Did you know that a business just down the street from yours may be able to help double your profits this year? Or does this sound a little too far-fetched? Maybe. If you operate a retail store that sells tires, and the business down the road is a hair salon, you may have a hard time making this happen. However, loose partnerships between complementary, non-competing businesses can be a financial goldmine when implemented strategically. And your partner may be just steps away!
Formally called 'host beneficiary relationships (HB),' these partnerships help small and medium-sized businesses tap into very specific target markets and close sales under existing relationships of trust.
HB relationships allow one business (the ‘host’) to add value to their product or service, and the other (the ‘beneficiary’) to benefit from the impact of a referral. The beauty of this arrangement is that the roles can then be swapped; the ‘host’ becomes the ‘beneficiary’ and vice versa.
Like any marketing strategy, HB relationships don’t work for every 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.
How Can a HB Relationship Help Your Business?
Establishing, planning, and implementing a successful HB Relationship campaign is more complex than asking your neighbor to send a letter to his client base with an offer from your company.
As with every other component of your marketing strategy and materials, an HB relationship campaign must be purpose-driven and evaluated to be the best approach to secure your desired results.
For example, if your business caters to a broad audience and you have an irresistible offer that is going to have people running through your doors, you may want to consider a simple advertisement that will reach the most people. Alternately, if you offer a common product with a low price point – like coffee or candy – it’s unlikely that a HB relationship is worth the cost and effort involved.
So in what cases will a host beneficiary relationship benefit your business?
1. A Start-up Company
A company that is just starting out has the most to gain from a HB relationship. Faced with the standard challenges of establishing a new operation – credibility, product positioning, target market establishment, marketing strategy, etc. – a HB relationship is an ideal way to get the business off the ground.
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.
2. Entering a New Market
An established business venturing into new territory is in a prime position to benefit from a HB 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.
Again, this works best when the target market is highly segmented; otherwise, an advertisement would be a faster and more cost effective strategy.
3. A New Product / 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 HB relationship with the right partner will help to correctly position your offering, and deliver it to an exact audience.
The host business benefits by offering loyal clients the first opportunity to purchase or use the beneficiary business’ product or service.
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