Lessons from the Food Court in Strategic Alliances

Some decades ago the powers that be at Burger King learned the surest way to ensure the success of their hamburger joints was to build as close to a McDonalds as possible. The idea was that two restaurants in the vicinity of one another would establish a "food corridor" and actually create more business for both restaurants.

The strategy was so effective it is thought to have given birth to the food court which can be found in every mall in America today.

While on the surface the idea of even acknowledging, let alone locating near your competition may seem a dangerous move, the strategy has been proven not only sound, but strikingly effective.

Of course with service companies, where the company goes to the prospect rather than entice them in to a brick and mortar shop, it's not a matter of location as much as it is actively partnering with your competition.  And again, while this might seem counter to what we have been taught, leveraging your competition is one of the surest ways to explode your business.

Before you write this idea off, it is not at all uncommon for businesses that align themselves to see growth in an excess of 20% within the first 90 days of creating a reciprocity program. Not unlike stock car drivers that know the value of drafting (that is two cars racing close together can travel significantly faster than two cars that are racing apart) two or more businesses closely allied can generate more prospects than they could if separated.

To understand why you must know a basic tenant of business far too many business people never learn. No matter what your product, you business is marketing - PERIOD! You could be the only master finish carpenter in your town but if people are not aware of you, your business is on the fast track to nowhere.

And since you should be spending more on marketing that anything else except labor, being able to cut this cost by diluting it with other like-minded businesses is one of the surest ways to increase profitability.  The reason this strategy is not as dangerous as it might seem is simple. It's actually quite rare for any two businesses, even in the contracting fields, to offer services that overlap 100% of the competition, 100% of the time.

Yes McDonalds and Burger King both sell hamburgers. But if you want a fillet-o-fish sandwich McDonalds is your only choice. If you're craving onion rings with that burger - the King wins.
  
These might sound like trivial distinctions and they are. But trivial distinctions drive consumer behavior. For example let's say you sell vinyl, double paned, Argon filled replacement windows. There are as many window choices on the market these days as there are holes to put them in.

Every window has its own unique features. Some have grids between the panes of glass, others external. Some come with Argon, others Krypton. Some offer wood grain laminate, others are made of real wood. One window costs $99.00 while another could run as high as $1500.00. The options are nearly endless.

Why, once you have spent probably a hundred dollars or more to generate a prospect, would you ever lose one because your window only comes in white? Of course if you're like many companies you could arm twist your prospect to buy your window. You could drop the price to near break even. You could even go so far as to actually paint the window. Or you could simply refer them to the window company that has what the customer wants - a brown window.

Of I'm not suggesting you create these strategic alliances with every other company in town. The point is to find companies that share a similar prospect demographic - that does not provide the exact same products your firm does and create a mutually-beneficial relationship.