What Are the Advantages of a Joint Venture?

Maggie Worth

A joint venture is an initiative in which two or more distinct entities work together to achieve a common goal. Promotional activities are one of the most common such initiatives, but others might include the launch of a new product, such as a bandage that is pre-coated with an antiseptic, or the joint sponsorship of a special event, such as a local business fair. The advantages of a joint venture include reduced costs, a wider offering range and access to a broader existing customer base.

Woman holding a book
Woman holding a book

One of the major advantages of a joint venture are cost savings, both for the consumer and for the businesses participating. One example of a joint venture would be a restaurant and a theater or event facility that offers a dinner and a show package. In this situation, people who buy the package will pay one price to one entity and will receive either a set amount of money to spend at the restaurant or the opportunity to order from a prix fixe menu along with tickets to the play or event. The price paid for this package usually represents a small discount over what the buyer would have paid had he purchased the meal and the tickets separately.

In this example, both the restaurant and the theater will also save on marketing costs. The two entities will share the costs of placing ads in newspapers, online or on the radio as well as on printing fliers, posters or other such materials. This savings is part of what allows them to offer a discount to the customer.

Another of the primary advantages of a joint venture is the ability to offer a broader range of products than one business has to offer. This generally works best when the products are compatible, such as with dinner and a show. Other compatible joint ventures might include a hotel and rental car or a hair and nails package. In a grocery setting, the customer might be offered a discount for 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 business' existing customer base is an additional advantage of a joint venture. Companies often share electronic and print mailing lists during a joint venture, which can increase each business' list in the future. The venture will likely be advertised in both participants' social media sites as well.

Customers who frequent one business also might be prompted to try the other for the first time. In the dinner and a show example, a customer who regularly eats at the participating restaurant might see an advertisement and decide to go see a show he might never have seen. A patron of the theater, on the other hand, might decide to try a restaurant he's never tried. If he likes it, he might come back in the future. Of all the advantages of a joint venture, the ability to reach a broader customer base might be the most valuable over time.

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