When the CEO’s of two small advertising agencies in the northeast found themselves continually competiting with one another for accounts–and losing out to a third party–they decided to consider a partnership to capture missed opportunities yet retain their unique identities. The solution? A Master Agreement.
What is it?
A Master Agreement (MA) has completely different definitions for different industries. In the context of Partnerships, a MA carves up a market for two or more companies; allowing the firms to protect existing clients, go after new clients together while communicating clear boundaries to partners, prospects and clients.
Companies of all size successfully use MA. In the early 2000’s, I created a MA between Network Appliance and Microsoft, who were competing across a number of product lines and markets, yet partnered for a particular market and product line. Yet it is even more common for small companies to use master agreements to protect their existing client base while pursuing growth in a new product or service area.
Note: Don’t confuse this with the sales-version of a Master Agreement. These outline the parameters for purchasing–e.g. once you are a certified vendor, you are allowed to purchase from a Master Agreement, such as one used by communities and vendors or Dell.
How is it used?
1. By market
A MA has a table, the product or sevices listed on the left and the market (or industry) across the top. 17 primary vertical markets exist–finance, technology, manufacturing etc. However, if your a small business with less than five employees, you may not be dividing the MA by industry, instead, it might be my local (zip code) or target demographic.
2. By target demographic
In the case of the ad agency, the zip code approach didn’t make sense. So the approach was demographic. One agency specialized in senior citizens, the other in teens. The table for a particular manufacturing industry split identified the area of specality for both, enabling the agencies to partner to go after bigger accounts that wanted a single agency to handle a broad target market.
3. By product line
A third way to construct an MA to isolate product or service lines. In the case of an insurance firm and a financial services firm, both offered financial planning, but one offered life policies, the other estate planning. The MA defined the market down product lines–partnering the two for large clients that wanted to offer both to their customers.
In the case of the ad agency, both firms offered traditional direct mail services, but one was superior in email marketing. Again, the lost prospects that wanted a firm to handle both to a broad target market (from teens to seniors). The MA was set up to protect the clients and new business opportunities that the agency with both could manage on their own. Yet the firms partnered when a prospect wanting both internet and traditional direct mail, and both target demographics were desired.
The last way an MA can be defined is by time. For instance, two blood competitors partner for a period of time to protect against a new market entry. This makes a lot of sense for service providers, or companies that don’t have the latest and greatest product or service offering.
Other considerations….operations–who gets the money, when is it disbursed, who manages customer support and service, who warranties the product lines, whats the positioning to the sales, customers and other partners,….all of these are columns on the matrix that need to be defined before the MA is signed. Doing so ensures a consistent message to the entire community inside and outside the business.
More questions on MA’s? Email me at email@example.com