Joint ventures involve two or more entities working together towards a common goal, such as promotional activities or launching a new product. Advantages include cost savings, a wider range of offerings, and access to a broader customer base. Companies can also tap into each other’s existing customer base and share marketing costs.
A joint venture is an initiative in which two or more separate entities work together to achieve a common goal. Promotional activities are one of the most common initiatives, but others might include the launch of a new product, such as a dressing pre-coated with an antiseptic, or joint sponsorship of a special event, such as a local trade show. The advantages of a joint venture include reduced costs, a wider range of offerings and access to a broader existing customer base.
One of the main advantages of a joint venture is cost savings, both for the consumer and for the participating companies. An example of a joint venture would be a restaurant and theater or event facility offering a dinner and show package. In this situation, people purchasing the package will pay a price to an entity and receive a set amount to spend at the restaurant or the opportunity to order from a fixed-price menu along with tickets to the play or event. The price paid for this package is usually a small discount on what the buyer would have paid had they purchased the meal and tickets separately.
In this example, the restaurant and theater will also save on marketing costs. The two entities will share the costs of placing advertisements in newspapers, online or on the radio, as well as printing flyers, posters or other materials. That savings is part of what allows them to offer a customer a discount.
Another of the main advantages of a joint venture is the ability to offer a wider range of products than one company has to offer. This usually works best when the products are compatible, like at dinner and a concert. Other compatible joint ventures might include a hotel and a rental car or a hair and nail package. In a supermarket environment, the customer may receive a discount when purchasing bread from one company and lunch meat from another. This ability to offer two different but compatible products at a discount doubles the chance that a buyer will be interested.
Tapping into another company’s existing customer base is an added advantage of a joint venture. Companies often share electronic and paper distribution lists during a joint venture, which can grow each company’s list in the future. The venture will likely be announced on the social media sites of the two participants as well.
Customers who frequent one business may also be asked to try the other for the first time. In the dinner and show example, a customer who regularly eats at the participating restaurant might see an ad and decide to go to a show they may not have seen before. A theater shopper, on the other hand, may decide to try a restaurant he has never tried. If he likes it, he can come back in the future. Of all the benefits of a joint venture, the ability to reach a broader customer base may be the most valuable over time.
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