Over the weekend I built an IKEA wardrobe. I love building stuff but in the interests of marital harmony, my husband is banned from wielding an Allen key or a screwdriver. I can’t stand the frustration, cursing and bits on back to front; plus I love the satisfaction of doing it myself.
Last week we presented at a conference on the principles of pitching for corporate partnerships. One of the questions we always get from the audience is ‘how do I assess my value and know how much to ask for?’
It turns out that IKEA is actually the secret weapon in extracting more partnership value.
How so?
A study by Michael Norton of Harvard identified a cognitive bias called the IKEA effect. It means that consumers place a disproportionately higher value on products they partially created. In fact, consumers were willing to pay 63% more for something they had assembled themselves than something ready-made. The owners of the Build-a-Bear franchise have similarly perfected the art of charging high prices for a generic object by allowing you to customise your purchase.
The act of participation in the construction turns your prospective buyer into a co-creator of value. If you want to get more value from your prospective corporate partner you need to get them involved in the formulation of the partnership. Let me explain.
You’ve identified an ideal corporate prospect and you’ve conducted one or two discovery meetings. The temptation is to move straight to a proposal and then spend weeks chasing them up for an answer. Indeed, some corporates will often say ‘just send me a proposal’.
The better approach is to invite them to collaborate on formulating the partnership. You construct a strawman partnership outline and schedule a workshop with your corporate prospect, including all of their key people. At the workshop, you can test their appetite for the various components, ask for their input and make tweaks wherever necessary. When you come to the final proposal or pitch, it should simply be a summation of all the discussions you’ve had, so no surprises.
It’s much harder to say no to something you’ve helped to create and the IKEA effect means that your corporate partner is likely to value it more highly. You’ll be more confident in asking for more value.
We once facilitated such a workshop between a mental health charity and a health insurer. They had a small partnership that wasn’t growing and the commitment of the corporate was waning. Through the workshop, they identified their strengths, priorities and aspirations for people living with poor mental health. The health insurer was paying out for expensive treatment when people had not received treatment until they experienced severe symptoms or psychosis. The charity had been focused on early intervention for mild to moderate symptoms. The workshop allowed them both to identify an underserved cohort, the ‘missing middle’ and commit to new, shared activities. The value of the partnership went from $200,000 to $ 5 million. The collaborative approach also allowed the charity to develop peer to peer relationships at multiple levels, with experts on both sides eager to share their knowledge.
Offering your corporate partner a proposal and asking for feedback is not the same as making them co-creators of the partnership. Your proposal should come at the very end of discussions when you’ve genuinely invited them to construct it with you. It’s a challenge for many non-profits, as you’re comfortable being the experts and all you really want is more money to do your thing. But co-creation opens up new possibilities, better solutions to mutual challenges and the likelihood of greater partnership value.
My IKEA wardrobe may be made of wood shavings left over on the workshop floor, but it looks a million dollars to me because I built it. Can you channel the IKEA effect to extract more partnership value?