Brand managers today regularly face the conundrum — how does one fuel the next wave of growth? Which markets to look at? And if a market is identified, what does a company do in terms of harnessing resources to tap the potential? Sure, one can look at an independent foray, but increasingly the unpredictability of the market place points towards one direction that of creating an eco system.
Alliances could be due to a lot of reasons right from marketing to R&D and design. If one looks purely at brands and marketing, forging alliances has become critical because of changing trends. There are technological changes taking place at a rapid place, increasing globalization and consumer needs are evolving.
So on one hand, brands are expanding into new markets, there’s also the element of growing competition in the domestic markets to take care of. It is becoming increasingly difficult to compete with all by yourself in the light of the changing landscape, so partnerships help. In the era of globalization, partnership with a local firm to distribute and even sell products under the local brand name means getting a foothold in the market. In the case of evolving consumer needs, an important part of marketing is to identify new consumer trends and create products. Partnering therefore helps save time or reduces time to market and even makes up for the lack of innovation prowess within the company.
Take the example of Philips, a big global player but its performance was slack. So the thought was can we partner with savvy companies who are good at bringing out the products. Thus Philips entered into a tie up with Sara Lee to launch a coffee machine.
So both the companies leveraged on their respective capabilities technological expertise combined with making the best coffee. The challenge from there on was how to make the new product available without making it expensive and thus unaffordable. So they came up with an innovation where they sold coffee machines with the regular coffee pods sold by Sara Lee. Thus it was a revenue sharing deal where Philips made money on coffee sales. In the first five years, 12 million coffee machines and 7 billion coffee pods were sold. Similarly, the consumer electronics company teamed up with Nivea to introduce a shaver that dispenses cream.
The typical mindset is proprietary mindset whereas partnerships require collaborative mindset. One has to be willing to give something to get something and it’s not an easy thing to do. One has to look at increasing the pie rather than fight for the existing pie.
Looking at new growth or revenue streams requires maturity on the part of companies. This partnership mindset is yet to gain deep roots in India. Most Indian companies collaborate with foreign companies but even locally one will need collaborations. It will gain traction as Indian consumers are evolving faster than the time before. So a company can choose to go alone, but will you be able to move with dexterity going solo? Or cut the lead time by partnering with someone? That’s a call, companies will have to take.
Alliances are broader phenomenon, so one now sees a trend where companies have separate alliance function on whom the responsibility of facilitating long term partnerships rests. Of course, it has to be top down approach and this function reports directly to the CEO because they are critical in not only identifying partners but also drive the partnership mindset within the marketing function as well as the company. The challenge here is the profile of people handling the function. There’s no definite answer. The typical stereotype is get people who are good in dealing with people or handling alliances. It may not be necessarily true and companies themselves will have to evaluate and arrive at the call on what kind of people should handle the alliance function within the company.
In the emerging markets, there are a large proportion of people who are scattered and organized businesses are not necessarily best placed to reach them. So partnerships with NGOs, government bodies along with alliances with profit entities are critical to reach out to the potential consumers. But the objectives are different across cases; therefore the working style also differs. It’s a necessity but a huge challenge when it comes to working with entities. Companies to a large extent have figured out how it works when alliances involves two brands. But companies partnering with NGOs and official bodies are a whole new kettle of fish, which everyone is trying to understand.–