CHAPTER 15
What Is Partnerships Program Maturity and How Do I Get It?
If you have ever purchased an official jersey, hat, or other memorabilia of a favorite collegiate or professional team, it probably came from Fanatics, the largest online retailer of officially licensed sports merchandise. Partnerships are vital to Fanatics' growth. The company works with a portfolio of nearly 1,000 modern partners to sell over 500,000 products from over 500 different teams, and this number is growing.
Fanatics began its partnerships program 15 years ago. Coupon and cashback sites originally comprised the majority of Fanatics' partnerships, as they did at the time for most companies. Today, Fanatics' partners include influencers, bloggers, and affinity-based communities, as well as sports content aggregators like SB Nation, news publishers such as the Chicago Tribune that are located in towns with beloved sports teams, and large media companies such as CBS Sports. Together these partners comprise a profound customer acquisition and retention engine for Fanatics.
Diversifying its partnerships portfolio. Fanatics became intentional about diversifying its partnerships portfolio several years ago, following a senior management change at the company. “Our new leadership was more data-driven in their decision making,” explains Wade Tonkin, director of global affiliate partnerships at Fanatics. “When we got deep into the numbers, we realized many of our affiliates were not bringing in incremental revenue. They were bringing in sales, but they were sales that were likely to have happened anyway. As a result, we were paying sales commissions when we didn't need to be, which decreased our overall profitability.”
The company revamped its partnerships strategy to capture more value. First, it revamped its commission structure to encourage affiliates to promote items that had more incremental value to Fanatics. Second, it began to recruit partners that were able to influence the top of the sales funnel, partners that generated demand for Fanatics' products, rather than just closed sales. Influencers, bloggers, and affinity-based communities were a natural fit. These partners already enjoyed trusted relationships with Fanatics' prospects: passionate sports fans. What's more, they had high levels of ongoing engagement with these fans; many fans would visit partners' sites daily to keep up on the latest news. When these sports-based partners chose to feature Fanatics' products on their blogs, social media, websites, or boards, it was a match made in heaven.
“Our partners give people a reason to shop,” Tonkin explains. “Fans come through their sites directly to ours, where they find what they want, check out, and then a portion of the sale goes back to the original sports site in the form of a commission. We've had some huge wins, working this way. Several content partners have driven six-figure sales numbers on specific events, like a Super Bowl or college football national championship.”
Importantly, these are incremental sales for Fanatics. The customers who come to Fanatics via these partners are often outside the reach of its other marketing efforts. In other words, in the absence of these partnerships, the resulting sales would have been lost. What's more, 90+ percent of the time, these partners close deals faster than the company's other marketing efforts. “Customers that come in via these partners don't comparison shop or go to coupon sites to get further discounts,” Tonkin explains. “They send them and we close them.”
Recruiting these sports enthusiasts partners to work with Fanatics can take time and education. In most cases people have built these sports communities out of a love for a team, not out of a desire to drive revenue, and they can be apprehensive about merging the two. In these situations, Tonkin encourages potential partners to query their audiences directly about monetizing the site in this limited way. In his experience, fans are usually quite enthusiastic about their favorite blogger being compensated for the research they do and the content they create. This form of monetization doesn't compromise the integrity of the writer or the site; it actually enhances it, as it provides fans with an easy and reliable source of official team merchandise.
Optimizing partnerships performance. Tonkin's goals for Fanatics' partnerships portfolio go beyond recruitment of diverse partners; he wants to make each of his partners as productive as possible. He understands that when his partners win, Fanatics wins.
“We've got a good brand and great products, so what matters is figuring out what success looks like for each partner and each partnership type, and doing it, and then replicating that success with as many potential partners,” Tonkin explains.
A great PMP is essential here. Fanatics tracks all of its partner interactions and shares that data directly with its partners via an email report or an API that will enable them to put sales data into their own dashboards. This information allows partners to see the impact of their efforts and to identify opportunities for improvement. Working with shared data from actual results, Fanatics and its partners can roll up their sleeves, test different initiatives, see what works, and learn from the results.
In some cases, optimization included moving partners from operating via co-branded websites to having partners send traffic directly to the Fanatics of League Store ecommerce site. This move enabled partners to have access to the full range of League products and promotions—the Leagues often restrict product mix and promotions on co-branded sites—which allowed many to drive more sales and commissions. The move also simplified life on Fanatics' end, as operating parallel ecommerce sites was labor-intensive and did not have the tracking and reporting capabilities that enable performance optimization.
Getting the right PMP in place. A mature partnerships program isn't run on a spreadsheet. Nor was Fanatics able to run its program on a traditional affiliate network. The network charged Fanatics a percentage of each partnership payout, which became prohibitively expensive. Migrating to a software as a service (SaaS) platform brought six-figure savings on platform costs alone and allowed the company to be more flexible and aggressive with its commission offering to bigger partners by virtue of the network/platform commission not being based on a percentage of the affiliate commission spend.
Organizational changes: form follows results. Until recently, Tonkin's group has operated as its own siloed entity: affiliate marketing. As people from other departments have come to understand how performance marketing works, and seen the revenue it generates, they have begun to tap into the affiliate marketing group's expertise and PMP. Several key traditional publishing relationships have been transformed into full or hybrid performance partnerships. “It's been a big win, putting a different perspective on some of these relationships that we have had for years,” Tonkin explains. “Our slowest growing [newly converted partner] is growing at a rate of 2.5x year over year and some are doing substantially more than that.”
Responsibility for several of these partnerships has been moved under Tonkin's remit, freeing up other areas, such as those that focus on sponsorships, to focus on nonperformance-based partnerships. Tonkin is careful to keep everyone throughout the organization up to speed about these partners now that they have converted to a performance basis, so that people continue to understand that they made the right move.
Although Tonkin's group is still referred to as affiliate marketing, this name is being revisited to more accurately reflect the enlarged scope of its efforts. “A lot of what we do within our program has evolved past that,” Tonkin explains. “This is much more than semantics at work here. People have different connotations in their heads about affiliate relationships versus partnerships. When I think of an affiliate, I think of somebody who joins a program, gets approved, and does what they do, making a few hundred bucks a month posting links on their sites. When I think of partnerships, I think of bigger operations and more complex deals. I think of two-way relationships with people who are on the phone every week, sharing ideas, making things happen.”
Tonkin's group manages both affiliates and partnerships, although it does separate them. Within the partnerships group there are both business development people and relationship managers. “We have hunter-types who can readily identify a prospect and bring in the deal,” Tonkin explains. “They hand new partners off to another group that focuses on nurturing those relationships, working closely with them to get the performance out of them.”
Tonkin is clear that building and nurturing relationships is essential to the success of diverse partners. Partnerships with influencers, bloggers, communities, publishers, and media houses are long-term investments, not one-off transactions. While it takes time and energy, this level of commitment enables partners to quickly identify and tap into opportunities that arise over the course of a sports season or several seasons. Sometimes these opportunities are predictable: preseason sales, Father's Day sales, or Mother's Day promotions. Other times, they are last-minute surprises such as a new uniform release for a team or a Super Bowl or Sweet Sixteen win. “We have to be able to move on a dime in these situations and that is only possible when an established relationship is in place,” Tonkin explains.
Institutionalizing partnerships learnings. Tonkin and his group are entrepreneurs. When opportunities arise, they thrive on having the freedom to figure out what will work best, to act, to learn, and to apply their learnings to other partnerships. That having been said, they also have a combined 40-some years of partnerships experience under their belts that they want to be able to share more broadly with their team. As a result, they are actively working to institutionalize their learning in useful ways.
“We don't want to be telling people that this is the way they have to do things,” Tonkin reassures. “We just want to give people guidelines, tips that have worked well for us in the past, that can empower them to run with it. There are so many moving parts, it's hard to stay on top of everything all of the time.” Toward this end, they have set up an internal wiki to capture learning, playbooks to facilitate “hot market execution,” and are working on a mission statement that puts forth the company's partnerships philosophy. They are also considering various ways of seeking partner feedback, perhaps a net promoter score, to assess “whether people are feeling the love and getting their time and money's worth out of our relationship.”
“Life is good at Fanatics,” concludes Tonkin.
FIGURE 15.1 The difference between full potential and partnerships maturity.
Maturity Is a Good Thing
Partnerships are a winning strategy. Companies can derive positive results with partnerships whether they are just getting started or have been at it for a while; however, enterprises that are building the necessary underlying partnerships architecture and capabilities now will be the real winners in the future. Partnerships program maturity allows for companies to reach their full partnerships potential (Figure 15.1). Already, firms that have the highest-maturity partnerships programs generate a greater share of their revenue from partnerships, drive faster revenue growth from their partnerships and at the overall company level, and are more likely to exceed stakeholder expectations of business metrics than companies with less mature partnerships programs.1 This chapter explores some of the primary strategies that companies are currently pursuing to realize their potential. To explore each of these strategies in more depth, enjoy the resources available at www.thepartnershipsbook.com.
Key Activities Along the Path to Full Potential
What is the path to a successful partnerships program? While every company develops its own definition of its full potential, and charts its own path to get there, patterns can be seen among their strategies. At present, these activities include taking a more strategic approach to partnerships, becoming more intentional about their partner experience, adopting and automating the partnerships process, diversifying their partnership types, expanding globally, optimizing their partnerships and their overall partnerships program, and building their partnerships organization to support their current and future growth.
Take a Strategic Approach to Partnerships
In the past we have observed that as companies gain traction, they become more strategic and less ad-hoc in their partnerships efforts. Today we are seeing companies being deliberate and strategic from the get-go, building on the experience and infrastructure of those who have been at it for a while, several of whom have shared their knowledge with us for this book.
As discussed in Part III, this involves creating a vision for their partnerships efforts. This vision describes at a high level how partnerships will enable enterprises to meet their most critical business objectives and the philosophy that underlies their partnerships efforts. This vision is translated into a strategic plan that describes what the partnerships organization will achieve over several time frames and links those outcomes to critical business objectives. The strategic plan is rooted in a comprehensive analysis of current partner and competitor performance and includes forecasts developed with the input of enterprises' modern partners and relevant internal stakeholders. It identifies where growth will come from—existing and new partners—and plans for discovering, recruiting, and nurturing new partners to productivity. It also recognizes the products, content, promotions, incentives, and people resources that are necessary to realize the anticipated results.
Partnerships planning looks beyond the actual portfolio to the capability and capacity of its supporting growth engine. Does the program have the right people, processes, and technology in place to carry out this year's plans and to be ready for what is coming down the pike? What is the best way to manage partnerships across an entire organization? How do partnerships skills and capabilities need to grow to generate and manage an increased number of global and strategic business-to-business partnerships? Is there strong organization support for necessary organizational shifts and investments?
To recruit quality partners, enterprises begin to think of their partnerships experience as a product or service that they offer their partners. They develop partner value propositions that articulate why potential partners would want to collaborate with them, how they will contribute to their success, and why they are uniquely qualified to deliver that value. Many begin to standardize and automate their partnerships process, adopting tools like the Partnership Design Canvas and standardized contracts, creating ideal partner profiles and clear guidelines for partner acceptance in order to streamline, not limit, their partnerships experience. Branded partner portals and partner Facebook groups offer fecund self-service resources for partners. Real-time API-enabled partnerships reporting—combined with ongoing direct consultation and collaboration between an enterprise and its individual partners—enables partners, and therefore enterprises, to meet and exceed their goals. Finally, enterprises develop standardized ways of eliciting partner feedback to improve their way of doing partnerships and of being partners.
Adopt and Automate the Partnerships Process
In the past, when companies began partnering they often operated on a wing and a prayer, piecing together different processes, practices, and technology, the majority of which are not specifically designed for partnerships. Today enterprises that are working toward their full potential recognize that they cannot manage their partnerships in a makeshift way and on spreadsheets. They know that partnerships portfolios that generate almost a third of companies' overall revenue, and that reside in multiple departments, require specially designed technology that automates the entire partnerships process, allows for customization, and brings the wisdom and truth of data science to bear.
These companies adopt technology that supports all of their current and anticipated partnership types so they can cost-effectively and cost-efficiently simplify and consolidate their global partnerships efforts. They look for platforms that provide visibility into all of their partner activity and enable them to accurately track, value, and compensate partner influence across their entire omnichannel and global customer journeys. This allows them to determine whether their partners are providing incremental value, offer their partners real-time insights into their performance so they can self-optimize, and often structure partnerships on a performance basis. They also want their PMP to spot abnormalities and accurately predict future partner performance, uncover fraud, and identify compliance issues. Many companies are also looking for their PMP to help them discover and recruit high-quality partners around the world and to engage with them on an ongoing basis in order to build productive, long-term relationships. And, of course, they want to be able to simply and easily pay their partners, wherever they operate globally, on time and in their preferred local currency.
Increasingly, companies are looking to separate their PMP from partner program strategy and management services, just as they have previously done with their advertising programs. Affiliate networks have traditionally married the two, which has limited enterprise choice and ability to select the best technology and the best agency partners to meet their unique needs. Further, as companies consolidate their partnerships efforts across their organizations, increasing the volume of activity that takes place in their partnerships program, they are increasingly opting for platforms that charge a flat fee for managing their partnerships, rather than a percentage of partnerships payouts, so that they can effectively fix their costs and not be directly penalized for growth.
Diversify the Company's Partnership Types
As companies' partnerships efforts mature, they expand and diversify their portfolio of partnerships to unlock more value. In the earliest phase of partnership maturity, companies tend to work with a small group of partners, perhaps 10–25, most of which are affiliates. This makes sense: these modern partners have well-established partnerships processes and influence customers at the point of sale to drive conversions. As companies gain more experience, they increase the number of partners in their portfolio. However, they lack diversity in their partner types: 90 percent of revenue is driven by 10 percent of their partners. This leaves enterprises highly vulnerable to a handful of their partners' results. A shift in partner focus or loyalty can take down a partnerships program.
Scaling and finding the right partner mix becomes a priority as companies continue to mature. Enterprises begin to segment their partnerships portfolios in terms of their target customers and their customer journeys, as well as by geography, product, and market vertical, and look to a broader swath of partner types to enable them to meet their goals. They will look to some partners to help them attract new customers and to others to catalyze ongoing shopping journeys. By the time companies are operating at the highest level of maturity, they have developed a more balanced portfolio that includes a sizable number of partners across a range of partnership types. Having proven the success of the pay-for-performance compensation model for partnerships, at this point companies often begin to explore its applicability to a wider variety of partnerships located in various departments.
Expand Globally
Partnerships enable companies to have an expanded and engaging presence in a highly fragmented marketplace. The global digital marketplace has vastly multiplied consumer purchase options. Partnerships enable companies to expand their presence to a potentially infinite number of storefronts around the world.
Global expansion typically takes place through enterprises' existing partnerships programs. It's too complicated for partners to join multiple programs for different regions if the products offered around the globe are essentially the same. And it's far easier for enterprises to run their programs on a single PMP, assuming the platform supports local language contracts and can make payments in local currency. Yet global expansion remains complex. It requires in-country expertise and support and solid compliance with local laws and practices. This is not the place to move forward enthusiastically, making up the rules as you go and asking for forgiveness from local authorities later. It takes careful upfront planning, expertise, and strong relationships with local partners. Many companies elect to work with partnerships management agencies to establish and manage their programs in areas in which they wish to expand.
Optimize the Company's Partnerships and Its Partnerships Portfolio
As partnerships become responsible for a significant and increasing portion of overall corporate revenue, more people within enterprises become interested in partnerships efforts and performance. Optimization of individual partnership performance, and of overall partnerships portfolio results, becomes critical.
Optimization of individual partnerships and of an overall partnerships portfolio involves measuring and assessing past performance, using predictive analytics to forecast future results and reduce incidences of fraud, and proactively designing new combinations of product, promotions, content, and incentives to enable partners to grow. Being able to track each partner's influence on customer journeys becomes table stakes. To do so, companies use a state-of-the-art PMP to track customer action across every device and channel. With this data, they can better understand their actual customer journeys and see how their partnerships efforts interact with and influence other marketing activities.
To more fully understand and assess partner impact, companies are broadening their perspective on measuring partner value to include both partner efficiency and partner effectiveness metrics. In addition to looking at CPA, ROAS, and revenue, they are looking at partner-assisted revenue—revenue they may have helped to generate but that they didn't close—partner profitability, partner ability to reach new customers, and partner results by product categories, geography, device, and SKU. These insights enable enterprises and their partners to assess incrementality and right-price their activities, paying partners for the actual value they bring.
Enterprises are pulling multiple levers to help catalyze their partners' growth. Sharing performance insights directly with partners who don't generally have access to enterprise sales data to see the impact of their efforts allows partners to proactively optimize their results. Testing various combinations of product, content, promotions, and incentive structures gives enterprises and their partners the opportunity to determine what makes a difference to their partnership results. Providing fresh brand assets that support partner success, promoting partners across their broader marketing efforts, offering personalized training and certification, and mentoring key performers also help move the needle.
Build the Partnerships Organization
Most enterprises are knee-deep in partnerships; they just may not recognize it as such because their partnerships have many different names and are developed and managed in different departments across their organization. As enterprises begin to build a track record of successful performance partnerships, and as their leadership begins to understand that partnerships have the potential to generate as much or more revenue than sales and marketing, interest in partnerships grows across organizations. Senior-level management is installed—please extend a warm welcome to the new chief partnerships officer—and intentional collaboration across departments engaged in partnerships begins. This collaboration is often accompanied by a gradual migration of partnerships to one PMP. With the ability to track each partner's influence on an enterprise's business now possible, enterprises begin to evaluate when and where it makes sense to convert other partnerships to a performance model. In some cases, performance partnerships efforts are consolidated under one roof.
Prepare for the Future
Partnerships are fast becoming a critical lifestream for enterprises. Hundreds of innovative enterprises are stretching the boundaries of what “partnership” means, spawning new types of partnerships, experimenting with how those partnerships are designed, optimized, and scale, and learning what it takes to effectively collaborate across organizational borders. What's happening here is not just a rebranding of affiliate marketing, it's the birth of the partnership economy. Although we are in the early days of fully realizing the full partnerships potential, we see it already infusing all aspects of customer engagement, and in the not-too-distant future, partnerships ecosystems will be the foundation upon which highly successful businesses are built.
The Quick Summary
- Every enterprise defines what full potential is for itself and charts its own path to get there. However, successful partnerships programs share the same essential foundations: a strong and broad organizational commitment to partnerships as a growth strategy; a clear yet evolving vision for how partnerships can achieve critical business objectives; a strategy for realizing that vision; and an enabling partnerships growth engine.
- What is the path to reaching full potential? Companies are taking a more strategic approach to partnerships. They are adopting and automating the partnerships process. They are expanding and diversifying their partnerships portfolio and taking their programs global once they have experienced success in their home market. They are using advanced techniques to value and optimize their individual partnerships and their partnerships program and portfolio. As their remit expands and they begin to manage a greater portion of enterprise partnerships, converting them to a performance basis, they are building stronger and more experienced partnerships organizations. In every way they can, they are preparing for a bright future through partnerships.
What's Up Next?
The next chapter explores the partnerships planning process, which enables enterprises to both maintain and optimize their current partnerships program while putting a strong foundation in place for the future.
Note
- 1 “Smooth Your Partnership Journey by Learning from High Maturity Companies: How to Make Tactical Improvements to Your Partnership Program,” impact.com.