The Undeniably Incredible Power Of Joint Ventures
The goal for me (Or rather the result that I would like for you to have) by the end of this article is for you to know what a joint venture (or strategic alliance — I’ll use this term interchangeably with joint venture) is, what you can do with them, and how they are used.
What Is A Joint Venture?
In a very simplistic way you can look at a joint venture as a partnership that has a strategic twist to it.
It is a way of creating leverage so that you can dramatically enhance your ability to enter into new markets, add new products and services into your offerings, and tap into other peoples resources, capital, goodwill with their market, and distribution centers while minimizing your spending of time, money, effort, and risk.
It’s essentially a fantastic way to give yourself an advantage in your market. It’s no secret that the business world is very competitive (Even while you’re reading this the competition is likely to be planning to take more business from you), so every single advantage that you can give yourself is vital not only to the survival of your business, but more importantly, to the growth of your business.
The Most Dangerous Thing That Your Competition Is Trying To Do To You
There is something that, if you allow it, your competition will do to you that will leave you beaten down, constantly struggling to differentiate yourself, and could possibly even lead your business into extinction…
And that is commoditization — they will try to commoditize the products and services of your business, making you “just like everyone else”, and if you’re just another one of the many different options that people have available to them, with nothing unique that differentiates why they should do business with you instead of all of the other options available to them, including not making a purchasing decision at all…
Then only determining factor becomes price. You become the lowest common denominator — people will choose to do business with you because you are the cheapest. You’ll have to engage in price wars, where everyone is distinguishing themselves by lowering their prices, then you’ll have to retaliate by lowering your prices further, squeezing your profit margins more and more until eventually you don’t have any more profits to squeeze, leaving you with many headaches.
One of the ways to avoid these price wars of commoditization, or “the race to the bottom” (as Seth Godin would call it), is to get early access to the market, to build relationships with the people who already have access to it, to get access to your potential customers, clients, or patients long before they make a buying decision; this offers you the time to differentiate your business.
How Can YOU Use Joint Ventures?
So the question then becomes “How do I get that access to my market in the most trusted way, in the most timely way… without having to spends tons of money, time, or having to fight it out with competition?”
Joint ventures are one of the most powerful ways to do just that.
If you can agree that there is a lot of fear, apprehension, and uncertainty in the market today, making people far more likely to procrastinate, contemplate, and be indecisive… Then you can understand why this is also a major factor in why business survival today is so challenging. On top of all of this fear that your potential customers, clients, or patients have, there are very few trusted advisors that they can turn to.
If there was a way for you to get access to the people they trust…
If you yourself could be positioned as their most trusted advisor…
If you could get that access in ways that no one else could…
If you could get someone else to sing your praise…
… Then you hold in your hand trust and the hearts of the people you want to sell your products and services to
It is very common practice for many, many business to spend a majority of their time going out into the cold market, where nobody knows them, and struggle to build a slow and linear relationships with their potential customers, clients, or patients. Instead, they could go much faster after their intended objective through joint ventures.
How Are Joint Ventures Or Strategic Alliances Used?
One of my absolute favorite examples of how a joint venture was used to quickly grow a business that wasn’t doing all that well can be summed up to one sentence:
How Jay Abraham once took an unknown product that was originally doing less than $100,000 a year in gross sales… and helped turn it into a $13 million dollar a year household name in 18 months!
The product is likely a product that you’ve heard of — it’s called Icy Hot.
The owner of the company at the time was selling the analgesic balm direct to the consumer at the time and he did not have a lot of money to spend on advertising, so Jay Abraham’s problem was to come up with a way to help him leverage the money, resources, and distribution centers of others to help this company grow, since a traditional large scale lead generation through paid advertising wasn’t an option.
They were able to leverage magazines, mail-order advertising agencies, television, and radio stations to take on all of the marketing, advertising, and promotional risk for them.
Upon further inspection of the business they found out that for every new “start” or first-time customer he put on his mailing list, the owner got one out of three people to reorder over and over and over again for life — or until someone came up with a cure for arthritis.
The average customer, in fact, ordered six more times a year. Forever!
The product sold for $3 at the time, and it cost just a bit over 48 cents to manufacture, package, and ship out a jar.
Jay approached magazines, mail-order advertising agencies, and radio and television stations — with the proposition of running ads for Icy Hot whenever they had unsold time or space or the opportunity to insert something in a package they were sending out.
He’d allow them to keep all the money people sent them, and he’d send them 45 cents on top. (Remember, the product sold for $3 … so he was offering to pay them 115%.)
Up until he did that, no one had ever paid or offered to pay someone more than the full selling price in exchange for assuming all the selling risk.
As you might suspect, this offer took the advertising marketplace by storm. In just under a year, he had set up — solely on a pay for performance/contingency basis — over 1,000 separate arrangements with magazines, newspapers, television stations, radio stations, catalog companies
This helped to massively grow the company because in actuality, he was really only spending 93 cents — the 45 cents he lost on every sale (Which was not spent up front, but after a sale), plus the 48 — cent cost of the product.
And for that 93-cent loss, he got nearly one million people to try out the product at least once. Three hundred and fifty thousand came back at least six times a year with an average order each time of $10. So for a one-time loss of about $930,000, he added $21 million a year to the business — and over half of that was real profit.
A $930,000 loss — which did not all incur at once — produced a $10.5 million annual profit.
… And that’s the power of strategic alliances, the power of leveraging the resources of others to help both you and them to realize exponential growth