Large Business Case Study—How To Fail by David Vallieres

When I was the director of economic development for the municipality I lived in, I would frequently be contacted by businesses in the area who wanted to get a low-interest loan (generally 1%-3%) from our economic development fund.

The fund was there to help create jobs for residents of the community. In exchange for a low interest rate, the company would promise to create as many new jobs as they could. If they requested $50,000 they had to create two new jobs, if they needed $100,000 they would have to create 4 jobs, etc...

While I was director of the fund, one of the companies my predecessor had provided a low-interest loan to started missing their quarterly payments. It was my practice to call the owner, schedule a meeting with them that included their financial director and/or accountant and review the reason for their missed payment. Of course, I would be there to get them to make an immediate payment, or at least get a firm date when the missed payment would be made.

During the course of this meeting I would always inquire about their current business situation. Did they have sufficient working capital? Were orders increasing or declining? Were there any changes to their fixed or variable monthly expenses and overhead?

Were they in the middle of labor or contract negotiations? etc...

The last question I would always ask, if there weren't any significant changes to their operations, was about their *marketing practices*...

I asked them if they had products and services they could provide to their past customers to help increase their cash flow. They said that the company's reps keep in touch with customers to make sure they are serviced and take orders for supplies and parts, etc... but during these 'service calls no additional offer is
ever made to the customer. If the customer needed something, they said, they would ask for it.

I asked when the last time a letter with an additional offer, or even a catalog was sent to their customers. "Never" or "years ago" was almost always the answer.

In the case of this one company, it became clear that they didn't have a clue about the lifetime value of a customer, how to work backend products and services or the idea of an endorsed mailing, up-selling, cross-selling, etc.. They had a customer base of 35,000 and had NEVER mailed to them or tried to sell them anything else! They never tried an endorsed mailing or any kind of joint venture.

Is this typical?

Sadly, for most established business, yes, it is typical.

When I asked the president of the company about this he said, "What would we write to them about? Besides I don't want to ruin our relationship. We're not barkers."

The reference to a 'barker' was a pretty typical mindset by most well established companies. They didn't want to appear too aggressive to their customers, like a sideshow at a carnival the 'barker' yells out at passersby to come and see the lady with the 14 fingers. If it wasn't for the fact that they has a good product that was in repeat demand by their marketplace, they would have been out of business a long time ago. The only thing keeping them alive was repeat orders, but even that was declining and was the reason they were missing payments.

They had a customer list of 35,000 and never mailed to them!

This mindset he had was simply wrong for the market conditions he and his company were facing. Instead of ruining a relationship, bringing excellent products and services to the attention of your customer base can only strengthen the relationship. As long as the products are really going to benefit your customer, you are doing your customers and prospects a favor!

No wonder they were having trouble making their payments. They had a very negative image about being too aggressive with selling company's products and services to their customers and it was hurting their business.

Don't ever assume that just because a company has a big building and several hundred employees that it understands how to build relationships with customers or how to effectively market themselves.

In this case, the company was built by a very dynamic and entrepreneurial individual (the current Pres/CEO's grandfather) and has been on cruise control since he passed away years ago.

If they don't fix their mindset soon (to be more like their grandfather's), they will be out of business.