The Age of (Really Strange) Corporate Partnerships

The pairings are coming fast and furious. The ride-hailing app that joined forces with a box-store company. The department store that now hosts a very niche store-within-a-store. The fast-food chain that’s partnering with a one-hit-wonder food company.

‘Tis the season of odd bedfellows. In just the last few months, a surprising number of companies have paired up in the hope of finding new business synergies. The idea, say experts, is mostly to join forces for the short term, but the benefits can also be great for bottom-line revenue—even if there’s also a risk of turning off customer bases.

 “They’re looking for that magical ‘one plus one equals three’ footprint expansion that can come from accessing built-in audiences,” says Deepali Vyas, global head of fintech, payments and crypto at Korn Ferry.

To be sure, collaboration between two customer-facing businesses is “not the newest,” says Miriam Nelson, senior client partner at Korn Ferry. Movie studios have long partnered with fast-food chains on tie-in merchandise for kids, and mainstream clothing companies commonly team up with outside brands and designers. In a 2020 survey of over 400 partnership marketers, respondents reported the top benefits of these affiliations to be increased revenue (55%), brand awareness (50%), customer retention (42%), and market share (37%).

Historically, these arrangements have typically been short term—extendable if successful—with participants seeking to grab new customers before moving on within a matter of weeks. Critically, the partnerships of yore operated in the sweet spot of both companies’ core businesses.

But today’s partnerships are, well, odd, and have elicited some raised eyebrows, at least initially, from customers. Rather than serving their core businesses and main audiences, firms are collaborating to attract new fringe customers who are sometimes rather distant from their typical revenue streams. For example, a carshare service and a big-box store can create a kind of delivery service that previously didn’t exist, says John Long, North America retail sector leader at Korn Ferry. “All of this activity is around finding new customers and new avenues for growth,” he says, and many can be whipped together fairly quickly.

Experts say there are several factors driving this  new movement. For one, the pairings can produce savings in areas like real estate and labor, which in some cases can be staggeringly high. Partnerships also allow both expansion and access to new customers—with minimal outlay for new infrastructure, whether brick-and-mortar or virtual. In those cases, firms find it more cost-effective to do business à deux. “If the ROI on building another store doesn’t pencil out, it’s a heck of a lot cheaper and easier to do a store-within-a-store,” says Long. These shops-within-shops can bring benefits such as allowing one company to offload an entire category of merchandise onto a partner.

Still, experimental partnerships in big business carry their own risks. Of course, the effort could fail—but in today’s leadership landscape, that can actually work in executives’ favor, as a demonstration of their willingness to try new things. “If it doesn’t resonate, then it’ll be seen as a one-off—it’s a test run,” says Long. The bigger risk of these newfangled partnerships is failing to calibrate values between the firms, both internally and externally. At a time when employees and customers alike are particularly sensitive to corporate statements and investments, alignment is critical, so that stakeholders will buy into the partnership. For customers, “expressing themselves through their brands is even more important now,” says Nelson.

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