The Fastest Way to Find New Customers

The Fastest Way to Find New Customers

Tap into your customer base by piggybacking on established businesses with similar target markets.
By Brad Sugars  / Entrepreneur.com

Updated: 8:42 a.m. PT Oct 29, 2007

Some years ago, I overheard a debate between two friends about
the name of a startup business. "It’s a good name," said one friend
to the other, "but I’m not sure it’s the best name." You
could say the same thing about the techniques typically used to
attract customers to a new business. Traditional strategies like
networking and mailings will do the job, but they won’t do the
best job.

If you’re a startup, the fastest way to get the cash registers
ringing is a little-used method that involves forming
"host-beneficiary" relationships with established businesses that
cater to a target audience similar to yours. Then you promote
yourself to their database with a special offer presented as a gift
from the older business.

The beauty of this arrangement is that the startup (the
beneficiary) can instantly reach large numbers of highly qualified
prospects with the tacit endorsement of the established business
(the host). The host is willing to participate because it’s a way
to reward loyal customers without incurring any costs. The rookie
gains new customers, while the veteran gains goodwill.

Women’s Clothing and
BMWs

One startup that successfully used this technique was a high-end
women’s clothing boutique. The store arranged to give a free silk
kimono to every female customer of a local BMW dealership who
brought in a letter sent by the dealership offering the gown as a
gift for their past patronage. The kimono had to be picked up at
the boutique.

More than 600 women responded, picking up $100 kimonos that cost
the store just $16 apiece. Those 600 women spent an average of $400
on other merchandise during their initial visit. Do the math, and
you’ll see that the startup spent $9,600 to generate some $240,000
in sales–and, not incidentally, to begin building its own
clientele.

Six Steps to Success

Host-beneficiary marketing is actually a simple and relatively
inexpensive process that will deliver solid results if you follow a
few basic rules:

1. Precisely define your target audience.
"Women 35 to 55" might be a start, but it’s not enough. Create a
detailed profile of your target customer. The more segments you can
identify, the more potential hosts you can approach.

The women’s clothing boutique that marketed to BMW owners, for
example, determined that their likely customers drove certain types
of cars, patronized a certain class of hair salon, belonged to a
health club, and were likely to play bridge. A birdseed store might
come up with a list that includes consumers who shop at outdoor
equipment outfitters or are affiliated with local conservation
groups.

2. Identify local businesses that serve the same market
segments.
That way, you can not only bring people in the
door for your initial offer, but also increase the likelihood that
they’ll return to give you repeat business.

For a cigar store, logical host partners might include better
men’s clothiers, upscale shoe stores, luxury car dealerships and
country clubs. And don’t forget non-commercial organizations like
Rotary or Kiwanis.

3. Develop a clear offer for each prospective
partner.
Come up with a free or deeply discounted product
or service that has a high perceived value for the consumer with a
low dollar cost for you.

One new computer support business offered a voucher worth two
free hours of computer repair to the small business clients of a
local accountant. A jewelry store offered free jewelry cleaning to
clients of a hair salon. A marketing consultant offered a free
seminar on how to run sales to one local newspaper’s advertisers. A
framing shop offered free photo framing to a photographic supply
store’s top 200 customers.

4. Pitch the plan, highlighting the benefits to the host
business.
Emphasize that it’s a way for the established
business to reward their customers at no expense and with virtually
no effort. It’s also a way to reach out to customers without
overtly trying to make a new sale.

5. Supply a letter for the host’s use.
Providing a draft "offer" letter that can be sent to the host’s
customers on the host’s letterhead will help put the plan into
motion quickly. It will also show the partner how easy it will be
for him to participate.

Some businesses will allow the letter to be inserted into their
monthly invoices or newsletters at no cost to you. Others will
charge or require that you pay for a separate mailing. It’s a small
price to pay for access to the host business’ customer base.

6. Develop a strategy to convert redeemers to repeat
customers.
This, after all, is your long-term goal. For
the women’s boutique that gave away a kimono, the strategy was to
encourage browsing and lure shoppers into dressing rooms to try the
merchandise. For one new bakery that gave away a chocolate éclair,
the approach was to hand out a buy-five-get-one-free VIP card with
the free pastry.

Whatever the specific plan, the host-beneficiary method is the
single most effective way to quickly attract a critical mass of
qualified customers to a new business. Instead of beating the
bushes for customers with individual referrals or scattershot ads,
you can tap into a targeted group of consumers en masse to
jumpstart sales.

Best of all, you’re piggybacking on the success of another
entrepreneur who has spent years building a solid customer base. In
many ways, this eliminates the need to reinvent the wheel. For a
startup facing so many other challenges, it’s just smart
business.

Brad Sugars is Entrepreneur.com’s Startup Basics columnist
and the founder and CEO of ActionCOACH,
recognized by
Entrepreneur.com’s Franchise 500 as the world’s leading business
coaching franchise
.

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