0:00
I'm Karl Ulrich.
I'm a professor at the Wharton School, and this session is on sales partnerships.
I want to start with a story.
In 2004, I started a company with a group of MBA students called TerraPass,
and the big idea behind TerraPass was that
we would remediate the environmental impact of driving you car.
You could join TerraPass for about $70 or $80 per year, and TerraPass would,
on your behalf, buy enough wind power to offset fossil fuel used out a power
plant that would be roughly equivalent to the gasoline you would burn in your car.
That was the idea behind TerraPass.
Now, when we came out of the course, we had a few hundred customers, and
we thought the business could potentially be something real.
And so we raised a little money, we spun out the company, and
we got started in growing that startup.
0:59
We had some successful PR, and we attracted, as I say, a few
hundred customers, and those customers that bought our product were very loyal.
They liked it quite a lot, and they told their friends.
The problem was that only about 5% of the population was at
all interested in the product.
95% of people, when they heard that idea, thought it was pretty silly.
And so the challenge for us was how do we acquire
just those customers that are really interested in our product?
How do we cut through the noise and
reach only those who are most likely to resonate with the message of our product?
1:49
Now, we had tried quite a few different things, but
the initiative that really broke through for us was sales partnerships.
And the idea behind a sales partnership is to ask the question,
who already has access to your target customer, and in what way can you add
value for that partner who has access to your target customer?
Now, of course, you can just pay them,
that is you could share the revenue of your product with the sales partner.
But there are often other ways in which you can add value.
For instance, your product can bring a certain luster.
In our case,
an environmental luster to a product that otherwise lacks that attribute.
Now, typically, what we're talking about in sales partnerships
Is not a conventional retail partner.
So for instance, if you make bicycles, and you go looking for
a retailer that sells bicycles to sell your product through,
that's a conventional retailer relationship.
It isn't really what I mean by a sales partnership.
What I'm talking about here is a partnership for someone
that is selling something else or has some other relationship with your costumer, and
you're basically riding along with them in order to access their target costumer.
3:10
Let me make this concrete for
you with three examples that we did in sales partnerships with TerraPass.
The first was with Ford Motor Company.
The insight we had was that when somebody is buying a car, they're already thinking
about options and additional accessories that they might buy to go with the car.
What if, at the point of purchase,
we could offer a TerraPass to go alongside a new vehicle?
And the benefit proposition would be that TerraPass
mitigates the environmental impact of owning that vehicle.
Now, we thought, maybe this would be particularly attractive to those who were
buying cars that have relatively poor fuel economy, or
maybe it would be appropriate for those who were hesitant to even own a car.
But if they could get a TerraPass with that car,
it would mitigate an objection to owning the car.
And we therefore thought that might be quite attractive to either car dealers or
the automobile manufacturers.
In fact, we were able to establish a partnership with Ford Motor Company
called Green Miles.
And the program behind, the idea behind that program
was that someone buying a Ford automobile could buy a TerraPass, and
TerraPass would mitigate the environmental impact of driving that car.
And as part of that exchange, TerraPass would share some of the revenue
from the TerraPass purchase with Ford, and Ford would provide the email address and
customer information of their customer, and TerraPass could then have
access to that customer for the lifetime of the relationship with the customer.
So that was one example of a partnership.
A second example was a deal that we did with Expedia.
Expedia is a travel retailer.
It sells airline tickets, hotel rooms, that sort of thing.
The idea behind the Expedia deal was that during the checkout sequence,
after someone had purchased an airline ticket,
they would be offered the possibility of purchasing a TerraPass
certificate that would mitigate the environmental impact of that flight.
So you would be buying enough environmental remediation to cover
the fossil fuel use of that flight, and that would be done during the check out
sequence on Expedia in the same place where Expedia offers you things like
airport packing or rental cars or theater tickets during the check-out sequence.
That partnership turned out to be fantastically successful for TerraPass.
I believe TerraPass acquired close to a million customers as a result of that
Expedia deal, and something like 2% of those who checked out
on Expedia after buying an airline ticket opted in to buy the TerraPass add-on.
So we acquired those customers as a result of that transaction.
6:07
That partnership brought us exposure to millions and
millions of customers that we otherwise wouldn't have been able to reach.
The benefit for
Expedia, in addition to the percentage of the revenue that we shared with them,
was that it mitigated an environmental concern that many customers had.
And so it polished the environmental attributes of the Expedia product.
It made the airline ticket feel more environmentally friendly, and
thus mitigate a risk factor for Expedia that consumers would
consider flying to be too environmentally costly to purchase.
The last deal that we did as a sales partnership was with
Bloomsberry Chocolate, and
what we did was we bundled a TerraPass certificate with a chocolate bar.
And so the idea was that when you purchased a chocolate bar,
a Bloomsberry chocolate bar, you also got the equivalent of one day's
mitigation of your environmental footprint.
And so to think about that,
TerraPass would mitigate the environmental impact of your living for a day.
That is the average driving, air travel, household energy use,
embodied embodied and products and service for the average American.
TerraPass would mitigate one day's worth
in conjunction with purchasing that chocolate bar.
And for that, Bloomsberry charged an extra $2 US
on the purchase price of that chocolate bar.
Those chocolate bars were sold through the Whole Foods grocery retailer
in the United States, and I believe we sold about a half a million units
of that chocolate bar in conjunction with the TerraPass product.
So another example of a sales partnership that allowed TerraPass
to reach customers it wouldn't otherwise have been able to reach.
8:05
So in some, the advantage of sales partnerships is that
your partner already has access to your target segment.
So you target partners who already have a customer profile or
customer segment that closely matches the segment that you're looking to reach.
And then you have to think about what is it you can offer the partner that makes it
attractive for the partner to want to bundle your product or
to want to refer their customers to you.
In addition to money, which is an obvious benefit,
you just share some of the revenue with the sales partner.
You have the opportunity to bring some brand attributes to that partner.
So in the case of TerraPass, we brought the environmentally
friendly brand attribute to brands that really wanted to have that.
For instance, to an automaker and to the seller of airline tickets.
Sales partnerships have the potential to dramatically expand your reach and
accelerate your growth beyond what you can do on your own.
Kartik HosanagarProfessor
Lori RosenkopfVice Dean and Director, Wharton Undergraduate Division
David HsuRichard A. Sapp Professor of Management
Laura HuangAssistant Professor
Ethan MollickAssociate Professor
David BellXinmei Zhang and Yongge Dai Professor, Professor of Marketing
Karl T. UlrichVice Dean of Entrepreneurship and Innovation
