Strategic partnerships are nothing new. For decades, companies have been working together, with businesses like Starbucks and Google, Spotify and Uber, and McDonald’s and Coca-Cola teaming up for their mutual benefit. Some of these companies may not seem to have much in common, but the best strategic partnerships find creative ways to expand audiences and potentially enter new markets. When you combine forces, you can build brand awareness and ensure profitable futures for both organizations.
What are strategic partnerships?
A strategic partnership is a collaboration between two or more entities that pool resources, technology and/or finances to achieve mutual success. Generally, non-competing businesses choose to work together to mitigate risks such as expanding marketing efforts in unfamiliar territory, which can be a costly endeavor with no guarantee of success. In this scenario, working with a strategic marketing partner is a great way for a business to improve its ROI because this allows it to quickly expand its customer base at a low cost.
A strategic partnership is also sometimes referred to as co-branding. It allows businesses to share information, services and other resources they may not otherwise have access to. Each business is then able to grow at reduced costs.
There are six different kinds of strategic partnerships:
- Integration partnership: This type involves integrating separate operations or services to make customers’ lives easier. Integration partnerships are common among sales-as-a-service companies that create APIs to integrate with other services. For example, one of the best email marketing services may partner with several content management system vendors so customers can connect, modify or move data from one program to the other seamlessly.
- Technology partnership: This arrangement entails one business employing another to help them with their technology services. This can be as simple as two businesses working in the same office building splitting the cost of an expensive piece of equipment, such as a large-format printer. Explore the reasons your business should have an IT partner.
- Financial partnership: This common partnership usually involves a business working with a third-party financial or accounting company to create value for their organization by reviewing datasets. The partnering financial company generally audits the business’s finances, completes a market analysis, and generates a forecast and insights to help the business’s leaders make decisions.
- Marketing partnership: This partnership is also extremely common and can be as straightforward as two businesses marketing each other’s products or services to expand their reach. The best marketing partnerships operate in similar fields, such as a local general contractor partnering with an interior designer.
- Supply partnership: This type of partnership involves a manufacturer partnering with a vendor to stock their shelves with a particular product. For example, an electronics store may partner with an audio manufacturer to exclusively sell its brand of headphones. Another example is an office building that works exclusively with one manufacturer to stock cleaning supplies.
- Supply chain partnership: This arrangement is typical among larger businesses and comprises multiple companies working together to create a product. For instance, a company that sells televisions may work with several other businesses to manufacture their product; one company develops the screen, a second produces the electronic components, and a third creates the plastic or metal housing. [Learn about supply chain distribution.]
Before you enter into a strategic partnership, consider which type will best suit your business’s needs.
What are the benefits of strategic partnerships?
As the definitions above indicate, strategic partnerships are essentially symbiotic relationships. Each partner has something to gain by working together, whether by decreasing costs or sharing resources. Below, we’ll dive into some of the less tangible benefits in detail.
1. Access to new customers
One of the most important parts of developing a business is widening your reach. A strategic partnership can mean getting access to new customers, and that also means an opportunity for free advertising. When you partner with another business, you may be able to reach their clients as well. This makes for an incredibly effective marketing strategy — you’re stretching your reach to double the clientele.
A company will only want to partner with you if your business is strong and prevents value. If your organization is on shaky ground and the arrangement has nothing to offer the prospective partner, such a deal is likely not in their best interest.
2. Opportunity to reach new markets
Along with access to new customers, your brand could potentially expand into new markets if you find the right strategic partner. Consider Google and Starbucks as an example. If you were to associate a company with coffee, Google probably wouldn’t be the first to come to mind. But when the two mega brands work together, they can dip into each other’s markets. What if, for example, Google created virtual coffee shops that mimicked the Starbucks experience? That would get Starbucks into the metaverse, a market it is new to but one Google has experience with. Likewise, Google doesn’t typically target coffee fans, but doing so through a partnership with Starbucks would give the company new territory to explore.
Google and Starbucks did embark on a strategic partnership back in 2013, when Google provided the chain’s coffee shops with faster Wi-Fi.
3. Added value for existing customers
Another benefit of a strategic partnership is the value it adds for your existing customers and what, in turn, that value produces for your business. If your partner relationship presents advantages for your current clients, their loyalty to your brand will likely increase. Building brand loyalty is critical because it encourages one of the most powerful marketing tools: word of mouth. Customers who hear positive comments about your business are going to tell their friends about it, which means your business will grow. [Read related article: What Makes Customer Loyalty Important?]
4. Better brand awareness
Another significant result of a strategic partnership is the construction of and increase in brand awareness. One of the most crucial things you can do for your small business is to get out there and let people know who you are. When you partner with other organizations or influencers, you offer more chances for people to be exposed to your logo and other branding, which creates organic curiosity.
Brand recognition is an essential first step in becoming a household name. In terms of strategic partnerships, you could work with an already-established business that boasts a large customer base. If that business starts publicly promoting your company, you’ll not only get more attention, but you might also attract other organizations to work with.
Keep in mind that when you partner with another company, any bad publicity they receive could reflect negatively on your business as well. Consider these brand fails on social media — if one of your strategic partners ends up in a similar situation, your arrangement could do more harm to your brand than good
5. Building brand trust
Brand trust spawns naturally from a good business partnership. When companies see you work well with others and generate profit from it, they will be more willing to help out and support your business too. It’s all part of creating a healthy, stable and productive business network. You want to develop positive relationships with everyone, and partnerships help you meet and work with new people who can potentially help you grow your business when you need it most. Additionally, consumers may trust your brand more if you partner with a company they already trust.
What are examples of strategic partnerships?
Many top companies engage in strategic partnerships on a regular basis. While your business is no doubt smaller than the ones cited below, these examples are great for inspiration. Consider how you could apply similar arrangements at your own company.
Sherwin-Williams and Pottery Barn
This strategic partnership benefited both parties by appealing to customers interested in home improvement projects. On the Pottery Barn website, users were able to coordinate Sherwin-Williams paint colors with the available Pottery Barn furniture pieces. The site also linked to a blog with DIY tips for painting projects.
Spotify and Uber
Although the music-streaming service doesn’t seem to have much in common with the ride-sharing app, these two companies partnered to give Uber riders a chance to control each ride’s music with Spotify. Why does this arrangement make sense? Spotify provides a unique service in a busy marketplace, while Uber offers riders a chance to listen to their own playlists.
Ford and Eddie Bauer
The car manufacturer partnered with the apparel giant to create unique advertising opportunities for both companies. Select Ford vehicles were outfitted with premium Eddie Bauer features like leather seats, while Eddie Bauer accessories like luggage were printed with the Ford logo. Both companies were able to increase their brand awareness this way.
The partnerships above were all formal arrangements governed by contracts. To protect your business, you’ll want to have a legal agreement in place. That will particularly come in handy if you need to dissolve a partnership, which could be complicated depending on how intertwined the two companies are.
Sean Peek contributed to the writing and reporting in this article.