Growing revenue and market share through like-minded partnerships.
Hosted by Marcus Colombano of Pineapple SF among the towering Redwoods of Camp Navarro, I joined Phil Otto of Otto Design Group, and Farzad Sharif of Airbnb Experiences, to discuss what makes a great partnership, and how leading companies are working together to reach new audiences.
Partnering with like-minded businesses can be an effective way to reach new audiences and grow your customer base, but solid partnerships take time to develop, often starting with baby steps. Finding a healthy balance of incentives and expectations is fundamental to any thriving business relationship. Both sides should feel that the time and resources they invest in the partnership feel worthwhile, and neither should feel like the other is getting a disproportionately better deal. Once the scale tips too far in one direction or the other, partnerships tend to dissolve.
“In reality, partnerships are sort of like shotgun marriages…you have to make sure your brand values are very well aligned because you’re giving your brand away to some extent and you’re putting it in someone else’s hands.” – Farzad Sharif, Airbnb Experiences
So with all the potential risks and challenges, what motivates businesses to form partnerships in the first place? According to Farzad, these motivations generally fall into four buckets:
- Borrowed brand equity – Partnering with somebody because they have a credibility factor, authenticity factor, or cool factor. Something that you want to connote credibility to your brand.
- Domain expertise – Partnering with someone who is accomplished at something or has certain know-how that you don’t have and by partnering together you gain that knowledge
- Market acceleration – Partnering with somebody who has accomplished something that significantly lowers your barrier to entry into that market. This often leads to M&A.
- Audience reach/audience exchange – Often taking the form of barter partnerships between two well-aligned audiences. Each company feels they have something of value to offer to each other’s audience.
Farzad brings up an excellent caveat about these four partnership archetypes. They are not mutually exclusive; In fact, oftentimes the best partnerships blend two or more elements.
A great example of a like-minded brand partnership we see often in the outdoor and active lifestyle space is a social media giveaway aimed at broadening brand exposure for the companies that participate in the form of impressions, engagement, followers, and email subscribers. This type of partnership combines both borrowed brand equity, and audience reach/audience exchange.
In most cases, the brands that end up collaborating on these giveaways are not necessarily the same size, which can create some inherent challenges. The smaller brand may give away $300 worth of product, whereas the bigger brand may only give away a product worth $100. On the surface, this looks unequal, but the bigger brand brings their larger social media following to the table, through which they will garner more exposure than the smaller brand could provide.
The smaller brand benefits from the bigger brand’s audience, while the bigger brand is able to use the giveaway to gain credibility with the smaller brand’s more niche following. Or perhaps the smaller brand invests more resources than the bigger brand towards promoting the giveaway in the form of ad spend or content development.
Strategic partnerships play an integral role in the work we do at Foghorn Labs. Our partners help us stay on top of industry trends by providing an outside perspective that we can trust. Our PR, web development, and technology platform partners provide immense value to our clients through their expertise in complementary fields that we don’t pretend to be experts in. Lastly, and most significant to our bottom line, about a third of new business comes from partner referrals.
Partnerships take many forms, not all of which are between businesses. Savvy brands who sell direct-to-consumer are finding innovative ways to use customer feedback to inform their own product development, merchandising, and sales strategies. The relationship between a brand and its customers can be far more than purely transactional. When implemented correctly, product reviews, surveys, live chat, and buying behavior analysis can provide detailed insights and relevancy that no third-party research tool can match. Brand fanatics and even critics can provide a perspective as well as a feedback loop that can help accelerate innovation, avoid potential pitfalls, and feel more comfortable taking risks.
“Unless you have a partnership with your customer, you don’t know what exactly they need and you can’t evolve to continue that relationship.”
– Marcus Colombano, Pineapple
The absolute value each party derives does not necessarily need to be equal for the partnership to be successful, but the relative value must be balanced. In the end, what’s paramount is for each side to gain something they could not have achieved by themselves.