Part 1 of 2: Product sales and development
Strategic alliances are valuable affiliations or partnerships with similar or complementary businesses. They are not reserved for large corporations. Because of the nature of the web, you can easily link in with like-minded businesses to pool your resources and capture a greater share of the global market. By aligning yourself to carefully selected organisations and sharing your strengths, you can fast track your online success economically.
The success of strategic alliances depends on what each party brings into the relationship e.g. assets, experience and commitment and on what terms and conditions the relationship is defined e.g. joint venture, endorsement or partnership.
Strategic alliances can be useful to extend your product line, add new points of sales and consequently increase your turnover. Here are a few benefits of product strategic alliances:
- Expand your range of products
Offer a wider selection of products by adding those of your strategic alliance partners to your regular offerings without incurring the cost of producing and distributing the goods. In some cases, you simply need to provide a link and direct product enquiries from your customers to your partner’s website. If a sale is made, you receive a referral commission. This type of alliance creates a new source of income.
- Cross-sell products
A customer who enjoys your products is more likely to seek and follow your advice for future purchases because you have gained credibility. Recommend the products of your strategic alliance partners and receive a pre-negotiated referral commission on product sales. Because of your trusted recommendation, customers benefit from a shortened purchasing process (no need to research and review) and reduced element of risk in trialling new products.
- Supply holistic solutions
Provide ‘complete’ solutions that require bundling your products with those of your strategic alliance partners. This is similar to the one-stop-shop principle where you find all products and services under the roof (in this case website). Buying a package deal for a fixed price is convenient, quick and relatively easy for the customer to order.
Example: Some web site designers bundle their design services with hosting and domain name purchases. On the one hand, customers benefit from not having to deal with three different entities (web designer, web host and registrar) and having to work out the logistics. And on the other hand, web designers receive a commission on sales of their strategic alliance partners’ products whilst adding value to their own services.
- Create products jointly
Develop new products drawing on skills and knowledge of each partner. Shared resources and expertise will gain lead time, reduce product development costs and may also widen the appeal of your product.
- Develop new applications
Tailor products from your strategic alliance partners to meet the needs of your own market and likewise, your partners can find new uses or applications for your products.
Example: My book ‘200 Marketing Ideas for Your Website’ has found a new lease of life with one of my strategic alliance partners. It is now sold as a human resource management tool for recruiting staff and volunteers on the web.
- Invite an expert
Form a strategic alliance with an expert in your field who will answer questions from your website visitors. Advertise your products on the sidebar where the answer to the problem is displayed and have the expert recommend your products when appropriate. From this arrangement, the expert can benefit from free publicity for his services and possibly a commission on your product sales.
- Increase perceived value
This is a win-win-win situation. By offering a product from a strategic alliance partner as a bonus, you add value to your own product, the customer benefits from a freebie and your strategic alliance partner gets a special introduction. Naturally, this can be a reciprocal arrangement where a strategic alliance partner offers your sample or promotional product.
Example: Give away a half-hour introductory consultation with your partner or a promotional ebook valued at $29 with each sale of your product. All parties benefit from this transaction.
- Gain product acceptance and credibility
To increase the attractiveness of your products or services, have a reputable expert in your field endorsing them. As part of the alliance, give a commission on product sales and advertise the expert’s own products and services on your website.
- Pre-sell products
Recommend products and services from your strategic alliance partners. When a product receives a favourable mention, as in an article or review, it is usually ‘pre-sold’ to the customer i.e. the customer has already made his mind to buy the product, before the click on the purchasing link to the partner’s website. You may want to produce articles and reviews for your own products that your strategic alliance partners can publish on their websites.
- Increase your sales force
Your strategic alliance provides an additional sales force. With more people and more websites to promote your business, your sales should increase.
- Develop new distribution channels
Add new points of sales for your products using your strategic alliance partners’ locations to service your customers. This will reassure those customers who are uneasy about purchasing over the web.
- Exchange knowledge and products
Save on operational costs by trading products and services for free or discount prices with your strategic alliance partners.
Example: Within the National Speakers Association, we ‘pick each other’s brains’, refer customers and sell each other’s books. This strategy enables us to increase our knowledge base and provide new distribution channels for our products.
By forming strategic alliances with like-minded people, you can build on each other’s brand equity without incurring costs.
In the next part, we look at how online strategic alliances can increase the visibility and market share of your business and conclude with a short checklist of issues to consider before forming a strategic alliance.