Thursday, February 20, 2014

LOVE AFFAIRS

It’s the month of love! Couples all over the world are celebrating Valentine’s Day and professing their undying love for each other. However, only a few relationships can stand the test of time. A close look reveals that only those based on mutual trust and understanding last long. You need to be great friends, good partners first to eventually become good lovers. Everybody can do with a good companion. After all, life can get tough and a trustworthy companion makes the journey easier. If you can choose the right companion, half the battle is won. A love affair will last long only when you choose your partner with care. A hasty decision in this respect will only end in a broken relationship.

Business too, is also all about relationships and affairs. Having an ‘affair’ is actually good business. Ask any Bollywood (even Hollywood) actor and (s)he will tell you how a rumour of an affair between the lead couple just before the release of their film is bound to get the audience more interested in the film and contribute to increase in ticket sales. It’s a time-tested trick and always grabs the maximum attention and media coverage. However the ‘affair’ we are talking about is a ‘corporate affair’. And in that regard too, it is a time-tested trick to grab the attention of the consumer.

In today’s fast moving and competitive world, one of the fastest ways to spread your presence in the market and get noticed and talked about is to find the right business partner. Look at Coca-Cola. Its success story is based on partnerships and alliances. Be it the bottler (in 1899 it started its first bottling agreement and today has 300 bottling partners around the world), the supplier, etc., all are partners of the brand and its success depends on the efficiency of these partners. However the biggest partner of Coke has been McDonald’s. Coca-Cola products are sold in over 31,000 outlets of McDonalds spread across 100 countries. Coke entered the Russian market with the help of McDonald’s. In US alone, 5% of Coke’s market share comes from McDonald’s. It’s all thanks to Ray Kroc – the man who made McDonald’s such a successful QSR chain. Back in 1950, Ray Kroc persuaded a young Coke employee to supply him Coca-Cola. Since then, the relationship has grown from strength to strength. The point to note here is that not a single McDonald’s restaurant serves Pepsi, even though there is no document that prohibits them from serving Pepsi. It’s a partnership that has benefitted both brands. If you look carefully, you will find that every dollar that Coke earns comes from some partner or the other – be it a bottling partner or a distribution partner.

Coke has a partnership alliance with Disney too and is the sole provider of soft drinks at Disney theme parks. The Coke-Disney-McDonald’s partnerships are made in heaven relationships. All of them target the same audience – families. So the deals make sense and the common goals have made the alliances last for so many years.

On similar lines Pepsi has an ongoing affair with Pizza Hut that has proved a win-win for both parties.

Partnerships make good business sense.
A partnership between two brands actually makes for a good deal. It’s better and cheaper than takeovers. A partnership deal can almost immediately add to a company’s revenue base and reduce costs without almost any capital investments. So when Starbucks wanted to increase its presence, it partnered with the book shop Barnes & Nobel and set up its stores inside the stores. Pepsi wanted to enter the iced-tea business, so it partnered with Unilever’s Lipton. Quaker Oats on the other hand spent $ 1.7 billion in buying the brand Snapple. Pepsi’s deal was more cost effective!

Look at all the big brands and you will find a series of partnership deals responsible (to a great extent) for their success.

Look at Nike. It’s the largest shoe brand in the world, yet it does not manufacture a single shoe. Every thing is done by its partners. Boeing is one of the largest aircraft manufacturers in the world. However the truth is – apart from cockpits and some other parts, it manufactures nothing else! The logic is simple. If you cannot do it better and cheaper alone, then go ahead and find a partner who can do it more efficiently for you.

Pharmaceutical giant Eli Lilly realised the importance of partnerships decades ago. It has been forming alliances for nearly a century now. It is sitting on at least 100 partnerships across the world, making it a formidable competitor to defeat. 

Yahoo! has been in trouble for a long time. However its very fashionable CEO Marissa Mayer has decided to enter into relationships with the right brands to help improve Yahoo!’s efficiency. A few days back Yahoo! announced a data partnership with Yelp, one of the most popular restaurant reviews site. The partnership would imply that all the listings and reviews of Yelp will be incorporated into the search results of Yahoo!, thus benefitting both brands. Yelp’s reviews are what customers have grown to trust. Yahoo! with no investment may be able to attract more customers to its search engine.

Partnerships are a cheap alternative to mergers and acquisitions. Growth is faster and cheaper here. However like every relationship, it needs to be nurtured. If the partnerships are not based on a common mission, a common goal, they are bound to fail. A classic example of this is the American airline industry in the 1990s. All the big airline companies started focusing on partnerships with one another in America. That’s when a small carrier stepped in and started providing customers with cheaper and better services than other airlines and their numerous partners. Virgin Atlantic, another new player at that time, did just the same and it easily snatched away a large chunk of market share from the biggies. AT&T at that time had formed more than 400 alliances. Almost none of them worked out.

Choosing the right partner is serious business and should be done with a lot of care, for a broken relationship brings along with it more pain and misery than a no relationship status.

Co-branding is the way to go
Let us look at some of the successful partnerships and learn from them, for this is going to be a winning strategy of the future. As Peter Drucker once said, “The greatest change in corporate culture and the way business is being conducted may be the accelerating growth of relationships based not on ownership but on partnership”.

Life can get a little lonely and scary without a good companion. In business too, brands may find it a little overwhelming to capture all markets all alone. It’s the era of globalisation and to be successful, you need to have access to global markets. A safer way to venture into untested waters is through partnerships.

In marketing terms, partnerships are also referred to as co-branding. The more intelligent, interesting and innovative your co-branding partner, the more successful you will be. In Thailand, in 2011, Coke was behind Pepsi in terms of market share. Nothing seemed to work to change things for Coke. Then floods hit the country. Immediately, Coke changed its branding strategy and partnered with The Red Cross and started promoting donations to The Red Cross instead of promoting its cola. In three months, the brand was more visible and more liked than ever before. Its new tagline, “A million reasons to believe in Thailand”, got it millions of good wishes and new customers and it soon became the market leader. This is not the first time such ‘brand charity partnerships’ have been successful. Pampers partnered with UNICEF and improved its brand image. It is something the brands would not have been able to do alone.

As the saying goes, ‘A man is known by the company he keeps’, brands too need to be careful about whom they partner with, for it has a direct impact on their image. So yes, go ahead and co-brand. But remember to be very cautious. No wonder just anybody cannot partner with James Bond, but whoever manages to woe him always benefits for its image suddenly becomes more hip, more modern and more interesting. The clothing giant H&M partnered with Madonna, Top Shop partnered with Kate Moss, Apple partnered with Nike to create a sports kit that allowed your shoes to talk to your iPod, Nike partnered with Michael Jordan to create Air Jordans which became one of its best-selling shoes, Southwest Airlines partnered with Sea World. It was a strange but interesting partnership as the passengers were sometimes visited by penguins making the airline more interesting and also making the passengers aware about the various attractions of Sea World. One of the most rewarding partnerships has been those that The Global Fund, also known as (RED), has got into. Over the years, (RED) has joined hands with Apple, American Express, Armani, Starbucks, Bank of America, etc. The deal is – if you buy any (RED)-tagged product, a part of the proceeds goes to (RED)-funded The Global Fund. The Fund has raised more than $130 million till date!

Look around you and you will find all great brands partnering with other great brands and together reaping benefits of the alliance. TGIF partnered with Jack Daniels and devoted an entire section of the TGIF menu towards items that were flavored with Jack Daniels. Yes, you guessed it right – it became the most popular section among diners at TGIF!

Many brands have also found trusted partners in the world of movies. Horlicks partnered with Narnia and Kung Fu Panda and featured the characters on its pack, making it a sure shot hit with the kids. Yummiez partnered with Disney’s Toy Story 3. Del Monte partnered with Krrish 3. And the list goes on...

As you celebrate love and relationships this month, take a close look at your business affairs. It’s time to find the right brand to start a love affair with.

9 comments:

  1. I agree. Business partnerships are comparable to a couple. Both parties should have mutual understanding and same goal to run their projects successfully.
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