11.27.2007

Entrepreneur:

“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.

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.”

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