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STRATEGY

The Secrets of Cross-Promotion

Different entrepreneurs tell how they have found marketing partnerships to be an effective way to stretch a budget.
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Marketing

Done well, marketing partnerships can stretch your budget

These days, cross-promotions are everywhere. Big companies like MCI and major airlines team up to offer frequent-flier miles for placing calls, while the local dry cleaner and tailor give discounts to each other's customers. According to consultant Kare Anderson, such alliances keep growing more popular. "They've been springing up even more in the past 18 months," she says.

Anderson, president of the Compelling Communications Group, in Sausalito, Calif., is not sure exactly why cross-promotions are spreading. Critical mass may be a factor: as more businesses run joint promotions, still others try them. Or perhaps it's just that successful cross-promotions reward companies with increased market share and better brand awareness--often at an attractive price. That local dry cleaner and nearby tailor can dip into each other's markets and increase visibility for the cost of a coupon.

Sound simple? It's not. Just as smart cross-promotions offer chances to reach promising new markets and customers, poorly planned ones bring fresh opportunities to waste time and money. (See "Cross-Promotion from Hell," below.) When you join forces with another company, you're linking reputations as well--so choose your partners carefully. Obviously, you want to work with a company that's reputable and trustworthy. However, you also want one that offers something extra, such as marketing resources you lack or access to markets you can't reach. Before you sign up for any cross-promotion, ask the following questions:

Are we a natural fit? Joel and Judy Kimmel, co-owners of Primo's, a $600,000 chain of three San Francisco-area specialty coffee shops, are old hands at cross-promotions. But the Kimmels knew they had found an ideal match last year when they teamed with Charlotte Albright, owner of local candy maker Sweet Charlottes. The reason? Both companies have similar clientele and reputations for high quality. Now Primo's sells Sweet Charlottes chocolates and offers free samples with its espresso. In return, the chocolate shop gives customers coupons for espresso and sells Primo's coffee beans in bulk. Customers have responded so well that the trio is test-marketing a potential new niche: cafÉs showcasing both coffee and chocolate.

Do we enhance each other's credibility? Sometimes there really is strength in numbers--particularly for very small businesses. Just ask Betty Hedrick, president of the Hedrick Co., in Mercer Island, Wash. By cross-promoting her $500,000 financial-planning business with six other small business-to-business service providers, Hedrick gains access to new prospects and enhances her company's image. Her method? The companies jointly produce a quarterly newsletter and mail it to all their clients. For any of the companies alone, a newsletter might prove too taxing and costly. Working together keeps costs affordable. Plus, the shared newsletter "expands the types of expertise available to our clients," says Hedrick.

Do we bring different resources to the table? Sam Poole, CEO of Maxis Inc., a $55-million software company, wanted to promote his kids' line to mothers and children. After some research, Poole's Walnut Creek, Calif., company asked an established cookie manufacturer, Mother's Cake & Cookie Co., to do a cross-promotion involving free software for schools. The cookie company put a Maxis coupon on its packages, and Maxis advertised the joint promotion in computer stores. Poole says sales of children's software rose 13% during the three-month cross-promotion.

Is the sum of our parts greater than the whole? When Judy Cockerton, co-owner of No Kidding!, a $1.2-million toy store in Brookline, Mass., and Toy Box, a $500,000 shop in Mattapoisett, Mass., is out of a toy, she knows what to do. She phones a competitor. That's because her company last year formed a marketing alliance with five other area independent toy retailers to battle a common enemy: big toy chains. Now when she explains her toy shortage to one of her fellow cross-promoters, the other store takes the order over the phone at no extra charge. Though careful to avoid antitrust violations by discussing pricing, the group cohosts promotional parties, holds joint raffles, offers a collective frequent-buyer card, and shares bulk discounts. "When you're competing with all the specialty franchises and Toys 'R' Us, this seems to be the smartest way to do it," says Cockerton.

Case study: Cross-Promotion from Hell

One appeal of a cross-promotion is the chance to identify new potential customers. But what if they're the wrong prospects? Maxis CEO Sam Poole remembers when, at another software company, he created a cross-promotion with computer retailers and a diskette maker. The promotion enticed prospective product buyers with a sweepstakes for free Super Bowl tickets, with excellent seats. "It sounded so cool," Poole recollects.

The trouble was, he was right. "We had thousands of requests from all over the country," he says. The offer was so attractive, it was relayed around the nation through sweepstakes newsletters. Since the company had billed the contest as a sweepstakes, it couldn't, by law, ignore the voluminous requests for entry forms. "It didn't matter if people owned a computer or not," gripes Poole. "The vast majority probably didn't." To handle the requests, Poole had to hire part-timers, print extra coupons, and in some states, mail stamps to contestants in accordance with state regulations. Not surprisingly, increased sales didn't cover costs.


Resources

For lots of quick tips on cross-promotions, read Pocket Cross-Promotion, by Kare Anderson (MasterMedia Limited, 1996, $8.95). To request a copy directly, send E-mail to kareand@aol.com or order the book from Anderson's Web site. Add $1.05 for tax and postage.

JUDY COCKERTON, No Kidding!, 19 Harvard St., Brookline, MA 02146; 617-739-2477 99

COMPELLING COMMUNICATIONS GROUP, Kare C. Anderson, 15 Sausalito Blvd., Sausalito, CA 94965; 415-331-6336; kareand@aol.com 99

HEDRICK CO., Betty Hedrick, 2835 82nd Ave. SE, #310, Mercer Island, WA 98040; 800-722-8807 or 206-232-8807; bettyh@nwgroup.com 99

MAXIS, 2121 N. California Blvd., Suite 600, Walnut Creek, CA 94596; 510-933-5630; www.maxis.com 99

SWEET CHARLOTTES, Charlotte Albright, 1395 El Camino Real, Millbrae, CA 94030; 415-589-1417 99

MOTHER'S CAKE & COOKIE CO., 810 81st Ave., Oakland, CA 94621; 510-569-2323 99

PRIMO'S COFFEE, Joel and Judy Kimmel, 150 Shoreline Highway, Suite B20, Mill Valley, CA 94941; 415-289-2425 99




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