UK: Form alliances and make your marketing spend go further.

UK: Form alliances and make your marketing spend go further. - Marketing: join forces and think win-win.

Last Updated: 31 Aug 2010

Marketing: join forces and think win-win.

If you can't beat 'em, join 'em. Not, perhaps, the most glorious philosophy of life, but the notion of joining forces with like-minded allies is fast becoming one of the big ideas in marketing - especially among medium-sized firms who find themselves up against more powerful rivals wielding bigger budgets for market research, new product development and marketing.

Marketing alliances offer fast-track growth for low, upfront investment - for those who get them right. Almost anyone is fair game for an alliance: suppliers or customers, people in different lines of business but which nevertheless complement your own, even competitors. According to recent research by Coopers & Lybrand, for example, two-thirds of middle-market firms have entered some form of alliance: 37% with their customers; 35% with suppliers; and 15% with competitors. 'The old idea of competition involving keeping your cards close to your chest is breaking up,' comments Richard Wade, who heads the firm's middle-market consultancy practice.

Once companies realise that one plus one can equal three, 'the ingenuity they can show is quite amazing'.

The simple trick is to take the cliche of 'think win-win' and make it work. The most obvious application of win-win thinking is with customers.

Instead of trying to make money out of them, alliance marketers look for ways of making money with them. Instead of putting up prices to boost profits, they try to work with customers jointly to reduce costs or increase sales. This approach has been most extensively applied in areas such as logistics through partnership sourcing agreements but there is no reason why it should not apply to marketing.

Jointly developing new products or entering new markets can have a double advantage. Two heads and two budgets are often better than one and the risk of launching a new idea that your customers reject is much reduced.

The same logic can apply to suppliers. You are likely to be far more supportive of a supplier who believes that his future profit growth depends on yours.

Another fruitful area for mutual back-scratching is 'complementors' who help round out each other's brand offer. A hotel recommends the services of local taxi firm D and the taxi firm returns the compliment when picking up weary travellers from the railway station. Likewise, smaller players such as Elf and Somerfield have put their petrol and retailing skills together to counter the threat from bigger rivals such as Shell, which is moving aggressively into convenience retailing, and from Tesco and Sainsbury with their own-label petrol operations.

Alliances with direct competitors can also be surprisingly fruitful.

The classic example is the antiques fair, where competing dealers get together to promote a venue that attracts custom for them all. Similar thinking is now being applied by companies which want to develop commerce on the Internet.

Marketing alliances usually focus on three things: sharing customers, sharing promotion costs and improving products and services. While many medium-sized firms prosper precisely because they offer specialist products and services, borderline deals can be clinched if they can say, 'I can't help you on that aspect, sir, but I know a man who can'.

If two companies are targeting similar audiences, then it can make sense for them to conduct joint promotions or share the cost of direct mail or advertising campaigns. But perhaps the biggest opportunity is in sharing customers. This can be a simple 'I'll let you mailshot my customers, if you let me mailshot yours', or it can be a fully-fledged strategy. Look at the way smaller credit companies have bypassed the might of Visa and Mastercard by developing affinity cards for charities, trade unions, political parties and so on.

But marketing alliances can be scary. There is always a risk that partners will fall out over who is pulling most weight or getting the biggest benefits.

Nevertheless, compared to the cost and hassle of formal joint ventures, and mergers and acquisitions, forging win-win marketing alliances can be a quick, flexible and easy way of using limited resources better and gaining access to new markets and new customers. No wonder it's becoming so popular.

Alan Mitchell was editor of Marketing and now works as a freelance journalist.

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