‘How can we make a strategic alliance with a competitor work?’

Q: So many MRx columns ago, you tackled the issue of strategic alliance for a UK coffee brand that wanted a presence in the huge China market. We forgot the coffee brand name. What we remember is that it decided to participate in the China coffee market via a strategic marketing alliance with a certain Chinese business group. We’re actually not interested in knowing who the coffee brand and Chinese group were and if that alliance-based market entry succeeded. Our interest is in the reverse case where a Chinese brand or some other aggressive Asian brands from, say, Korea or India, wants to enter the Philippine market through a marketing alliance with us. We’re a successful local brand in consumer services and in the consumer health care product category.

In the past, we’ve resisted several overtures from China, Korea and India for a joint venture and strategic alliance especially when the marketing alliance was about a service or product category where we’ve already established a strong foothold. These entering brands are going to be our competitors!

We have business friends who are all for a strategic alliance especially with successful Asian brands and even if these are potential competitors. They tell us that these are not like competitive Western brands but brands who are our own “Asian brothers and sisters” and they are more like us. But we also have just as many business associates who have horror stories to tell about their failed alliance experience with known Asian brands.  They warn us and tell us: “Be very careful because in no time at all they’ll eat you alive.”

In weighing the two sides of the issue, we’ve come to at least two conclusions. Firstly, strategic alliances from successful Asian brands are here to stay and so it no longer makes any business sense to continue resisting. Secondly, the benefits of a strategic alliance seem to outweigh the risk.

So may we ask you this question: Do you have any experience to share with us on this issue and which can help us plan how to make a strategic alliance even with a competitor work?

A: We’d like to share with you our experience. Unfortunately, all of them are with clients where we’ve signed a non-disclosure agreement. But we do have one experience that’s truly insight-rich and data on it have been made public to the media. We’ll share this one story and draw lessons from it in answer to your question.

This is a marketing alliance case in the pharma industry. What’s so instructive about this case is that it involved the two most popular forms of marketing alliance, namely, co-marketing and co-promotion.

To quickly differentiate the two, co-marketing calls for the two “allying” companies to market the same product but branded differently.

On the other hand, in co-promotion the two companies market the same product but under one brand.

The product in this case is a non-steroidal anti-inflammatory drug popular with doctors for the treatment of arthritis, acute pain and painful menstruation.

It was G.D. Searle who originally developed it. Searle co-promoted the product with Monsanto and Pfizer under the brand name Celebrex.  But Monsanto was Searle’s parent company. When Monsanto merged with Pharmacia, Pfizer decided to acquire the Medical Research Division of Pharmacia thereby giving it ownership of Celebrex.

In the Philippines, the story was slightly different. In the mid-’90s, Pharmacia engaged Pfizer to co-promote Celebrex. At about the same time, Pharmacia decided to co-market it with Biomedis (a Unilab ethical division) under the brand name Coxid.

What happened? The market saw a successful Pharmacia-Pfizer co-promotion alliance. However, the Pharmacia-Biomedis co-marketing partnership was not so successful. In the words of a Biomedis executive: “It’s an understatement to say that the co-marketing was a disappointment.”

Medical journal reporters covering the story were quick to judge that it looks like co-promotion was a better alliance strategy than co-marketing.  So a rhetorical question was asked: “Shouldn’t we be co-promoting more than co-marketing?”  Then a cynic added the question: “Or should we at all do either one?”

Market analysts probed deeper and kept asking why the co-promotion did well and why the co-marketing was short of its targets. In the case of co-promotion, they found out that at the very start the two partners agreed that their interactions on the project would be limited to the top people and that they would evaluate and judge success by the agreed “delivarables” of sales, market share and profitability. No monitoring of “inputs” was necessary. So the level of management in charge was top management. These were the three “key factors of success” of the alliance.

What about the co-marketing case? What the market analysts found came to them as no surprise. What made for the failure were forces that were almost the exact opposite of those found in the co-promotion. Almost everyone in the organization of each partner were allowed to have a say.  Every level of the organization from top to middle to supervisory was represented in the alliance team of each partner company. But there was no one working full time on the alliance. The point person was a middle manager whose call to a meeting was often ignored by a few at first and later by most. And the really significant failure trigger was the starting attitude of the partners toward each other. There was distrust at the very start. Here’s one comment from one of the co-marketing partners telling us how much lack of trust there was: “When we began and after we met one another, we were wondering how do we know if these are their best people? Up to how much information will we share and how do we know if they’re not holding back?” That’s not exactly the kind of chemistry that can make for success!

So here’s a summary of our Marketing Rx for your likely marketing alliance.

First, manage the alliance more by output and less by inputs.  That way you lessen the frequency of interaction with one another and therefore minimize occasions of conflict.  Do this by defining the alliance team to be your top people. If you have to have your middle management participate, have someone work full time on the alliance.  Forget about a prospective partnership if trust is missing in either or both of you and your co-promo or co-marketing partner.

Keep your questions coming. Send them to us at [email protected] or [email protected]. God bless!