Strategic partnerships can bring a slew of benefits for your company. You’ll enhance your offering by adding more services and/or products for your customers, which helps strengthen customer loyalty and drive growth and profits. Even better, your strategic partner brings their own capabilities and experience, allowing you to achieve these goals without reinventing the wheel, adding more resources, or pivoting away from your core value proposition.
But if you want your strategic partnership to take off, you need mechanisms to define and measure success. A clear plan for strategic partnerships measurement empowers you to understand what can be improved and optimize the relationship for maximum results.
Setting KPIs for strategic partnerships also gives you a basis for data-driven decision-making, which grounds your decisions in objective insights. This contrasts with intuition-based decision-making, which can boost innovation but may lead to flawed conclusions. If your strategic partnership is driven solely by intuition, there’s a real risk that you’ll overlook serious issues, fail to notice areas that should be changed, or misjudge your overall success.
In this blog, we’ll show you how to establish strategic partnership KPIs, make the most of your data to measure ROI, and keep your partner program on track for long-term success.
Why measure partnership success?
If you’re not measuring your strategic partnership, how do you know if it’s succeeding? You need measurements to validate your return on investment (ROI). Monitoring KPIs for strategic partnerships reveals whether you’re actualizing the benefits and value you expected.
At the same time, measuring strategic partnerships guides you to what needs to be improved. Tracking these metrics allows you to optimize your strategies for success, allocate resources in the most efficient way possible, and make informed decisions about expanding, continuing, or altering your shared project.
Measuring success is also crucial for building strong partner relationships. It demonstrates transparency, shows your commitment to the project, and ensures that you stay aligned on your shared goals. Without hard data, you can’t prove value to stakeholders or gain internal buy-in for future projects, and potential opportunities to expand your partnership could go unnoticed.
Of course, you might find that your partnership isn’t driving value. That would be disappointing, but it’s better to gain this insight sooner so that you can make deep changes or cut your losses and move on to a different partner, rather than continue wasting money and resources on an unsuccessful project.
How to measure ROI
There’s a straightforward formula for measuring ROI, which is:
(Net Profit / Cost of Investment) x 100% = ROI
The final percentage shows you how much value you gain from every dollar that you invest. But measuring ROI for strategic partnerships usually requires a more nuanced approach that covers more than just dollar revenue.
Strategic partnerships generally bring non-financial returns, like brand reputation or increased awareness, which aren’t easy to quantify in a mathematical formula. These partnerships are also designed for the long term, so a snapshot ROI calculation doesn’t capture their full value.
How to measure strategic partnerships’ ROI
The right way to measure value for your strategic partnership needs to cover three distinct areas:
- Direct financial returns such as revenue and profits
- Indirect financial returns such as customer retention and brand equity
- Non-financial returns such as market presence and reputation
Let’s take a close look at each of these areas.
Direct financial returns
Direct financial returns are usually the easiest to calculate, because it involves clear numbers. But you’ll need to measure revenue generated, cost analysis, and your net profits to get a comprehensive view.
First, track revenue generated by your collaboration. That involves direct sales, affiliate commissions, and shared profits, but it also includes income from shared customers and indirect sales, which can be trickier to divide up accurately. Partnership management software or robust tracking mechanisms can help with this challenge.
Next, conduct a thorough cost analysis of the partnership. That means adding up all the costs, both direct and indirect. Direct costs include expenses like partner payments, marketing, technology, and other resources, while indirect costs include employee time, training, and inadvertent expenses. Then you can subtract the total costs from the total revenue to determine your net profit.
Indirect financial returns
Indirect financial returns can be trickier to measure, but they’re an important part of your ROI calculations. It’s vital to know how to evaluate returns like partner-sourced leads and conversions, increased customer retention and churn rates, and higher brand equity. Analytics tools like CRM software or Google Analytics are the best way to track leads and conversions from your partners. You can estimate their financial value by using your average conversion rate to calculate the potential revenue these leads represent.
Changes in your customer retention and churn rates reveal whether your new features and services have impacted customer loyalty. Compare current rates to those from an equivalent period before your partnership, and use them to work out how much extra revenue you’ve gained from the collaboration.
Brand equity refers to the impact your partnership has on your brand’s reputation and recognition. You can measure it through customer surveys, ratings, reviews, and social media sentiment. Higher brand equity translates into more new customers and improved customer loyalty, which lets you charge premium prices.
Non-financial returns
Non-financial returns might be the hardest strategic partnership KPIs to measure, but they are crucial. Increased market presence, product or service offering, and company reputation all empower you to attract new customers and retain existing ones, which affects your profits in the long run.
To assess a boost in your market presence, analyze customer reach and brand recognition. In a similar vein, the best way to measure an enhanced product or service offering is by comparing sales trends before and after the partnership. If customer reach, brand recognition, and/or sales trends have gone up, it’s a positive sign for your ROI.
Company reputation is more difficult to monitor. You’ll need to survey your customers, analyze online reviews, and monitor social media sentiment, and compare it all to pre-partnership responses. Contrasting overall customer satisfaction (CSAT) scores can also help you track a shift in market perception.
How to track these KPIs
Monitoring all these strategic partnership KPIs is close to impossible through manual processes. There’s simply too much data to keep track of, and it’s coming in from too many sources. Fortunately, there are tools and solutions out there that can help.
Analytics tools
Tools like Google Analytics can track the metrics you need to calculate strategic partnership ROI, but it’s up to you to choose the right KPIs. Use key metrics like referral traffic, conversion rates, customer acquisition sources, churn rates, and time spent on page, and set specific tacking parameters like UTM codes for each of your partnership-related campaigns.
This way, you can see exactly how much traffic and revenue is coming in from each source. Make sure that the metrics you choose align directly with your partnership goals. Just bear in mind that your KPIs won’t give you insights about indirect or long-term value. You’ll have to calculate that yourself using the data from your analytics tools.
Surveys and customer feedback
Customer surveys and feedback give you valuable qualitative data about issues like brand perception, customer satisfaction, and the impact of your new product/service offering. They can bring more nuanced insights into the impact of your partnership, but it’s not always easy to tap into them.
Customer satisfaction platforms can help you roll out surveys that ask customers to rate their experiences, identify partnership-specific benefits, and provide qualitative feedback. They also help you analyze the results to come up with KPIs like Net Promoter Score (NPS), customer satisfaction scores (CSAT), and brand sentiment.
ROI tracking platforms
ROI tracking platforms are comprehensive solutions that collect and aggregate data about your partnership from a range of different sources. They let you set specific partnership-related goals, and then they monitor metrics like cost per acquisition, customer lifetime value, and overall profitability.
Top challenges of tracking ROI in strategic partnerships
There are a number of specific issues that make it tricky to measure ROI for strategic partnerships.
Data sharing limitations
Your partners might be reluctant to send you detailed financial data, sales figures, or customer insights. That’s understandable, since it can include sensitive customer data and/or proprietary information, but it does make it much harder to track KPIs.
Clear data-sharing agreements and a commitment to using secure data management tools can help overcome these issues, and gain buy-in to sharing the data you need to evaluate your partnership’s performance.
Communication gaps
Communication gaps can be another significant challenge. Misunderstandings, differences in formatting reports or charts, and delays in sending updates can leave you with an incomplete or inaccurate picture of vital data.
It’s best to build in mechanisms for smooth, clear communication from the very beginning of your partnership. Agree to regular meetings, specific communication channels, and designated reporting structures, to keep all stakeholders aligned and informed.
Complex partner relationships
Part of the strength of these relationships comes from the way you join forces, combining resources, marketing efforts, and financial exchanges. However, that makes it harder to accurately isolate and attribute direct and indirect returns.
To thoroughly evaluate your partnership, you’ll need to break it down into core components, like individual marketing campaigns or specific financial investments. Then you can assess each part separately for direct, indirect, and non-financial returns, to gain a clearer picture of the overall ROI.
Long time to see returns
Last but not least, strategic partnerships are long-term relationships. That means that it can take a while before you start to see significant benefits, making it complicated to calculate ROI, especially in the early stages of the project.
To address this, you’ll need to take a longer view of success. Track incremental changes over time, setting short-term goals alongside long-term objectives. This way, you’ll have milestones to use to gauge progress and verify that your partnership is on the right track, even if you’re not yet seeing the major returns you’re hoping for.
Tracking strategic partnership ROI requires a different approach
You might have a great feeling about your strategic partnership, but It’s not always easy to verify your intuition and produce accurate reports that prove its value. Once you understand the different factors that affect strategic partnership ROI and adopt the necessary tools and best practices, you’ll be able to overcome the challenges in strategic partnerships measurement and keep your project on course for success.
