From the March 1999 issue of Startups

How does a small company act like a big one? By building relationships with other businesses to increase sales for all. It's called partnering, and it's the most important success strategy in business today.

If you've recently received a marketing piece from a professional association or an offer from a major credit card company, that's partnering in action. The association or bank offers you a group of services delivered via a network of partners that provide everything from reduced rates on rental cars and long-distance services to life insurance.

Partnership marketing is the new survival strategy for entrepreneurs, too. With the number of new businesses on the rise nationwide, there's increasing competition for market share in every sector. By wooing marketing partners that successfully sell products or services to your target customers, you can expand your business and create a big-company image while sharing marketing tasks and expenses. Beyond the cost savings, you'll also gain access to valuable resources, such as qualified prospect lists and the support of larger, more experienced marketing partners.

Here are four ways partnering strategies can help you build your new business.

1. Launch a new product or service. Say you've developed a new product or service and want to launch it nationally, but don't have millions of dollars to do it on your own. Why not partner with a major association or corporation that's already marketing to the same target audience?

Suppose you've created a revolutionary Web-design product for entrepreneurs that's simple and affordable. If you partner with a small-business association, a financial services company that targets small businesses nationally, or even one of the top five long-distance carriers, both sides benefit. You assist them by adding value to the group of products and services they offer. Meanwhile, your product becomes part of their national marketing program, so you get access to a huge prospect base, wide exposure for your new product and expert marketers to put the program together. (Not to mention, you save millions!)

2. Test a new market. The right marketing partners can help you test a variation of an existing product on an entirely new market or market segment. Say your company sells sports apparel for school teams and you decide to test-market bomber jackets with vintage sports-car emblems, targeted at adult sports-car enthusiasts. Rather than attack this new market on your own, you could partner with associations or businesses that sell related products to sports-car drivers and test-market your bomber jackets to their customers at a special price. Your company would gain access to qualified prospects for the new product, get quick feedback (whether good or bad) on the test-marketing effort, and save a lot of money.

3. Widen your prospect base. One of the best ways for start-ups to expand without adding overhead is to partner with companies or people offering complementary services. You'll often see an advertising copywriter teaming with an art director to offer full-service advertising development. Together, they have access to a wider range of prospects and can bill for their work on a project basis, rather than hourly, increasing their incomes. They can also combine their marketing efforts, reducing the amount of time each of them has to spend individually marketing his or her services.

4. Expand your business geographically.What happens when a medical billing service in Los Angeles partners with similar businesses in Dallas, Chicago and Boston? They establish relationships that allow them to share resources and expertise. At the same time, they create a nationwide company image. With this type of partnering, each business can choose to keep its own corporate culture and client base, or the companies can blend into a single, larger entity.

Take, for example, the graphic designer from Washington, DC, who had three full-time employees and a thriving business. When she got engaged to a New Yorker, she needed a way to start a new life there without giving up her growing business. She succeeded by partnering with a graphic design firm in New York City, collaborating with them and working from their offices two days a week. Within a year, she had full-time offices in both cities.

Lip Service

Gabrielle Melchionda's first attempts at getting a distributor for her all-natural lip balm failed. So the owner of Mad Gab's Inc. in Portland, Maine, figured she'd just have to handle sales herself. Then a call on a prospective customer changed her mind--and her strategy.

Melchionda, 28, had gone to visit family in San Francisco and spent a few hours that weekend trying to drum up some business in the area. One health-food store owner told her she was doing things "all wrong," that the "right way" was through a distributor. Rather than just talk, the merchant introduced Melchionda to a well-known and respected distributor. That distributor liked the lip balms, took them to a one-day trade show, and sold product to 50 stores.

That was in 1994. Today, Melchionda has agreements with six distributors--including one that turned her down years ago--and she's lining up even more. Her advice:

  • Ask for referrals. Go to the retailers you want to sell to, and find out what distributors they prefer to buy from; then approach those distributors.
  • Understand distributors. Take the time to look at the manufacturer/distributor relationship from the distributor's perspective. Know their product lines and what they're looking for; be prepared to discuss pricing and margins. "The biggest thing a distributor wants to know is: Can they move your product?" Melchionda says.
  • Build a relationship. Work with your distributors on training, sampling, advertising, promotions and specials.
  • Choose carefully. Start with a small, regional distributor that works with companies compatible with your product line and goals.
  • Use existing relationships as leverage. When you get a few distributors, let other potential distributors know. If you're selling to a certain store and can convert that business for the distributor, use that as a negotiating point.
  • Be prepared. Don't approach a distributor until you have the necessary marketing support and manufacturing capability.

Jacquelyn Lynn (JlynnFL@aol.com) writes about business and management from her home in Winter Park, Florida.

First Things First

Before you start, consider these important tips for smart partnering:

  • Put the parameters of your marketing partnership in writing. This ensures everyone involved understands what is expected of them and intends to live up to their commitments.
  • Before approaching a major corporation, such as a long-distance provider or financial services company, be sure you've established a track record and can deliver your product in high volume when needed.
  • Be prepared to sell prospective partners on the benefits of forming an alliance with you. What do you bring to the team that will strengthen the overall marketing program?
  • Expect to spend time negotiating and planning. Developing win-win partnerships is challenging, but your reward is a financially stronger, more successful company.

Contact Source

Mad Gab's Inc., (800) LIP-LUBE, http://www.madgabs.com