2.1 — Exploring value-led and strategic partnerships
Recap
Our previous article on paid partnerships focussed on driving growth with a clear focus on preventing excess spend on customer acquisition. In this article we are going to explore how value-led partnerships, strategic partnerships and communities impact unit economics. Our final article will focus on using tools to drive growth, and identifying legal and risk factors that scaling businesses should consider.
Overview
Value-led and strategic partnerships have benefits beyond customer acquisition — they are crucial for building trust, influencing other deals and co-creating products and integrations. Sometimes commercial models may be attached, however, we want to highlight that such strategic partnerships take longer to build than affiliate and marketing structures, but can have much greater impacts.
Kyrill Zlobenko (GM Europe at Seedrs) observed that great partnerships can originate a high number of deals, but more often they also influence deals, increasing the likelihood that they’ll close. They provide co-branded marketing and PR to boost awareness; they also provide credibility for prospects; they signal that top partners have vetted you.
Strategic partnerships and communities are particularly valuable for firms that are focusing on being:
- Expansion oriented: they wish to increase their total addressable market through product integrations and product co-creation
- Runway conscious: they’re conserving their cash runway perhaps to invest in product, rather than spend on affiliates and digital marketing or are bootstrapping their business
- Value-led: they might operate in regulated environments and wish to avoid commission payments by being value-led and solving problems for potential partners
Value-led selling and partnerships allow businesses to minimise their acquisition costs and provide access to low-cost marketing opportunities e.g. a partner’s customer relationship management system (a CRM tool used to market to a client base). Such partnerships are successful when clearly defined problems are being solved for partners, who in turn will advocate for a particular product.
Definitions
Bootstrapping: new businesses that only use their founder’s capital, and grow by re-investing their own revenue. Businesses that bring in new capital through revenue, rather than raising externally.
- Example: GoPro was bootstrapped by Nick Woodman through his own savings, using its sales to drive growth.
Communities: a collection of partners and brand ambassadors, who are able to share best practices, learnings and collaborate together for the benefit of their clients.
- Example: Salesforce offers a range of initiatives and events for its range of partners.
Product co-creation: product co-creation refers to designing a product in conjunction with a customer or partner from the outset.
- Example: Xero facilitates payments directly from its cloud accounting software, through its Pay with TransferWise product.
Product integrations: this can be quite a broad topic, but for simplicity we refer to it as the seamless synching of data from one product to another
- Example: luggage storage locations being synced from LuggageHero to Guesty.
Total addressable market: calculate the total amount of customers served by each company within an industry, and this by the average annual revenue per customer. This represents the total opportunity that your product can serve and generate revenue from, through your offering and any integrations with partners.
- Example: assumptions behind Uber’s total addressable market (TAM) led to differing valuations, due to some stakeholders calculating the TAM as being the global taxi and car-service market whilst others went further to include additional assumptions and new use cases, such as a supplement for mass transit and driverless automation.
Value-led selling: value-led selling focuses on highlighting the benefits of a product, rather than discussing its features. We’ll focus on the challenger sale methodology in this article.
- Example: British Airways highlight how Club World provides clients with a better night’s sleep, rather than discussing the length and specifications of their flatbeds.
Customer journeys
When looking at client acquisition being driven by partners, it is crucial to understand what type of clients will be referred to you and how they will sign up. We’ve divided them into three main groups:
Self-service: clients sign up themselves after being advised by a partner. They may come through a dedicated landing page and apply a tracking code for attribution purposes.
- Example: LuggageHero’s customers can enter promo codes provided to them by a referrer.
- Customer profile: consumers (B2C), freelancers and SMEs (B2B) where the CEO or founder might sign up, who might come in large volumes but be of a lower average revenue value.
Partner-assisted: clients might begin to sign up themselves, but partners can subsequently assist or send an invitation to their client to help begin signing up.
- Example: Receipt Bank facilitates partner assisted sign up and account management.
- Customer profile: larger businesses and higher end SMEs that might delegate sign up to their teams or external stakeholders, who might come in medium volumes and be of average revenue value. Your team might support these clients with inside sales functions.
Partner-led: the partner completes the full sign up process on behalf of their client. This may be restricted to particular partners who have passed due diligence thresholds or completed training.
- Example: Smart Pension’s adviser platform facilitates bulk customer sign up for its partners.
- Customer profile: enterprise and multinational businesses that might delegate sign up to external consultants or advisors through a Request for Proposal (RFP). These clients come in lower volumes but are typically very high value and you might provide them with account managers.
2.2 — What is a value-led approach?
Driving unit economics
Qualifying and clearly defining what problem you’re solving for your partners and clients is a great way to optimise the following unit economics:
- Active rates: the percentage of customers who use your product on a weekly or monthly basis, and the speed in which they first use your product or generate revenue after opening up their account.
- Customer acquisition cost (CAC): any money spent on marketing campaigns, affiliate commissions and outreach to acquire new customers, value-led approaches stray away from paying commissions and marketing spend.
The Challenger Sale methodology
We’ve found the challenger sale methodology the most relevant way of implementing value-led and consultative selling, by using broad and probing questions to create opportunities to demonstrate the benefits of your product or partner program and clearly define how you will help partners’ end-clients.
Probing questions allow you to quickly qualify potential partners and clients as early as possible and ensure that you’re genuinely solving their problems. The below questions are tailored for accountants, and allow you to identify how they work and quantify potential pain points that a financial services product could solve.
Example: accountant persona
How do you access your clients’ statements for account reconciliation?
- Probe: how much extra time do you spend on clients who send you paper statements?
- Identify: the cloud accounting software they use and how many users have migrated
- Quantify: the pain point of paper statements and migrating clients to cloud based systems
- Demonstrate: how you can solve that pain point
What do you do when newly formed companies have difficulty opening a bank account?
- Probe: how long does it normally take them to open the account?
- Identify: their go-to-bank and resolution process
- Quantify: the pain point of waiting for an account to be opened
- Demonstrate: how you can solve that pain point
How do you support your clients when they look to access funding?
- Probe: how many financial institutions do you contact to compare funding options?
- Identify: who they recommend for access to funding
- Quantify: the pain point of making multiple enquiries offer comparisons
- Demonstrate: how you can solve that pain point
It’s crucial that you educate your partnerships team and sales team with training and playbooks so that they understand what benefits your products provide. This allows them to tailor questions to deliver insights and demonstrate the value of your product in a contextualised manner.
2.3 — Capitalise: partner subscription model
We spoke to Ollie Maitland (co-founder of Capitalise) about building up a B2B2B growth channel and how they’ve been able to equip accountants with tools to advise and solve problems for their clients:
It is important to realise that partnerships have costs even if they are “free”. In fact if the partnership is worth doing then both parties should be able to invest and it would still work. If either party can’t contribute real money then is there actually a partnership there? What’s more this builds a commercial relationship and commitment between the parties — partnerships is a competitive space because there is only a certain amount of space for strategic partnerships that are mutually beneficial. You need to be front of mind with a strong proposition, for partners to consider you and drive action in the form of growth.
Problem definition
- Transparency: business finance was previously sourced through relationships with different financial institutions, with less transparency and comparison
- Scalability: Capitalise equips accountants to compare financial products from 100+ lenders and complete the process up to an underwritten offer for their clients
Capitalise’s decision to offer a subscription-led partnerships program means that their potential partners consider their implementation strategy in further detail before signing up, notably considering:
- Distribution: how many of our clients can we help and how?
- Ownership: who will be responsible for advising on funding?
- Training: how can our team work with Capitalise to undergo training on advisory, to identify needs and support clients?
- Marketing: how can we produce marketing materials to proactively position ourselves as advisors?
Recruiting partners
The decision to offer a subscription led partner program might result in fewer partners, however, this is offset by the strong impact on unit economics that occurs as a result of the subscription-led model.
Revenue upside far outweighs the decrease in addressable market (e.g. partners with fewer clients most likely can’t get a positive ROI on rolling out the platform with just one or two referrals per year).
Increasing the total addressable market
Capitalise is also now in a position where it can position itself as a go-to marketplace for other institutions that manage financial data for SMEs e.g. neobanks and e-money institutions that don’t have loan facilities. By launching Marketplace API, Capitalise is in a position to deliver value to the following stakeholders:
- SMEs: data driven and transparent way to access funding, regardless of the financial institution they choose to bank with
- Financial institutions: offer a wider range of products and improve their proposition, without taking on the underwriting risk
2.4 — Increasing the total addressable market through partner product co-creation and integrations
Product co-creation refers to designing a product in conjunction with a customer or partner from the outset. Such collaboration with partners can increase your total addressable market and drive user activity through:
- Co-branded marketing
- Warm introductions to leads
- Endorsement from strategic partners
Product teams should be included or informed at the earliest possible moment, in order to identify partners who align with the product roadmap to activate customer acquisition whenever new products are launched — e.g. Revolut launched a partnership with Smart Pension when the direct debit functionality was released.
LuggageHero — unlocking growth through integrations
Jannik Lawaetz (Founder & CEO of LuggageHero) shared their experience of acquiring a competitor that had an integration with Guestly, which led to a number of subsequent integrations with strategic partners to increase their total addressable market and drive their growth across Europe and the US.
Product integration: LuggageHero built a custom API to connect each of its partners (property management platforms), so that they could offer luggage storage to their guests.
Total addressable market: LuggageHero increased its total addressable market by integrating with Guesty and other property management platforms such as Booking Sync, who rent out Airbnb properties. This allows property managers to proactively highlight the LuggageHero solution by offering a nearby location for customers to store their luggage.
Brand awareness: The integrations also help LuggageHero to educate customers on the fact that an alternative exists to storing luggage at train stations, which might not be located close to their accommodation and are characterised by long lines.
Importance of communication
Strong communication between partners and product teams allows you to build up a strong understanding of:
- Partner requirements (what their priorities are and what technical tools they use)
- End-client requirements (understanding the root cause of the problems their customers are facing)
- Legal requirements (ensuring that co-branded marketing materials do not falsely advertise a particular product or service)
- Which competitors your partners work with (understand whether those competitors solve problems more effectively than you or if they pay more commission)
- Unaddressed problems that exist for the partner or the wider market (discuss how these can be turned into opportunities)
2.5 — How can you retain and drive growth from partners and communities?
Once a partner programme has been established, it is crucial to continue to maintain momentum and drive growth from partners. There are a number of ways to do this:
- Remove friction from the partner and customer journey
- Provide marketing materials, content, copy and logos (e.g. TransferWise)
- Push co-branded campaigns across social and traditional media
- Create open lines of communication — perhaps via a partnership portal
- Educate the partner on the product
- Offer to introduce your own sales and/or onboarding team to reduce resource requirements for the partner and increase your control of the client’s experience
Insights from an industry leader
Nick Goode (growth expert) offered some key input into retaining and driving growth from partners:
Never underestimate the value of continued engagement. Partnerships are two way:
- What communication frequency and platforms are you using?
- Keeping partners and stakeholders in the dark is no good for fruitful relationships
Some partnerships are better free:
- At Revolut, many accountants told us that they did not want a revenue share model — instead they wanted to create maximum financial efficiency for their clients
- The accountants’ focus was solving customer problems, not making money off new technology
Content is king:
- What angle? What data? What insight can you provide to your community that enables them and you together to go further?
- Don’t be shy about sharing your story. We learn from each other.
Examples of how you can remove friction for partners
Issue: how many clicks/actions does it take for a partner to refer a client?
Solution: look at what can be automated or prefilled for the partner each time
Issue: what are the most frequently asked questions that your partners ask you?
Solution: create webinars or pdf resources that you can give to your partners to pre-empt such questions — tell them that these are what other brand ambassadors and stakeholders in their industry are most concerned about.
Issue: what are the most frequently asked questions they receive from their clients?
Solution: map out user stories of how your partners interact with their clients in order to build resources that support them. If these partners are a key growth channel, consider providing dedicated resources to answer their clients’ questions.
Issue: how are you able to collect data on the above?
Solution: make it easy for your partnership and business development team to collect information about the queries and concerns partners and clients have. Use a tool like Airtable or Google Forms to collect and quantify data as a live dashboard.
Building an online community
When building your community, it’s important to give, give, give. Create content that’s valuable and free. Learn more about this theory here. The community is likely to become one of your most effective growth channels and it costs nothing but your time to implement.
Michaela Pleskova has built and managed communities at Google and more recently Revolut, highlighted the importance of building a community.
Building a community is essential for your company. Your brand ambassadors don’t just help you to increase brand awareness and give you a better understanding of what your customers truly want, they act as your sales force.
What are the forums, LinkedIn or Slack channels used by your audience?
- Identify: influencers and key stakeholders
- Probe: the problems they currently face
- Discuss: what an ideal solution would look like for them (this is a discussion, not a sales pitch)
What can you bring to the community?
- Identify: topics already being discussed
- Probe: how does your product and vision align with those topics
- Discuss: what thought leadership you can offer (focused on industry trends and perspectives, not your product)
What type of accredited body exists?
- Identify: chartered community (e.g. ACCA UK)
- Probe: what type of events they hold to keep their members up-to-date (webinars etc)
- Discuss: how you could co-create an event or content for them (this will drive awareness)
2.6 — What are the key learnings of value-led and strategic partnerships?
Keeping partners focussed on driving new business is possible without financial incentives provided that the partnership is mutually beneficial. You need to continue to solve problems for them and their clients in order to drive strong active rates amongst their users and minimise your acquisition cost — we’ve found that the value-led approach is an effective way of demonstrating this.
Value-led unpaid partnerships can crumble more quickly than they took to form, so here’s a quick checklist to ensure you stay focussed on what’s important:
Clearly define the problem you’re solving
- Why: there are an abundance of partner programs around, businesses will sign up for many but will deliver long term on the few that genuinely solve problems for them.
- How: understand the root cause that partners and their clients are facing through effective questioning, connect with their communities and quantify the feedback they give you to demonstrate the impact your product could have on solving the problem.
Make it easy for your partners to work with you
- Why: if partners and clients find it hard to refer or sign up to your product, or encounter the same unresolved problems and obstacles, they’ll be less inclined to work with you.
- How: educate your partners on the process through training, provide additional support and resources to them. Map out how many clicks it takes to open an account, refer a client and explore how you can automate parts of the process to reduce friction.
Collect continuous feedback
- Why: partners, communities and brand ambassadors know your product inside out, at times more than your sales team will because the nature of their interaction around your product is not a hard sell.
- How: involve the product team in your partner days, set up scalable feedback collection processes and dashboards, invite your partners to beta test new features of the product and to review your roadmap.
Ensure your values align
- Why: when your partners advocate for you, they’re placing trust in your team and product to do the right thing by your customer. Reputations matter and so it’s crucial that you consider the type of values a business promotes when selecting strategic partners.
- How: discuss values and priorities from the initial phase, explore case studies and testimonials from other partnerships that they have live.
We’ve also summarised the advantages and considerations of value-led partnerships for you to discuss with your team:
Advantages
- Proven way to drive active rates and minimise acquisition costs
- Quickly profitable once a critical mass of partners have been established
- Constant source of feedback on your product and proposition
- Trusted endorsement for businesses and consumers alike (at times more so than a digital marketing ad or affiliate site)
- Often have communities of their own which will unlock new potential partners for you
Considerations
- Slow to build — trust and credibility take time to establish
- Slow to scale — partnerships are more considered and require team members who understand the product and context well
- Less levers to pull to dial up growth without any financial incentives
- Easy to replicate by competitors, which is why product co-creation is crucial to keeping your product ahead of theirs
Our final article will explore how best to drive growth by using tools to automate processes, manage partners and measure success. We’ll also provide an overview of key legal and risk factors that should be considered by businesses as they focus on growth, to ensure that acquisition isn’t accompanied by any growth pain or nasty surprises!
