The most expensive marketing consultant in the world, Jay Abraham, said that if he could only employ one method to survive, joint venture marketing would be his choice.
Joint venture marketing is an arrangement where one company endorsees the products or services of another company. A joint venture marketing arrangement can also be reciprocal where each company endorses the other one.
Advantages of joint venture marketing include:
- Often no cost. Two companies may choose to endorse each other on a reciprocal basis with both parties keeping all of the profits.
- Pay for performance. Unlike traditional advertising, a company need only provide a commission to an endorsing company if and only if a sale is made.
- Leverage. If another company endorses you to its customers, you are leveraging the goodwill a company has with its customers. A prospect is more likely to act on a recommendation from a current supplier than simply from an advertisement.
Selling a company on doing a joint venture deal is relatively simple once you understand how to present it and some of the marketing math behind your proposal. One example of a joint venture is a promotional arrangement between a gardening center and a restaurant. The gardening center approaches the restaurant to give away a free meal for a direct mail campaign the nursery wants to launch. The gardening center said it would:
- Mail a coupon to prospects in the local area with a free meal certificate (only one per household). Prospects could redeem the free meal if they made a purchase at the garden center.
- Design the mailing piece, secure the addresses to mail to and pay the postage.
- Mail the coupon to its current customers to promote the restaurant.
The gardening center sold the concept to the restaurant by explaining that at no cost, other than one meal, the restaurant would increase its visibility from the direct mail piece the gardening center was sending.
The gardening center also explained the financial benefit the restaurant would gain from giving away a free meal. Here’s the explanation:
- Restaurant gives away one meal at a cost of $20.
- The cost of the meal is $10.
- The restaurant indicated that the average customer would visit the restaurant four times a year and that the average customer remained a customer of the restaurant for five years.
- The gardening center educated the restaurant on the lifetime value of the customer and calculated that that value was $400 ($20 per meal x 4 meals per year x 5 years) with a gross profit on one customer of $200.
- In summary, the gardening center showed the restaurant that by giving away one meal the restaurant would harvest $200 of gross profit.
- The restaurant further indicated that the previous calculation did not take into account that if someone who redeemed the free meal brought someone with him for a meal (at the regular price) the restaurant would further increase its gross profit.
Joint venture marketing can provide an easy, low cost way to expand your sales and profits. Pick your first likely joint venture partner today and propose a win win marketing opportunity. After you secure your first joint venture arrangement and see the benefits, arranging subsequent deals with be much easier.