In the case of one supplier and retailer, there was no local authority to tailor the

trade funds. Just by working together more closely, the partners unbundled their

trade funds and put additional resources against new product development.

Result: Sales rose by $6 million, and profitability improved by 7. 2 percent.

 

The survey also asked for respondents’ main partnering objectives. Predictably, for most companies the goal is to get closer to the customer, to better understand the customer company’s needs and requirements.

 

It should be noted, by the way, that not one of the top four objectives cited were related to cost reduction. Rather, all are market-related, centering on customer centricity, new products, speed to market and geographic expansion (Chart 2, “What are the Main Objectives Your Company Seeks in Improving Business Relationships?”)

 

That’s interesting, because in the past and even now, many people still assume that cost reduction is the primary purpose of partnership –– in fact, as the survey confirms, companies use partnership to develop products and grow sales.

 

Another survey question is represented in Chart 3: “In What Functional Areas Will Your Company Focus to Create Business Partnerships?”

 

Essentially, respondents said these areas are sales / distribution, marketing, R&D and customer service. All of these relate, of course, to increasing sales. As Chart 3 shows, the more cost-focused areas tend to fall to the bottom of the list.

With so much money involved, trade promotion management is always a major opportunity. For example, in the case of one supplier and retailer with whom I worked, there was no local authority to tailor the funds. Just by working together more closely, the partners unbundled their trade funds and put additional resources against new product development. Result: Sales rose by $6 million, and profitability improved by 7. 2 percent.

 

And it all came about when two companies sat down at the table, and agreed to become strategic partners.

…But Don’t Neglect Cost Opportunity

This isn’t to say that cost-focused partnerships aren’t worth pursuing. Consider the weird, square milk jug now found at Costco and Sam’s (see box, “Example: Efficiency via Packaging Innovation”). Consumers say they hate it. But they buy it, because the price of milk in that jug is roughly 23 cents a gallon less than milk in the typical jug.

 

Why? Recently, The New York Times wrote about this new jug configuration, and included a chart showing how milk arrives at many supermarkets –– in the typical gallon jug in little plastic crates –– compared to the way it arrives at Costco: efficiently palletized. The Times pointed out what every retailer knows: Traditional milk jugs cannot be stacked; they require those crates for storage and transport. The new jug, by