Adding the Third Dimension - Co-opetition, Affiliating, Alliancing, Partnering, Hosting

Take the word competition.

Remove the “com” and replace it with ‘co-op’
 
You get a new marketing word — co-opetition.
 
Co-opetition is the title of a not-easy-to-read book (but very interesting nevertheless) written by Adam M. Brandenburger and Barry J. Nalebuff.
 
On the book’s inside sleeve, they describe co-opetition as a “high-profit means of leveraging business relationships.”
 
And that’s precisely what we want to talk about here - high-profit relationships. We call it, “Marketing in the Third Dimension”.
 
It has many (probably infinite) variations. Our purpose here is to open your mind to those infinite possibilities so that we can later explore them with you in more detail.
 
This series of diagrams gives you the basis of the idea:
 

The Desired Customer
Resistance Barrier
You


What the diagram is representing is a typical marketing situation. At the bottom of the diagram is you. You’re trying to market to the desired customer at the top. But in between you and the customer is what we’ll call a “Resistance Barrier.”
 
If you try to approach (by advertisements, by letters, by commercials or whatever), the resistance barrier prevents the messages getting through. Another way of thinking about the Resistance Barrier is as a “lack of interest” barrier.
 
And almost no matter how hard you try to get through it, the barrier becomes impenetrable. Or at best, it costs you so much to get through, the barrier makes it absolutely uneconomical to keep trying.
 
It’s here where we look to the Third Dimension.
 
If we could draw here in three dimensions, you’d see something interesting about the Desired Customer. That’s this — the customer doesn’t exist in space alone. In a very real sense, the customer is “connected” to other people — specifically (and this is the key) to other suppliers who are non-competitive to your client.
 
Here’s the Desired Customer with existing relationships with entities S1, S2 and S3. Entities S1, S2 and S3 are, if you will, companies or suppliers who have a pre-existing relationship with the Desired Customer.
 
Opening up this third dimension gives us the key. For your client to reach the Desired Customer effectively, what you or your client has to do is to form some sort of alliance (or co-opetition relationship) with any or all of S1, S2 or S3.
 
Then any or all of S1, S2 and S3 effectively serve as hosts for you, effectively “introducing” your client to the Desired Customer.
 
An example might help. Let’s say you are trying to establish a market in, for example, New Zealand.
 
One way (the traditional way) would be to try to go directly to the market with advertisements, direct mail, and so on.
 
A much more effective way is to open up the third dimension by asking this question:
 
Who else is currently dealing with the Desired Customer we want to get to?

We’ll call this question “the 3rd dimension” question. Asking it opens up a whole new dimension.
 
Let’s see how it works in our particular case. There are several steps:
 
1.       Identify who the Desired Customer actually is.
2.       Determine all possible links with potential hosts.
3.       Negotiate win-win relationships with the host or hosts.
4.       Determine the most effective method of hosting.

In our case, let’s say the Desired Customer is obvious — the accountant in public practice. So that’s step 1 done.
 
Step 2 has us exploring thing like computer companies, the Professional Bodies, suppliers of training material, Banks and Financial Institutions.
 
Step 3 is interesting. It has many variations. For example, the mere fact that the host introduces you may well add enough value to the relationship from the host’s point of view that there is no monetary exchange. And that’s often the way.
 
Or you might offer the host a percentage of the savings you make on marketing costs. Or, you might offer the host a percentage of the “sale.” There are a myriad number of ways. In a sense, the way you do it is immaterial. What is material is that you do it.
 
Step 4 offers a lot of opportunity and variation too. For example, in our case, it might be a special seminar that the host offers to his customer base at a lesser rate than the “normal” customer would invest.
 
Or it might be simply what’s called an “endorsed” mailing where the host endorses you on their letterhead to the Desired Customer in some way.
 
(By the way, always suggest at least the endorsed approach. Approaches where you write to the host’s customer base are generally less effective than the endorsed approach. Similarly, you could explore “piggy-backing” for yourself. This is where your mailing piece rides along with or is in some way attached to a normal mailing that the host would otherwise be doing to their client.)
 
The effect of all of this is enormously significant. For example, when we in fact did the exercise in New Zealand, we got a 10 to 1 improvement in our marketing effectiveness. One way of looking at that is to say we achieved 10 times the numbers that we’d previously achieved for a given outlay.
 
And therein is the major point about Co-opetitive relationships. You really can expect an order of magnitude improvement in effectiveness.
 
The key is to be sure to ask that “3rd Dimension” question before you spend any money at all on “traditional” marketing. Again, the 3rd Dimension question is:
 
Who else is currently dealing with the Desired Customer we want to get to?

The most significant thing for you to realize here is that no one (and we do mean no one) else is in a better position to engineer these relationships than the accountant in public practice (than you, in other words!).
 
So .. let’s look at some interesting examples of how we can give marketing efforts significant boosts.
 
§         Say you own a home and office cleaning company. We can contact every carpet retailer in town on your behalf, offer to pay the cost of a mailing to the carpet company’s customers, and offer to write the letter, ostensibly coming from the carpet retailer, that recommends you cleaning service to their customers. We help you tap into a perfectly profiled customer base. The carpet dealer earns a percentage of sales and harvests otherwise hidden profits from his “dormant” list.
 
As you can see, both parties win. Since you are accessing only qualified prospects, the cost of acquiring a customer via a host relationship is a fraction of what it would be if you ran an advertisement or did a cold mailing on your own. This, of course, gives you much higher profits on every sale.
 
And, assuming that you offer a good product or service, the host company (the carpet dealer, in this case) has nothing to lose by recommending you. Yet, it could mean thousands of dollars in profits for you with no effort on their part.
 
§         As another example, say your company builds tennis courts. We would approach tennis clubs on your behalf and sell them on the idea of mailing their members a special offer to have a tennis court in their own yard. Now, the response might not be “big,” but you couldn’t get a better-targeted list of names and, actually, you don’t NEED a big response to make selling a “product” like this exciting. At first, the tennis club proprietor is likely to balk at having your client sell tennis courts that take away members. But, when he or she sees that they can earn more in one sale (for which they did nothing), and then earn ten years of membership fees from that person, the opportunity suddenly becomes very attractive.
 
§         If you can’t afford to pay for advertising, we may be able to organize a joint venture with a newspaper, magazine, radio station, etc., where they agree to run your advertisement on a “per inquiry” (PI) basis. This means instead of getting paid up front, the newspaper gets a certain amount for each person who responds to the advertisement (e.g., a percentage of sales).

Most publications won’t accept PI advertising, but some will. (Some publications will run PI advertisements on a “stand-by” basis, or they will only run your advertisement if they have extra space to fill.) 
 
In approaching media about PI, you will have the best chance of success if you can demonstrate, in dollars and cents, that they stand to gain more from the PI deal than from being paid in advance for advertisement space.
 
One final word on this 3rd dimension. Consider that you can look at it from two different perspectives. For example, take the 3rd Dimension question:
 
Who else is currently dealing with the Desired Customer?

And turn it right around. When you do, you get this:
 
Who else might want to get access to the customers that I already have?

This illustrates another key point about co-opetition. It is, you might say, a two-way street. If you have a list of customers (and you ought to have at least that), recognize that that list has most likely cost you a lot of money to develop.
 
Recognize too that it has value to someone looking at co-opeting (if that’s the right word) from the other perspective.