Power In Numbers
One of the biggest challenges for any new company is building credibility and name recognition in the marketplace. An effective way to do just that: Join forces with an established company that has the visibility you want.
The concept of joint promotions is neither new nor unique-and you don't have to be a big company to do it. Gus Conrades and Bryan Murphy incorporated online automotive parts exchange Wrenchead.com in February 1999. Just six months later, they closed a deal with CBS Corp., exchanging a 22 percent equity stake in their company for $33 million of advertising, promotion and other consideration across CBS' media properties over four years. Wrenchead.com is also the national title sponsor of the United States Hot Rod Association (USHRA) Monster Jam, as well as other racing and concert events. Beyond sponsorships, Wrenchead.com uses joint promotions in other ways; for example, they recently held a sweepstakes and gave away a 2000 Chevy Silverado and two Suzuki Quadmaster 4x4 ATVs donated by the manufacturers.
"Through those events, we've garnered visibility on the corporate level," notes Conrades, 32, CEO of Wrenchead.com Inc. in White Plains, New York. That visibility has yielded even more business. The company started with just two people; a year later, the staff had expanded to nearly 100 employees-growth driven largely by joint promotions that linked the small start-up's name with large, established companies.
You can do it, too, says Conrades. Identify your customers and their activities, and then look for entertainment groups or businesses that are already reaching them and devise a way to join forces. Since Wrenchead.com customers constitute a demographic group that goes to car, truck and motorcycle races and concerts, Conrades found ways to sponsor such events.
Conrades approached CBS differently. Rather than making a specific proposal, he went in with a summary of his business and a description of his market. He pointed out that CBS was reaching the market in several ways, and suggested the two companies explore the possibility of a mutually beneficial relationship. "I didn't want to assume I knew what their strategy was," he says. "If you write a proposal, you're boxing yourself into a scenario, and if that proposal doesn't fit their strategy, you've wasted the one shot you had with them."
While Conrades has given up some equity in the company as part of his joint promotion deals, he says it's worth it. "If you look at the use of equity at our stage of development, it's a very inexpensive [way] to achieve a very high level of visibility in the marketplace," he explains.
Not every joint promotion requires equity or even cash. You may
consider bartering, which is what Conrades did when he convinced
vehicle manufacturers to donate their products for his
Don't be afraid to go after deals with giant corporations. Conrades suggests approaching their business development vice president or chief financial officer to explore a potential relationship. If you do your homework and have a common market, you'll probably be able to reach an agreement that benefits you both.