E-Class #45: How to Establish a Host Beneficiary Relationship

Checkpoint:

• You understand the difference between advertisements designed to generate leads, and advertisements designed to make sales
• You have implemented a few persuasive copywriting strategies into your upcoming advertisements

A host beneficiary relationship is another way to boost your referral business, and reduce customer acquisition costs.

Like referral strategies and testimonials, host beneficiary strategies use trust and credibility to generate leads and close sales. They also cost a lot less than advertising or direct mail, and reduce the amount you spend acquiring each customer.

If you haven’t heard of them before, host beneficiary relationships are loose partnerships between complementary, non-competing businesses, and they can be financial goldmines when implemented strategically. One business – the host business – sends a letter or other formal referral to their existing client base that introduces and recommends the second business – the beneficiary.

Of course, establishing, planning, and implementing a successful host beneficiary relationship campaign is more complex than asking your neighbor to send a letter to his client base with an offer from your company. But it’s not hard either – I’ll show you.

In this E-Class we will cover:

• How a host beneficiary relationship can help your business
• The scenarios in which a host beneficiary relationship can help your business
• How to set up a host beneficiary relationship
• Key tips and hints for setting up host beneficiary relationships

Is a host beneficiary relationship the right strategy for your business?

Host beneficiary relationships may not work for your business all the time. However, they are a great tool to keep in your marketing arsenal when starting a business, entering new markets, boosting product sales, or any other opportunity that requires a specific and personal approach.

Like every other component of your marketing strategy and materials, a host beneficiary campaign must be purpose-driven and make more money than it costs you to run.

For example, if your business caters to a broad audience – like a grocery store – and you have an irresistible offer – $20 off every purchase of $100 that includes a thanksgiving turkey – then a simple advertisement is going to reach a larger group of people and cost you less than an HB campaign.

The same goes for common products with a low price point – like coffee, candy or fast food. It’s unlikely that a host beneficiary relationship is going to bring in the sales you need to justify the cost and effort involved.

So in what cases will a host beneficiary relationship benefit your business?

A start-up company with no contacts or established credibility.

If your company is just starting out, you have the most to gain from a host beneficiary relationship. Faced with the standard challenges of establishing a new operation – credibility, product positioning, target market establishment, marketing strategy, etc. – a host beneficiary relationship is an ideal way to get your business off the ground.

For a new hairdresser, a partnership with an established local esthetician will help build a core group of clientele. The hairdresser offers a free haircut to all of the esthetician’s clients, allowing the esthetician to add value to her existing services, and the hairdresser to tap into a group of qualified potential customers.

Gaining access to a time-crafted list of potential clients in your target market is an impressive benefit. Getting an established business to communicate your offer on your behalf is an almost guaranteed way to establish your own credibility.

However, start-ups often have the least to offer a ‘host’ company in exchange for being the ‘beneficiary’. Trading client lists is not an option in this case. So what’s in it for the ‘host’?

The host is seen in the eyes of his customers as providing a reward or an exclusive offer for their continued support and loyalty. The host business earns goodwill and has an excuse to contact his database for the cost of a simple mailing.

A company that is entering a new market.

If you have an established business that is venturing into new territory, you’re also in a prime position to benefit from a host beneficiary relationship. Whether the business is known or unknown in the community, tapping into a refined target list will ensure that the right people are communicated the benefits of the new business’ offering.

In exchange, the host business may benefit from either the beneficiary’s client lists in other marketplaces, or the prestige of offering clients an exclusive offer for a new business in town.

For example, an interior designer or home stager would be an ideal match for an established real estate agent. The services are highly complementary, and targeted to a qualified customer base: those who are selling or purchasing a home. The real estate agent is seen to be providing a high level of service, and the home stager has instant access to an ideal potential customer list.

Again, this works best when the target market is highly segmented; otherwise, an advertisement would be a faster and more cost effective strategy.

A company that is offering a new product or service.

As with new marketplaces, launching a new product or service may require tapping into a new or more segmented audience to deliver your message. A host beneficiary relationship with the right partner will help to correctly position your offering, and deliver it to that exact audience you’re looking for.

The host business benefits by offering loyal clients the first opportunity to purchase or use the beneficiary business’ product or service.

Decided that a host beneficiary relationship is a good strategy for your business? Follow these five easy steps, and you’ll be well on your way to establishing a profitable partnership.

1. Clearly define your target market, or market segment.

This is crucial in establishing a host beneficiary relationship – just like it is crucial in every other aspect of your marketing plan. Not knowing and understanding your target market will put you on the fast track to business hardship, and waste time and money in the process.

You can determine your target market – or target market segment – based on the purpose or intention for seeking a host beneficiary relationship. Are you reaching out to a new segment of your market? Are you offering a new product or service that may appeal to a specific segment of your market? Are you moving to a new market area and looking to establish yourself amongst your broader target?

2. Make a list of potential host businesses that you could approach.

Once you have an idea of who your target market is, you need to create a list of target host businesses to approach.

Not every business is going to be interested or willing to engage in this marketing strategy – so doing a little bit of research and positioning your offer is well worth your while. To begin, you will want to draft a long list of all potential host businesses.

Do this by considering all business types that would be complementary to – but not competing with – your business. Those businesses that offer a service or product that is connected in some way to your own. For example, if you operate a hair salon, some potential HB partners would include esthetics salons, clothing stores, drug stores, and perhaps some specialty goods stores.

Or, if you operate a retail tire store, you might consider a list that includes hardware stores, automotive part shops, car washes, autobody shops, or specialty auto part distributors.

Pick up the yellow pages, or conduct a Google search for all businesses in your market area that fall under the categories you identified. You may also consider asking your colleagues and associates for ideas and recommendations.

When creating this list, make sure each business falls under these criteria:

They don’t compete with you. Their offer should be complementary to, but not compete with, your product or service. Make sure you consider this carefully – seemingly non-competitive offers may actually cannibalize your business.

Remember that your customers have a limited amount of money to spend, and if they begin spending money at your host’s business, they might stop spending money at your business.

They have the same target market. If you and your host business are not talking to the same customer base, then you’re wasting your words on customers who are not likely to buy your service or product. If your host business has no idea who their target market is, you may also want to consider looking at other host options.

Start with your customers – your target market or segment of. What services do they use? What products are they interested in? Thinking about their needs will help lead you to the most effective host business.

They’re established and have a killer customer contact list. Without this, they aren’t worth approaching – but how do you know they have or maintain a customer database? There are a couple of ways. Pay attention to the type of marketing your potential host conducts. Do they often send letters to their target market? Direct-mail flyers and other promotional materials? Or do they rely on advertising? Do they send a regular newsletter? They also may hold their customer contact information in their point of sale system – if it is technologically advanced enough to do so.

They are credible and have a positive reputation. As the beneficiary, you need to ensure that the host who is referring your business to their customers enjoys a good reputation in the community and with its clientele. Otherwise, you are being endorsed by a business that no one respects, which can be damaging for your reputation.

3. Approach your host business with thought and little strategy.

Once you have created a list of target businesses, it is time to plan your approach. There is some strategy involved in this; you need to convince the host businesses to lend their endorsement and customer contact list to you in exchange for something that will benefit them.

Introduce your product or service.

Present your offering to the host business as though you were presenting to your potential customers: heavy on benefits, and light on features. Assume that the host business has placed themselves in the shoes of their customers, and is evaluating whether your product or service is worthwhile for them.

Provide marketing materials and other supporting information like testimonials and market research to establish your credibility, and your understanding of the people you are trying to reach.

Tell them about your proposal and highlight what’s in it for them.

Provide as much information about how the host beneficiary relationship will work, and be sincere in your efforts. Leave room for their thoughts and contributions to ensure that they buy into the process.

Get them excited about the opportunity you’ve placed in front of them. Use bright examples, and tell a hypothetical story about one of their customers benefiting from your service. Then, bring it back to the benefits that the relationship or partnership will deliver to their business.

Give them a reason to partner with you.

Be clear about the benefits the host can expect to receive. While you will not always be able to offer something tangible, do your best to offer some incentive to the prospective host business.

If you are an established business, offer them reverse access to your customer database after the initial mailing. Or, if you have room in your margin, offer them a piece of the profits you receive from their customers. Whatever it is, make sure you articulate how this particular partnership is worth their while.

Communicate why you think they’re the perfect partner.

Tell the host why you chose to approach them in particular. Do they enjoy a great reputation in the community? Are they a well known business with a great sense of camaraderie? Compliment them on their business skills and the great relationships they have built with their customers and in the community.

Then, explain how your business can add value to theirs, and allow them to build on the existing relationships with their clients by offering your services.

Reassure.

Communicate the benefits of the host beneficiary relationship to the host, and reassure them that there is no risk involved for them. You are not out to take their profits, or place burden on their resources.

Remind them that you are seeking a complementary business relationship, one that benefits both parties.

4. Design your offer or message with the target market in mind.

Once you have secured your host partner, put the plan into action as quickly as possible. Offering to write the letter to their customers will not only give you control over the messaging of the offer, but also reduce the time investment required by the host. The process is simplified for them, and happens sooner for you.

• Just like sales letters and other marketing collateral, your offer letter should engage the reader and make them feel as though their needs and interests are cared for.
• The letter should position the host as a thoughtful service provider who sought out an offer specifically for the target audience.
• Your offer should be strong and slightly outrageous. Offer value-added packages, or free services, exclusively to this target audience.
• Remember to acknowledge the needs and troubles of your reader, and position your product or service as the answer or solution.
• Include an incentive to act quickly. Ensure your offer is time-sensitive or of limited quantity.

Remember some of these tips and hints when trying to establish a profitable host beneficiary relationship:

Test small batches to be sure. If you are unsure about the accuracy of your target market – do a test run. Send a small batch of 50-100 letters to a small group of people, and measure the response.

Alternately, you can send three different letters to each third of your target market, and evaluate which offer is acted on the most. This is of benefit for both the host and the beneficiary business because the response rate of the target market is tested, as are their purchase motivations.

Ensure there is a benefit for the host business. Remember that there must be an incentive for the host business, or the partnership is not worth the time investment. It is important to consider this, and plan ahead before you approach the host business. Create a number of options for the host to choose from, whether it is using your database after the initial mailing, or sharing a piece of the profits.

Be open and honest with the host business. If you are working with several businesses in your area on different offers, make sure each business knows and is comfortable with the arrangement. Ensure that each offer is distinctive and each host is benefiting from the arrangement without competing with other host businesses. This is just good business form.

Success often lies in the strength of your offer. With a strong offer, your HB campaign will be on the path to success. Make it something your audience can’t refuse. Your offer should not only be enticing and engaging for your audience, but should also benefit the host in reputation. Their customers should feel valued and appreciative towards the host for bringing your offer forward.

If the strategy works, keep doing it! Once you’ve established one successful HB partnership, keep going! This technique is a valuable way to promote your business and your unique products and services, and can be repeated several times each year with several different host businesses.

Get creative with the kinds of businesses you establish partnerships with, and you could open up your business to brand new markets.

Start with a strong understanding of your target market, and then brainstorm all of the businesses they might purchase from. Sometimes a host beneficiary relationship with a seemingly incompatible business will actually be a profitable strategy – as long as your target markets align.

Remember that host beneficiary relationships should always work in both directions. If you aren’t comfortable referring the business you approach to your own client base, then you need to rethink your strategy.

In the next E-Class we’re going to dive back into internet marketing, and look at taking the strategies you started a few weeks ago to the next level. Online marketing is constantly growing and evolving, so there’s always something new to learn.

Until then, good luck!