Strategic Partnerships: An Underutilized Revenue Stream
by Blackwood Impact Group
When company leadership seeks to increase revenue streams, the first places they turn to are the marketing and sales teams. Executives want to see more qualified leads entering the sales funnel and more closed deals exiting the other end. These primary initiatives are targeted to attract the product or service’s end-user.
While there is absolutely nothing wrong with this approach, there are alternative pathways to strategically increasing clientele and revenue. One area to consider is customer retention strategies. Another area to focus on is your referral strategies.
Your primary source of referrals should be your existing, happy customers. However another, yet underutilized, source of referrals is strategic partnerships. Consider developing marketing strategies to attract potential partners who can put your business in front of customers you might not have otherwise reached.
Why Strategic Partnerships Are Important
Customers who are acquired via referrals tend to be very “hot” leads. In Blackwood Impact Group’s experience, referred leads convert to closed sales more often than any other lead type. According to Annex Cloud, referral marketing generates three to five times higher conversion rates than any other channel. Referred customers are 18% more loyal than customers acquired otherwise and they come with a 25% higher profit margin.
Referred leads trust the referral source’s “good word” about your company. Their friend or existing service provider has already “tested the waters” with your company. The referred lead already knows you will give them good products and a good experience. Their risk is lowered, so your sale happens easier.
Companies tend to spend most (if not all) of their marketing dollars trying to build trust and convince potential clients who don’t know them to “buy now.” But the cost to acquire a referred leads can be much less than a traditional one while delivering a high return on your investment of time (nurturing the partnership) and money (incentives or referral fee).
Working with strategic partners is a form of obtaining referrals. It is also a form of word of mouth marketing, which is the top converting type of marketing. According to Nielsen, 77% of consumers are more likely to buy a new product when learning about it from friends or family. An ideal strategic partner will share a similar target market as your company. Their clients should be perfect candidates for your product or service.
A potential strategic partner could be a company that offers a similar service as you do, but there might be areas you service that your partner does not. For example, a local life insurance agency might have referral partnerships with one or more home and auto insurance agencies.
Maybe you and your potential strategic partners serve the same industry with complimentary offers. For example, car dealerships often have great relationships with several auto loan providers. Real estate agents often form alliances with mortgage agents and vice versa.
When you have good strategic partners, it can generate a steady stream of new customers. Your business can be another’s “go-to” for your products or services. Done right, strategic partnerships could help you drive down the overall cost of your other forms of marketing because it is working so well.
How to Get Started With Strategic Partners
It is important you think of your potential partners as customers. You will need to clearly communicate the value you bring to the relationship plus the benefits of working with you. Invest a portion of your marketing dollars towards attracting potential partners as you would any other lead.
You probably have a process for qualifying your customer leads. Similarly, you’ll want to have a vetting process for your potential strategic partners. Look for those who align with your vision for your customers. Consider their company culture; do they share similar principles as you? Do they have a similar customer service philosophy? Your strategic partners are an extension of your brand so possessing similar values and operational principles will create a better working relationship between you, as well as a seamless customer experience.
It is important to link with strategic partners who have a similar customer base as your company. For example, an HVAC (heating, cooling, and plumbing) service provider might partner well with other companies who serve homeowners, such as home builders, Home Owner Associations, general contractors, or lawn care companies. Trying to partner with a bicycle manufacturer might not make sense. You don’t want to create a disconnect in the end user’s experience. In the end, it would be unfavorable for the customer, your partner, and your business.
As you proactively seek out good potential partners, be sure you are attractive enough for them to want to work with you. Be clear about your goals. Know your target market. Have defined terms to the partnership; be clear about how to enter and exit the relationship. Have clearly defined roles and responsibilities within the partnership. Make the process of partnering with and referring business to you easy for them.
How to Protect Your Strategic Partnerships
As with customers, developing a great experience for your strategic partners will keep them happy and wanting to work with you for a long time. Creating a Standard Operational Procedures manual for your partnerships will help to ensure your partners know what to expect from you and your team members know how to deliver on the experience.
Consider the processes and systems you will want to put in place to facilitate the partnership. Tracking is critical so be sure you know how you will tag leads as coming from your partner as they enter your funnel. Set up procedures around how you will pay your partners their referral fee. Will you pay after each closed sale or after an earnings threshold has been reached? Whatever you chose, we recommend that the more automation you can place throughout the process, the better the experience will be for you and your partner.
When you enter into a partnership, be sure the relationship between the two companies is established with more than one key person. Establish multiple points of contact throughout your partner’s company. You don’t want the partnership to dissolve because your main point of contact exits their business.
Some people reward their partners with gifts and kickbacks, above and beyond the referral fee earned. If you chose to go this route, be sure to make it a gift the entire company can enjoy, not just one person. You want everyone at your partner companies to love your business.
Consider protecting your income stream by prohibiting your employees who leave from poaching your clients and partners for a specific time frame (one to five years). Another way to protect your referral sources and income stream is to consider partnering with several similar businesses. If you go this non-exclusive route, you will need to determine how to be fair in referring your clients to multiple companies with similar services.
If you are intrigued by the prospect of utilizing strategic partnerships but feel daunted by the process, or are unsure how to get started, Blackwood Impact Group is here to help. We assist companies with a variety of customer growth strategies, including strategic partnership development. We can work with you to develop and execute the best strategy for you. Contact us today at 770-502-6295 or firstname.lastname@example.org to learn more.