This is a tale of tragedy and comedy and the protected marketplace.

Years ago we were turned away from a local company that wanted to expand regionally because they thought we were too pricey. Compared to what they had been spending fishing around for new clients we were actually a bargain, because we saw new ways to increase sales without grandiose plans. They preferred grandiose over substance.

Several years later, ensconced in their castle of market share dominance, a new suitor finally came to the local market that matched their product, beat their price and matched their customer service. Prior to this invasion, the company enjoyed what we call a "protected market".

Nobody had figured out how to compete because nobody had the desire to match the company's efforts in all areas of product sales and service. It was a very customer focused company. This lead to some very heady confidence on the part of ownership.

Recently, we had the need to contact the company because we had purchased their product and plan long ago and had a problem which needed urgent attention. We were told we had to wait until after Christmas to receive any attention. I pointed out that as a ten-year old customer, I expected to get better service. That I needed help urgently or our holiday would be jeopardized, that I needed help on-site right away, and I wanted more attention than a new client scheduled for that day who had not spent a cent with the company yet. I have invested thousands in their services. I thought I was valued.

I was told I had to wait in line and be served on a first-come, first-served basis. HA! I said that this is what forced customers to consider their competitor, who I then named.

The mere mention shook boots. They apparently are very aware that their valued position is now in danger. I was ready to sign a multi-year deal with the competitor sight unseen based on their marketing efforts. And I was not the only person who made the switch recently.

All of a sudden I received immediate service. I should not have had to do that. Not at all. I hate having to threaten a vendor I thought was a valued resource. I was a long time retained client. The kind of life-long partner you want to create stable cash flow for your business. It takes six times the dollars to cultivate a new, possibly non-loyal customer than just retain the ones you have.

PHONE CARRIERS AND THE LIKE

Whether you are talking about a high-end service or even a mere cell phone plan, as a consumer dealing with someone who has a protected market, i.e. AT&T before the breakup, any cell phone company before the ability to port your phone number, you have little control. It is very important that the company with the protected market go out of their way to provide excellent service. Above and beyond the call of duty.

They don't have to. At least not immediately. Why should they? Eventually the employees are all made to feel the company is invincible. They dictate terms. A famous comedienne once filmed a mock television spot claiming, "We're the phone company. We don't have to give a damn."

And the phone company didn't care. Until the bitter, highly competitive end. And that didn't end with more phone companies. Or cable. Or satellite, etc. There is such a blurring of products that telecommunications firms are tripping over themselves to be the best at everything. They have to be. The market forces dictated that change. And we all have freedom of choice. And lower rates.

HOW TO LOSE A BILLION DOLLARS IN NO TIME

The best example of a company that has failed to integrate sales and marketing efforts with protected markets comes from a very large conglomerate with over $13 billion in annual sales. Not a small business at all. They had over 100,000 North American employees at one count. So they should know what they are doing. Right?

Surprise! They violated some of the most basic tenants of marketing, whether from pride or a bloated bureaucracy, and have steadily lost market share in many divisions. They earn their money both by selling management services earning a fee, and by selling product at client sites. They sell new accounts to replace old lost ones, but continued product sales are flat inside the accounts. The key to their loss was apparent from the inside, where we were lucky enough to be when the slide started. We witnessed the incompetence and market pressures which resulted in declining income for a huge firm.

We did not change history but learned a valuable lesson we can pass on to you here. The company had an executive marketing vice president who never had a clue what he was doing. He had been promoted into the position from a different position in a company that was absorbed in a merger. They had no where else to put the man. So they gave him a great title. And a lot of money. Millions. And he spent it all.

MOCK BRANDING

Over the next five years he pretended to build brands, all of which failed. So the company went out and spent additional millions buying existing brands to bring in and sell at lower margins due to licensing agreements. So they lost money on the initial product sales and branding efforts, and they lost money on flat sales of new brands brought in to replace the failed ones.

The wizard pretended to create a marketing division, which, unfortunately, never sold anything of merit. And the worst part was he had completely protected markets over which his firm exercised great control. Employees of their clients had little choice but to purchase this company's product. It was avoided anyway. Still, internal sales and same location sales were flat. Always flat. And no one questioned the results, not even the chairman of the board.

The corporation continued to whittle away at the ever disappearing pie of potential clients by successfully selling contracts to the Fortune 1000 which they saturated to a good extent. But sales of their product internally remained flat. They obtained the clients, but never capitalized on continued sales of perishable items that they sold at client sites. They were very good at getting new accounts and then losing money on the sales that were supposed to take place once the contracts had been signed.

This was not only unforgivable but lead to a decline in profitability for the long-term. It was not enough that the initial "sale" to use the company was made. That is only step one. The marketing aspect of internally selling product continuously was supposed to take over. Instead, missed opportunities abounded on a daily basis. The ladder was filled with subordinates who had as little knowledge as the wizard because he liked to surround himself with people who could not question his lack of knowledge.

The process continued unabated for three years as the company continued to lose same location sales, profits decreased and share earnings slowly declined. They have lost over 50% of their annual profit in some areas. That is like throwing away a billion dollars. Woof.

A HARD ROAD AHEAD

To compensate, they now hope to increase profit by selling more to existing accounts - i.e. those internal sales they neglected for almost a decade. And how do they hope to increase the value of their products and profits? By increasing prices of course! I don't think they realize that the alternative for a client's staff is to actually buy LESS of their products. So a price increase to increase profits may drive away more consumers. Wow. Only the most loyal employees who do not seek alternatives will continue to purchase. Internal sales will continue to decline.

Hopeless. Simply hopeless. They built a huge behemoth of new account sales through rapid mergers over a few years only to lose the internal, organic growth needed to sustain the beast for the long-term. They lost so many millions in dollars and so many years avoiding the truth that new business could not continue to replace old business lost. New accounts would not make up for old ones lost. They are only realizing this near the end.

Location sales were always the key to success. Not management fees. But they kept the marketing wizard and even promoted him to a division presidency. Until the chairman had to step down. The company is in upheaval. They have begun selling off entire divisions. To "concentrate on core aspects of their business." Translation: "We are going to keep losing money hand over fist. Sell now while we can possibly unload the worst of the bunch." Their proud dominance in some divisions is being assaulted in various ways. Ultimately, what they built will be dismantled.

The sad fact is we don't believe there is a single executive on board who could name the core aspect of their business. They are all looking out the window instead of inside the box. It stares them in the face and even when they name it, they lose sight of it.

They are losing their business, even with protected markets. They failed to plan properly. And they kept people around who did not want to make necessary changes. If huge firms with billions of dollars can collapse, so can the average small company. It is even more important for those with fewer financial resources to spend them wisely.

MEASURING RESULTS

When we inquired about the internal sales feedback this corporation received for those years we were informed that they had gathered a LOT of marketing data. On instructions of the wizard they accumulated information. Because he was imitating what others did. They gathered data. They had staff who spent their entire day gathering data.

All of which sat on very nice wood shelves, in large over-sized binders comprised of hundreds of pages each. They had an enormous library of internal sales data stretching back years - which nobody read, nobody analyzed and nobody understood. I know because I asked who reported on the data. The person responded that nobody did. They just collected it.

Many firms we know do the same thing. They collect data, they might even produce a report for presentation to the Board of Directors once a year. They have no idea what the data means as related to increased sales though. They can show that sales are up or down, or "holding steady", but they don't know why. And they don't know what can be done to change the effort to increase sales.

They don't use the data for any effect. It is merely data. Like past civilizations this company will eventually fail and the record of its demise is contained in the ignored data. The answers were there all along. But no one wanted to take the next step.

So much for having a protected market to sell within.

THE END GAME

The company which provided my original home service at the beginning of this article is still my vendor. I hesitate to change companies, especially since they did rise to the occasion. That is their one "benefit of the doubt" phone call. Next time I call the competition to inquire about their services.

What does this tell you about your company? Are you riding a protected market?

Are you so confident that you see no need to collect and analyze any data?

Are you about to be invaded? Would you know? What would you do if you had the chance to make the market share you own more profitable and secure in the face of better competition?

Have you sought to increase sales to your existing customer base? Do you know how?

Give RMG a call today and let's plan the end game strategy before the game is even afoot. You will take any new competitor by surprise and maybe even your own employees. The best defense is a good offense. Get lazy and lose your edge. The choice is yours. Or you can spend a billion dollars and hope for the best.

What can you learn from this encounter?

RETURN TO THE TOP OF THIS PAGE

All inquiries should be directed via email to: RMG