Partnership Marketing

Partnership Marketing is the joining of twodiverse organizations with a client base that can use the services and productsof both. In its broadest terms the concept can apply to almost any twobusinesses that serve the same type of client base. But in reality PartnershipMarketing can be very beneficial and profitable, but only to synergisticproduct or service providers.

WHY MOST FAIL

Partnership Marketing is neither new nor novel.Gas stations and convenience stores are a perfect example. Before, after orwhile the gas is pumping, we are prone to run into the convenience store for acup of coffee or some other convenience food. But productive partnershipmarketing has been evasive and most attempts end in frustration and mutualseparations. The reason that many joint or partnership marketing has notyielded the desired success is the lack of synergy between theproducts/services offered by the partners. For instance, most people who buytires have cars and, therefore, need auto insurance. However, there doesn’tseem to be enough commonality between the local Firestone dealer and aninsurance agency for cross-marketing to make sense to the tire customers (or tothe insurance customers).

How would you feel if you received solicitationsfor banking services simply because you were a customer of a grocery store?After all, most people who shop at grocery stores require and use sources ofmoney! Most people would prefer to base their banking relationship on somethingmore substantial than where they buy peas and carrots. Although many grocerystores now have banking branches in them, those branches are the conveniencefactor for already established relationships. The convenience of banking atyour grocery rarely trumps better rates and products at other bankinginstitutions. And it takes a unique customer to want to have their taxes doneat their local Walmart. Yes, there are tax offices at ‘big box’ stores, butthey have never been as busy as the tax services stand-alone stores. So we seeService Centers for other forms of customer service companies placingthemselves in (renting) grocery and ‘big box’ stores, but they are not examplesof Partnership Marketing.

Similarly, most insurance customers who havereached beyond the ‘lowest price’ syndrome for their insurance providers aremore interested in the qualifications and quality of the vendor than by thecasual relationship between the partners.

SYNERGY – THE WAY MARKETING PARTNERSHIPS CAN WORK

But, where there is SYNERGY between the productsand services of a partner and insurance, the potential for cross-selling andbuilding customer loyalty to both entities is great. In all the transactions wehave seen in well over 35+ years of agency consulting we have found that thecommonality of client relationships of successful versus unsuccessful relationshipsis the reason for the partnership. If the reasons of each partner is primarilyserving client needs, customer-centric (always doing what is best for thecustomer) relationships and building loyalty through multi-dimensional productand service provision, the partnership has a good chance of succeeding (if bothsides have equal requirements and equal opportunity for business development).If the reason for the partnership is simple revenue generation its chances ofsuccess diminish considerably.

So it’s the REASONS for the partnership andequality of requirements and benefits to both parties that will make therelationship successful from both the customers’ and the partners’ standpoints.

PITFALLS TO AVOID

1.Doing it for the money – Obviously business partnerships are meantto provide some additional revenue and profit to each party. This means that ifthe partnership will only enrich one or the other partner in the optimum stage,the relationship is doomed. We’ve also noted that in dozens upon dozens of suchpartnerships with insurance agents across many industries and disciplines, ifprofit is the only motivator (or the primary motivator) failure is much morelikely than long-term success. In reality, the potential profit derived fromselling some insurance policies to diverse but common clients will not deriveserious enough income to most other industries to warrant or justify the workof the partnership. Banks, as an example, measure their revenue projections inthe millions of dollars of profit and earnings (after tax). If money is themotivator, an insurance relationship will simply not drive enough income tojustify the work. And, if the partner business has low enough margins that afew thousand or a few tens of thousands of dollars will be attractive to them,the potential for serious enough returns to the agency diminishes, as well.

However, Partnership Marketing is an excellent way to maximize customerretention of both entities and could enhance the revenue per customer in eachpartner business through effective cross-sell and benefit partnerships.

2.Partnership Marketing WILL NOT WORK if the cross selling is, inany way, passive. Once the customers of both entities are informed of thepartnership they will either be mildly interested, curious, or not care. Anon-going cross-selling program in which the primary relationship managerintroduces the clients to the new partner and products or services will yieldthe most immediate and the most long-term results.

3.Cross Selling must be cooperative and bi-lateral. A unilateralmarketing program may yield one partner new clients and the other partner asource of revenue, but it is NOT Partnership Marketing. In order to be in atrue Partnership Marketing program, both partners must enjoy equal opportunitiesto generate new customers. That is the true synergy that makes partnershipssuccessful. A new client to an insurance agency may only yield a few hundreddollars of new commission while it may yield thousands of dollars of revenue toa partner. However, that is because of the scale of revenues generated by each.If you provide as many new customers to your partner as they do to you thepartnership will be successful in the long term.

4.Management of insurance by non-insurance professionals – We seethis in acquisitions of agencies by non-insurance entities more than inpartnerships. The manager doesn’t have to already be an insurance professional.However, if from another discipline, the manager must convert to full timeagency management to become effective. So, financial managers (from banks) ornon-financial operations managers who simply add the insurance operation totheir managed disciplines generally get frustrated when the agency doesn’toperate the way he expects because the employees understand the agencyoperations and procedures and systems while he does not.

5.Lack of marketing clarity at the outset of the relationship – Amarketing partnership MUST carry specific goals as well as procedures forseeding (or cross-seeding) clients from the insurance to and from thenon-insurance partners. “Let’s do it and see how it works” is a recipe forfailure.

6.Imbalanced work effort, responsibility, or income potential – Whenone partner has all the responsibility and the other has none — or when onepartner has all the benefit and the other only acts as a business source forsome financial return the partnership will probably fail. Conversely we haveseen successful marketing partnerships when both have a similar work effort andboth see tangible results beyond dollars (i.e. new customers, customerretention, customer satisfaction).

Synergistic Partnership Potentials

Real Estate – The best historical example ofsuch synergy is real estate or mortgage companies and insurance. Customers whopurchase homes or other properties commonly must have insurance to close thetransaction. If they have a strong relationship with an agent partner, theywill likely coordinate their insurance needs with their current advisor.However, if they have no such relationship or are not insurance savvy, theability to have a partner insurance agent to the real estate agent available toshop their insurance and present them with a policy at closing is a greatadvantage to an easy transaction. Real estate/insurance partnerships have existedfor well over 100 years and should be considered as a viable opportunity toserve the customer and provide additional business for both entities.

Banks – Included in this category are banks,savings & loans and credit unions. The synergy between banking andinsurance is PROTECTION OF ASSETS. Both institutions have asset protection asone of their primary tenets. But many financial institutions, like manyinsurance agencies use all the right jargon but act only toward the profitmargins. If relationship building is truly of interest to BOTH the bank and tothe insurance entity this synergy can work well. The key is to maximizeretention of customers for the ban and the insurance agency by providingsufficient number and types of services and products from both that movementaway from either will be difficult unless reasons well beyond price exist forthe departure.

Banks will be (and have been) generallydisappointed if their reason is simply to generate an additional revenue base.The ROI expectations of financial institutions are difficult to meet within therealm of insurance agencies. And net revenues (after expenses) of insuranceoperations aren’t even a ‘blip on the radar’ for most financial institutions)without a solid commitment to active marketing of insurance over a long period(3-5 years) to all bank customers supported by all other bank operations.

Most banks have management already stretched bythe requirements for product and service revenue sources in primary bankproducts. They may not be as excited as the bank board with the synergy ofinsurance and banking since it puts the responsibility for another product orservice into their already busy jobs. Those banks that believe in theCustomer-Centric philosophy and actually want to protect the assets of theirclients will still find a relationship with an agency attractive to have a teamof professional specialists available to handle the banks customers’ insuranceneeds instead of losing control of those functions to outsiders who may not beas protective of the customer’s assets as they are desirous of generatingrevenues.

The Best (and Worst) Ways to Partner

If an agency is partnering with another entityfor the right reason — to provide insurance services to that entity’s clientsand (hopefully) the product or service of the partner to all agency clients, ateam of agency staff and partner staff should be created. The goal of the Teamis to take the vision of the principals for the partnership, a MissionStatement, and convert it to short term objectives and action plans for theexecution of the partnership. The objectives must define annual goals theresults of which would accomplish the Mission of the partnership. Both partnerswill have goals for their own business generation from their partner’s customerbase or referrals and those goals will be tracked and evaluated quarterly forthe first few years and annually thereafter to show the owners of each partnerthat the benefits are on-going and equal to both.

Too often we have seen the dissolution ofpartnerships through active decisions or through passive negligence because,after the initial work effort, each partner’s efforts move to more productivedirections. No goals were set. No expectations were defined. No team wasestablished. No metrics were created. Eventually, benign neglect set in and thepartnerships fell into ruin. And the strange thing is that the PartnershipMarketing efforts were in the same industries in which others were quitesuccessful over the long run.

Conclusion

The key to success inPartnership Marketing is in the goal-setting and the commitment and metricsthat are implemented as a part of the marketing. If you set goals and managethem AND if the partnership is synergistic with both parties benefitting (relatively)equally you maximize your chances of success.

Reprinted from The PIPELINE, the national newsletter for agencyprincipals. The PIPELINE is published by Agency Consulting Group, Inc.,a leading consulting firm for independent agents in the U.S. for over 30 years.Call 800-779-2430, E-mail info@agencyconsulting.com, or visit www.agencyconsulting.comfor information about the content of this article or PIPELINE subscriptioninformation.

LastUpdated: June2, 2016?