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Strategic partnerships have mutual benefits and can lead to long-term profits.
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 partners 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.
A strategic partnership is a collaboration between two or more entities that pool resources, technology and/or finances to achieve mutual success. Generally, noncompeting 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 return on investment by quickly expanding its customer base at a low cost.
“Strategic business partnerships are about more than just working together,” Caitlyn Wells, founder of the operations agency Upwell Strategies, told us. “They’re intentional collaborations where two organizations combine their unique strengths to create something greater than they could achieve alone. Think of it as finding your perfect business match: Your expertise, values and goals align in a way that amplifies both parties’ impact.”
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.
“Partnerships let you share resources, tap into new customer bases and even split risks so big ventures don’t feel so daunting,” said Theresa Caragol, founder and CEO at AchieveUnite, a company that offers consulting services and educational programs.
There are six different kinds of strategic partnerships:
As the definition above indicates, 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.
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. “[Strategic partnerships] open doors to new audiences who already trust your partner and will soon trust you too,” Wells said.
Along with access to new customers, your brand could expand into new markets potentially 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 megabrands 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.
Strategic partnerships enable businesses to share resources, technology and operational costs without requiring significant capital investment. According to HubSpot’s 2024 ROI Report, customers working with partners see 53 percent more inbound leads and three times more deals closed than those without partners, demonstrating the measurable impact of collaborative relationships.
Partnering with established companies can enhance credibility and build trust with new audiences. 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 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.
Another benefit of a strategic partnership is the value it adds to 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. [Related article: What Makes Customer Loyalty Important?]
Robin Dimond, CEO of marketing and innovation company Fifth & Cor, detailed the value that Fifth & Cor’s own partnership strategy delivered to its customers. “At Fifth & Cor, we completely dissolved our sales team and built out a partnership team instead,” Dimond said. “People are more likely to work with someone they trust. Our partners are people that we personally trust to refer our clients to and vice versa.”
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.
While strategic partnerships offer significant benefits, they also come with inherent risks that businesses must carefully evaluate before entering into agreements. Understanding these potential drawbacks helps companies make informed decisions about partnership strategies.
In business partnerships, partners may become jointly responsible for debts and obligations, potentially putting personal or business assets at risk. When one partner faces financial difficulties or makes poor decisions, other partners can become liable for consequences they didn’t create. This shared financial responsibility means partners must trust each other’s business judgment completely.
Strategic partnerships require sharing control over business decisions, which can slow down decision-making processes and limit individual partner flexibility. Partners must compromise on business direction and operations, potentially preventing quick responses to market opportunities or changes. This shared authority can frustrate partners who are accustomed to making independent business decisions.
Poor communication represents a major risk factor in partnership failure, with misunderstandings and coordination difficulties creating operational inefficiencies. Partners may have different communication styles, decision-making approaches or cultural backgrounds that create conflicts. Without effective communication systems, minor disagreements can escalate into major disputes that threaten the partnership’s survival.
Goal misalignment between partners creates significant risk when companies have different visions for growth, profitability or business direction. For example, one partner may prioritize rapid expansion while another focuses on stability, creating fundamental tension in strategic planning. These conflicts inevitably arise when partners fail to establish clear, shared objectives from the start.
Becoming overly dependent on a partner’s resources, expertise or market access creates vulnerability if the partnership ends unexpectedly. Partnership dissolution due to partner departure, financial problems or strategic changes can disrupt business operations and customer relationships. This dependency risk is particularly acute for smaller businesses that rely heavily on their partner’s capabilities or market presence.
Sharing proprietary information, trade secrets, or business processes with partners creates potential security vulnerabilities. Partners may inadvertently leak sensitive information to competitors or use shared knowledge to compete directly after partnership dissolution. This concern is particularly acute in technology partnerships where intellectual property represents significant competitive advantage.
Many top companies engage in strategic partnerships on a regular basis. While your business is no doubt smaller than most of the ones cited below, these examples are great for inspiration. Consider how you could apply similar arrangements at your own company.
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 do-it-yourself tips for painting projects.
Apple and Nike have maintained a long-standing collaboration that bridges fitness and technology. Their first joint product, the Nike+iPod Sport Kit introduced in 2006, let runners connect a shoe sensor to their iPods to track workouts while listening to music.
The partnership has since evolved, with the companies teaming up on the Apple Watch Nike+, a version of the smartwatch tailored for runners. This edition features Nike-themed bands and watch faces, and it enables athletes to monitor pace, distance and routes directly from their wrist without carrying an iPhone. By combining Nike’s expertise in sports gear with Apple’s innovation in wearables, both brands strengthen their reach in the active lifestyle market.
Wells pointed to HubSpot and LinkedIn as an especially strong example of two leading companies in their fields partnering to create more opportunities for both their audiences.
“They’ve integrated their platforms to create seamless data flow between LinkedIn’s advertising capabilities and HubSpot’s customer relationship management (CRM) while HubSpot has also created incentives to choose to use HubSpot as your CRM to integrate with LinkedIn,” said Wells. “This partnership strategically addresses a common pain point for their shared B2B [business-to-business] market while leveraging each company’s core strengths.”
Dimond noted that partnerships can encompass more than two businesses. At Fifth & Cor, Dimond has been involved in a partnership between the company and two other agencies: The medical marketing company Influx Marketing and the visual brand development agency Pinpoint Creative.
“The three agencies have teamed up to go into clients together and dominate their marketing strategies,” Dimond said, with “Fifth & Cor taking social media, Influx doing paid media and Pinpoint creating an absolutely stunning visual brand.”
“It’s important to have partners that fill in your gaps,” Dimond said, “and that is what we have created.”
Building a successful strategic partnership requires careful planning, clear communication and ongoing management.
Advantages | Disadvantages |
---|---|
Access to new customers | Shared liability and financial exposure |
Opportunity to reach new markets | Loss of decision-making autonomy |
Shared resources and cost reduction | Communication and coordination challenges |
Enhanced credibility and brand trust | Misaligned goals and expectations |
Added value for existing customers | Dependency and continuity concerns |
Better brand awareness | Intellectual property and competitive risks |
Skye Schooley, Max Freedman and Sean Peek contributed to this article. Source interviews were conducted for a previous version.