The Six Building Blocks of Successful, Revenue-Generating Partnerships
The partnership economy generates billions in business revenue and growth each year. According to Forrester, for high-maturity companies, partnerships can bring in 28% of the company’s overall revenue and over 50% growth as a revenue acquisition channel.
Brands that establish mutually beneficial referral relationships with content creators, publishers, fellow brands, and other partner types are generating accelerated sales, acquiring new customers, and achieving targeted business goals. Partnerships can facilitate expansion into new markets, help promote and liquidate specific inventory, boost app installs and usage, or even help an enterprise live up to its values and social commitments.
In return, partners get some sort of financial compensation or merchandise. Or they may also gain special offers to share with their audiences, content and brand assets, positive brand associations, or data to use to improve performance.
It’s a sound exchange, but starting a partnership program and pivoting to partnerships as a business strategy can be daunting for any business still tied to digital advertising, or traditional affiliate marketing. It’s new territory, after all — a model reliant upon consumer trust and authentic relationships.
But there is a blueprint for getting started — six basic components that will give any partnership a solid and scalable foundation to build on. After over 20 years of watching and helping businesses launch successful partnerships, I can vouch for this six-point checklist. These are not only the building blocks of successful partnerships, they’re also the pillars of the partnership economy as a whole.
Building block one: partner compatibility
The universe of potential partners is limitless. To narrow the field to partners that might actually be a good fit for your organization and program, you need to assess compatibility.
Do you have complementary business goals? Does each party bring something to the table that the other needs?
You’ll need to assess risks, too, such as whether the potential partner works with any of your competitors and if an endorsement from this partner would seem credible to your target audiences.
Compatible partners will prioritize the relationship and contribute the necessary resources and effort required. The desire to work together should run both ways.
Building block two: relevant audiences
Is a potential partner’s audience one you want to reach? Sometimes the overlap is clear. For example, an enterprise that sells hiking boots and an influencer who writes about outdoor adventure will likely have good audience overlap. But a partner can also help you tap into a new market or introduce your brand to new customers, so you’ll need to look at other factors to determine relevance.
Is the partner’s audience large enough to make the partnership investment worthwhile? Do they have the trust of their customers or audience? The partners you work with must have well-established, strong relationships in place in order to serve as credible referral partners for your business.
Building block three: a desirable customer experience
How will a consumer actually experience your partnership, and will the interaction be a positive one? How will it translate into specific touchpoints? Will it take place on the partner’s website, mobile app, social media properties, a promoted microsite, or in a physical setting?
The customer experience your partner creates with or for you becomes an extension of your brand experience, even if it doesn’t take place on your branded property. Job one is to create a desirable experience that your target customers will find valuable.
Building block four: accurate tracking and measurement
In a sustainable partnership, the enterprise pays for the value it receives, and partners are compensated fairly and accurately for the influence they have. You’ll need to establish upfront what customer behaviors you want to catalyze through your partnership and how you will track these actions, measure success, and reward your partner.
Often, tracking takes place through live links and codes, and many of today’s partnerships work on a performance basis, with partners paid when agreed-upon micro and macro conversions take place.
Brands pursuing customer acquisition and retention goals might also employ a chained commission structure, which rewards partners for catalyzing multiple actions along the path to conversion. A subscription-based software company, for example, might compensate a partner first for introducing the product to a target customer. They could then add a bonus if that customer signs up for a free trial and another if the lead converts to a paying subscriber. A good tracking and measurement system will ensure you attribute and reward according to value delivered.
Building block five: a motivating value exchange
Effective partnerships are fueled by value exchanges, so it’s important that the benefit, effort, resources contributed, and risk are equivalent for both parties. Dynamic compensation and contract terms can both be tools for balancing the equation.
Building block six: a joint success plan
In any kind of partnership, both parties must have clarity on roles and responsibilities. Putting this into a formal partnerships success plan establishes what both parties need to commit to in order to ensure a successful partnership. It clearly defines each task, milestone, and responsibility, assigns roles associated with each effort, and establishes an expected timeline and any dependencies.
Customizing as needed
As consumer backlash and market factors diminish investments in digital advertising, the partnerships channel has emerged as a prime engine of growth and competitive advantage.
The partnership economy is now mature enough that newcomers don’t have to reinvent the wheel. Tap into proven best practices and sound fundamentals, and you can establish a partnership strategy that benefits everyone, including consumers. Then, with the essentials in place, you can develop and test different partnerships, growth strategies, and combinations of people, process, and technology to optimize your program for the future.
David A. Yovanno is CEO of impact.com.