the Holy Grail of business: recurring revenue.
The critical challenge was growing fast enough to forestall competition. Since reaching critical mass was impossible through in-house marketing, DBC reached out to brokerage giant, Merrill Lynch, for distribution. Merrill was so impressed that it bought a piece of the company and promised to hockey stick sales through its army of stock brokers.
Merrill Lynch launched MarketWatch, but despite some juicy incentives, the brokers didn’t make a single sale. Notone. With alarm bells ringing on both sides of the deal, I was brought in to find out what was going wrong and, if possible, salvage the joint venture.
The first thing I did was buttonhole every broker I could find. It didn’t take long. They repeated the same objection like a well-rehearsed script: “My best customers call five times a day for stock quotes. That’s how I get business. IfMarketWatch gives them stock quotes they won’t need me and I’ll be looking for a job.” Ironically, MarketWatch was dead in the water not because Merrill’s end- users didn’t like it, but because the brokers were afraid they would like it too much!
The solution meant heading back to square one. Through research we established that MarketWatch customers actually traded more and generated bigger commissions for brokers who took the plunge. But the damage was largely done. The word on MarketWatch had spread so fast and become so ingrained that the partnership between DBC and Merrill never came close to reaching its lucrative potential.
Despite the fact that my efforts in this case resulted in less than stellar results, I learned some great lessons on what it takes to produce a successful partnership.
- Know your customer. In every potential partnership there are actually two customers, the partner and the end- user, and we must know them both. If you think you can sell a partner by merely “demoing” your wonderful product you have not grasped this essential point.
- Ask questions. There is no substitute for grass roots research. DBC and Merrill spent too much time in conference rooms trying to imagine every possible contingency. A little sweat equity invested in talking to brokers would’ve been far more valuable. Don’t figure it out. Get out there and find out.
- Beware of Magic Bullets. Getting executives into a room and hammering out a contract doesn’t make a deal. The MarketWatch deal was done in a top down fashion with little attention to the bottom up challenges in the trenches. Every partnership is like moving a stubborn mule. Corporate may push from behind, but there must be boots on the ground pulling on the harness from the front as well. This means priming the pump through joint sales calls and other marketing efforts.
- Think Small. Whenever possible, use a roll out rather than a blanket introduction into a distribution network. Every cleaning solvent recommends trying it first on some inconspicuous place, and this applies to joint ventures as well. Not only will we uncover potential hitches but managing the critical buzz is much easier. Always remember that people talk and that first impressions are critical to making a deal successful. LaunchingMarketWatch in one or two offices would’ve uncovered the broker objection in a few days and saved millions in prelaunch marketing and post launch remedial outlays.
- Get the Buzz Working for You. Military science teaches us to focus scarce resources at the critical spot. With partners focus on one district, a couple of offices, or even a couple sales reps. Flood the zone with whatever it takes until a clear cut victory has been won. This approach produces a proven template for future roll outs, and positive word of mouth will mean the rest of the distribution network will be awaiting their turn with eager anticipation rather than sullen resistance.
- Rely on Persuasion Not Coercion. Always remember that a heavy handed “push” from corporate headquarters often backfires. With MarketWatch, Merrill’s brokers resented being force fed a product they had never signed on for. Part of their poor showing was attributable to just going on “strike” from pure pique at being left out of the decision. Turning things around also meant that the brokers would now have to admit they had been wrong in the first place. Winning hearts and minds upfront among the rank and file is much more effective than relying on diktats and quotas from corporate.
- Find a Hero. When a deal struggles both partners play the blame game. One blames poor salesmanship while the other blames the product. The easiest way to sidestep this situation is to find people to play “hero” during the initial roll-out and focus on them. Once these early adopters are moving product, others will not be able to blame anyone but themselves for missing targets. Besides, watching peers make money is far more motivating than a month of training and pep talks.
- Do Most of the Work. One time Walmart went shopping for sunglasses. The vendor with the best sunglasses at the lowest price didn't get the lucrative partnership. Instead it was the vendor who arrived at the meeting with their sunglasses already tagged and bar-coded to Walmart's spec. The glasses were already mounted on display cases custom designed to take advantage of some unused space the vendor had ferreted out from a typical Walmart floor plan. And the vagaries of inventory management, pricing, and product placement had already been solved by the vendor as well.
Our partners are busy people, and the more of their work we are willing to shoulder the more value we add and the more control we have over how our product is eventually positioned. By going the extra mile, this vendor not only got the deal, but their sunglasses didn't end up in a bargain bin in the shoe department. In my own career I never considered doing more than my share of the work a problem. Instead it was an opportunity to use service to become indispensable and have more control.
My own company started out providing distribution for product manufacturers. Later we developed our own product line and sold it through distributors. In both cases we could not have been successful without our wonderful partners. Over the years, a string of our employees came to my office frustrated over one of our partner’s sloppy bookkeeping, incorrect invoices, balled up shipping, lousy leads, or any number of other high crimes and misdemeanors.
Feigning genuine concern I would eventually say:
“Wow, isn’t that wonderful? If they had it all worked out, they wouldn't need us.”
Use service and selflessness to put your partner’s interest ahead of your own, and in the long run I promise, it will come back to you many times over.