3 Corporate Partnerships that Flopped and Why
When partnerships go wrong, they go REALLY wrong. Here are 3 examples that teach you what not to do when building and maintaining corporate partnerships.
Partnerships can generate significant value for everyone involved when stakeholders are properly aligned and committed. By joining forces with the right brand, you can combine your strengths, attract public attention, and gain new customers.
There’s just one catch: partnerships are more than a little bit tricky to maintain. Like any relationship, a successful business partnership requires a lot of time and effort from every participant. But anything short of that could spell disaster.
When a partnership goes awry, you could find yourself dealing with anything from bad PR to significant financial losses. We’re going to tell you how to avoid meltdowns in corporate partnerships (as well as give you a few nightmare-inducing examples).
Why Do Partnerships Fail?
Of course, there’s no shortage of reasons why seemingly can’t-miss partnerships end up falling apart. Some common factors contributing to failed partnerships include:
No partnership can be genuinely successful unless you have alignment. When exploring the possibility of a partnership, your company and your prospective partner(s) should map out your goals for the collaboration.
Along with that, you’ll want to make sure your goals align neatly. If they don’t, you could find decision-making to be all but impossible. And just in case plans change for one or more partners, your partnership should include a clearly-defined exit strategy.
Unequal Stakeholder Commitment
Back in school, did you ever put in all the work on a high-stakes group project while your classmates coasted? If so, you probably remember feeling frustrated with your “partners” at the time.
The same principle applies to the world of corporate partnerships: if one party works harder than the other to make the partnership work, the relationship between them could easily become strained. With that in mind, make a point of building mutually beneficial partnerships with other businesses.
Communication is vital in any relationship, and that extends to relationships between companies as well. Without sufficient communication, you’ll have trouble knowing if your business partners are satisfied with the partnership (and whether or not they’re sticking to your partnership agreement).
Learn From These Failed Corporate Partnerships
Now that you’ve read about factors that can put a strain on partnerships in the corporate world, it’s time to take a look at how these issues can play out in real life. Here are three infamously unsuccessful corporate partnerships—and the lessons you can take from each one.
1. Target and Neiman Marcus
Target’s 2012 partnership with Neiman Marcus wasn’t a bold move into the world of high fashion. Previous attempts, including partnerships with the likes of Missoni and Isaac Mizrahi, had been extremely well-received. With that in mind, Target went big on its Neiman Marcus collab, getting many famed designers involved with the project.
The biggest issue with this partnership was how each participating company (and their respective customer bases) defined the word “affordable.” While a $70 Marc Jacobs scarf might sound like a steal to someone who regularly shops at Neiman Marcus, it came off as exorbitant at Target. And the store’s previous designer partnerships were more reasonably priced and on brand, like Missoni’s $15 scarves.
But that wasn’t the only problem in play. Since a significant selling point of the Target/Neiman Marcus partnership was the involvement of prominent fashion designers, one might reasonably assume it would have focused on fashion. While the collection certainly included some clothing items, it largely consisted of confusing lifestyle products like Alice + Olivia bikes and Oscar de la Renta dog food bowls.
The good news is that Target shoppers ultimately got a much better deal on Neiman Marcus items than they would have expected. The bad news is that this happened because the partnership effectively imploded, to the point where prices were slashed by 70% to get products off the shelf.
2. U2 and Apple
Even if a partnership doesn’t have any obvious red flags, there’s still a chance that things will go wrong. Take U2 and Apple, for example. In 2004, the band’s hit single “Vertigo” scored a memorable iPod commercial, and Apple released a special-edition U2 iPod. But while “Vertigo” came from the album How to Dismantle an Atomic Bomb, that wasn’t the record that blew up in everyone’s faces.
Ten years after the “Vertigo” ad, Apple announced that every iTunes user would receive a copy of U2’s new album Songs of Innocence free of charge (a big deal in the pre-streaming era). It was the ultimate partnership between a true tech-industry leader and one of the world’s biggest bands. What could go wrong?
In a word: everything. Apple didn’t give every iTunes user the opportunity to download the new U2 album—they added it to their music libraries without asking. To make matters worse, there was no obvious way for people to delete the record.
To this day, the Songs of Innocence fiasco is widely considered a low point for Apple and U2 alike. And it’s easy to see why: it’s the quintessential example of what can happen when you leave your partnerships on autopilot.
3. Kraft and Starbucks
As bad as those two partnerships were, things can always go worse. Just ask Starbucks and Kraft.
On paper, a team-up between Starbucks and Kraft didn’t seem like a bad idea at the time. The former company is the world’s biggest name in coffee, while the latter is a massive food manufacturing and processing conglomerate. So when the two businesses agreed to distribute Starbucks coffee in grocery stores, it didn’t set off any alarm bells.
By 2010, Starbucks was bringing in $500 million per year in ground whole-bean coffee sales, but that doesn’t mean they were satisfied with their Kraft partnership. In fact, they were looking for a way out. At that time, the single-serve coffee market was on the verge of becoming a major force in the industry. And while this market is closely associated with the Keurig system, Starbucks couldn’t manufacture K-Cups under its Kraft agreement. Instead, they were locked into selling pods for Kraft’s own Tassimo system.
Starbucks offered Kraft $750 million to get out of their agreement ahead of schedule, but Kraft objected. Despite this, Starbucks decided to cut its losses, break the deal, and sell K-Cup packs anyway. That led to a three-year-long clash between the two businesses, which ended with an arbitrator ordering Starbucks to pay Kraft $2.75 billion.
Improve Your Odds of Success: Firneo Can Help
Nothing feels worse than a deal falling apart. It leaves you broken, exhausted, and wondering what you could have done to prevent it.
Why didn’t anyone teach you the tricks to get it right?
That’s why we’re here. When you sign up for Firneo’s cohort-based Certified Partnerships Professional program, you’ll get indispensable advice on building corporate partnerships that have a real impact. Better yet, you’ll learn everything you need to know in a mere eight weeks.
Click here to find out how you can get in on the action, and start building and scaling better partnerships for your company.
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