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Joint-venture success: in good partnerships, both partners benefit.

Rather than feel honored that a major outside organization wants to do business with them, savvy association executives realize that their organizations have much to offer in the marketplace. At the same time, the potential partners may have strengths of their own that can make them attractive to associations.

What's in it for them?

One strategy in marketing is market segmentation. Associations provide a ready-made segment. And the endorsement, real or implied, that an association gives can be a valuable sales tool for an outside provider.

Some of the strengths that associations can bring to a joint-venture relationship follow:

* a loyal base of members centered around an industry, profession, or other interest;

* a developed marketing channel through publications and other communication to members;

* the unique knowledge of the market that an association develops as part of its normal business operations and often takes for granted; and

* the imprimatur of the association, which can be as valuable as the "Good Housekeeping Seal."

Many for-profit providers see these contributions as being as valuable as a cash investment--maybe more so.

What's in it for you?

Besides pursuing nondues revenue sources, most associations are looking for new products or services to offer to members.

Impediments to new offerings include the cost of development and production, staffing, warehousing, and distribution. Joint-venture partners can provide the horses to pull those wagons.

* The partner has staff that can carry a lot of weight in developing and planning.

* The partner usually can produce the product or provide the service.

* If a product requires warehousing and distribution, the partner likely has these systems in place.

* The partner can expand the association's marketing opportunities, opening new channels for member recruitment.

If this sounds like a win-win situation, it is. There's no reason to enter into a joint-venture partnership if both parties don't have something to gain. There's risk involved, too. But the beauty of a joint venture is that it minimizes the hazards of developing or marketing something new.

The prepartnership interview

Not all partnerships are win-win. When opportunity knocks, it helps to be ready to open the door. But don't fling it wide without looking through the peephole first.

At SHRM the peephole is called the product evaluation and development system, or PEDS. This system forces a rigorous review of the proposals from would-be outside partners by all senior management before we even start writing a contract.

PEDS has two objectives: First, it screens out--or scares off--potential partners who aren't serious or who don't have a solid offer. Second, it requires the prospective partner to fully articulate a proposal, using SHRM's outline.

We developed this process a few years ago (and we continue to refine it) because we saw the business of joint ventures increasing. We didn't call a staff meeting one day and decide to begin pursuing joint ventures. The process evolved over years. Finally, it was big enough business for us that we needed to set up some controls.

Outside organizations were approaching us more and more, and they were coming in through different doorways: a seminar deal with the conference staff, a publication deal with the magazine, other offers through the information center. It was possible for the same organization to be negotiating concurrently with two or three SHRM departments--without any of the department heads knowing about the other potential deals.

We needed a system to get all the departments involved, at least in the beginning, in every potential deal. We also needed a system to standardize the way we collect information about potential partnerships so that we could evaluate each one consistently.

The product review

Here's how it works for us: Once the idea for a partnership surfaces--and the ideas can come from inside or outside the organization--the outside partner gets a lengthy questionnaire. Questions focus on the potential partner's market mix, the research and development of the product or service in question, and the financial components of the partnership.

The questions on the PEDS form include the following:

1. Have you been involved with other joint ventures? If so, provide a list. This question gives us some references we can check.

2. What is the distribution plan, including order entry and shipping? The answer here starts discussion of how some of the work will be distributed.

3. What resources are required to bring the program to market? That's another question about distribution of the workload.

4. What is the target market? Here, we want to test the fit between the product and our members.

5. What need or marketplace opportunity does the product or service meet? We get the prospective partner's view and match it with ours. We know our market, and we should know whether there's a need for the proposed venture.

6. What is the potential market share with the support of SHRM? What are the projected annual sales goals for this year and the next two years, with and without SHRM's participation? Here, we want to find out if the partner thinks we can make a difference. One recent proposal we received said SHRM would make no difference at all in sales. It's still in review, but we'll probably reject it.

7. What is the current pricing structure and the proposed discount for members? Without a member discount, we usually won't make a deal.

8. What is the competition for this product or service? This question is key. Suppose the product competes with a major exhibitor or advertiser. If we do a deal that offends a long-time supporter of our organization, it could cost us more in revenues on one side than we will make on the other side.
COPYRIGHT 1993 American Society of Association Executives
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Publication:Association Management
Date:Jul 1, 1993
Words:938
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