Real case of business competition

Below we describe a situation of conflict between companies, fighting in the real world, for a very specific market segment.

They are not large companies, they are simply an example of the thousands of cases that happen around us every day.

The article shows how with the right strategy, the right tactics, the right paces, and a healthy dose of innovation, creativity, imagination, perseverance, and hard work, the smallest company or entrepreneur can win, achieve their goals, and achieve success.

1. Introduction

We take part of the title of the book "How to drive your competitors crazy - The important thing is not to participate, but to win or lose" by Guy Kawasaki, because it was our leading book and that of the protagonist of our history, during the entire trade war that let's describe.

It is presented in narrative format, and the names and places changed, since the facts are real and the protagonists would not like to see themselves reflected here. We relate the events as they happened, and the decisions as they were made. Probably different decisions and facts would have led to a different result.

Therefore, on some occasion we will launch reflections that we hope will mean a pause in reading. Pause designed so that you meditate on it and can decide if you had acted in the same way. It is therefore proposed as a strategy exercise, not in vain it is included in our "Strategy Workshop".

2. Preamble

When the events occurred, he was working as an independent consultant for a firm whose purpose was to launch projects for their subsequent exploitation and sale. I was responsible for everything related to marketing and sales strategy. This article is based on one of the experiences I had to live. It all happened in a single city in a country of western culture around 1998.

3. The protagonist

“Once upon a time there was an entrepreneur”, who came through the door of our company and who had very clear ideas of how he wanted his professional future to be, although not so much, about where to start and how to guide him. He was over 35 years old, he considered himself a good professional in his field - now we will explain what he had been doing - and he had made the absolute decision not to depend “ever again” on third parties.

He had average studies, as to what is regulated education, and a great capacity for work; as well as a good dose of empathy. He had just come out of a traumatic experience, in the professional and personal aspect that had led him to leave the company for which he had been working for the past 5 years.

He did not know how to redirect his working life and also had a very limited investment capacity.

4. Where do we start

By mutual agreement, we began by reviewing in depth what his working life had been. In summary, his entire work and professional life had revolved around private and commercial research, both as a researcher proper, and in all related commercial and administrative tasks. He had been in several companies and knew the market and the competition.

I detail below the main functions that I had performed.

1 - Follow-ups and surveillance related to divorce issues. Activity that took up a lot of time, although it was highly remunerated.

2 - Location of missing persons. Activity that our entrepreneur based on a wide network of contacts. It was like the previous one a highly remunerated activity.

3 - Registry checks. Routine activity and with a very low profit margin.

4 - Preliminary investigations, this is verifications of the states of assets of persons or debtor companies against possible judicial claims. In practice this means location of seizable assets in case of defaulters or defaults.

Routine activity with a medium profit margin.

5 - Curricular investigations, as the name indicates verifications that the curricula presented are true. Routine activity with a medium profit margin.

Well, we had 5 possible business areas. Then we act by a discard procedure.

The first two options were immediately discarded, simply because they did not allow delegating any of the important parts, that is, our entrepreneur, carried out each and every part.

There were also a good number of companies that were dedicated to it and had difficulties in organizing customer acquisition.

We had 3 left, registry checks, preparation of preliminary reports and curricular verifications.

5. The choice

We focus below on seeing who were the potential clients of each of the areas:

1) Registry checks: mostly normal companies, real estate, financial institutions, banks and savings banks, agencies and consultants.

2) Preliminary reports: normal companies, real estate companies, financial entities and savings banks, agencies and consultants.

3) Curricular verifications: normal companies, agencies and consultants, recruitment companies and managers.

Together we had the following sets of potential clients:

Normal companiesReal estateFinancial institutionsManagements and consultanciesHiring and management selection companiesBanks and Savings Banks

Given the limitation of personal resources that we could put at the service of the new activity (our Entrepreneur only) and the limitation of material resources, we decided to focus on maximizing the results of the time that our entrepreneur could put into play.

Thus, we analyze the sets of potential customers based on their degree of commercial accessibility.

This would be a reduced analysis:

Normal companies: the decision depended on an inaccessible position - personal, financial, management - and the sale system required the complete circuit, prospecting, first contact, visit or visits, presentation of budgets and closing of the sale.

Furthermore, since the volume of their needs was small, each request “almost” had to be treated as an independent operation. Only a small number of companies were susceptible to loyalty.

Real Estate: the decision was centralized in an inaccessible position and the sales circuit is the same as in the previous point. The difference is that once the prospect became a customer, they became loyal.

Financial entities: the decision was centralized in an inaccessible position and the sales circuit is the same as in previous points. Once the prospect became a customer, it was loyal.

Management agencies and consultancies: the decision was centralized in an inaccessible position, the sales circuit is the same. The prospect was loyal. They rarely asked for it but on behalf of one of their clients.

Recruitment companies and managers: the decision was centralized in an inaccessible position and the sales circuit is the same as in previous points. Once the prospect became a customer, it was loyal.

Banks and Savings Banks: A peculiarity arose here, there were two large groups, entities that had centralized service for the entire network of offices (the offices requested what they needed from the corresponding department) and entities that did not have the centralized service and which were free to make their own decisions about it.

What would you do

6. What did we do?

Since we only had 1 sales representative (our entrepreneur) who also had to take care of all the research and administrative work, we decided to prioritize based on business volume / sales effort.

This simple reasoning allowed us to rule out:

To the normal companies (potential clients of registry verifications and preliminary reports) for low volume. To the companies Recruitment and management companies since only a few offered sufficient volume. To Real Estate Agents, Financial Institutions and Management Agencies and consultancies due to access difficulties. Those Banks and Savings Banks with centralized services due to access difficulties were also ruled out and it was decided to focus on those entities that, having no centralized service, converted to each of the offices in a potential client. Another important decision that had been taken previously and that I have not commented, is that the market had to be locally profitable. We did not want our entrepreneur to spend the day of the trip.

So the decision was made:

Our entrepreneur was going to sell "records inquiries" and "preliminary reports" to bank offices that did not have the centralized service; Well, each office was a potential client.

Then we decided to focus even more and see how many banks met the requirement. We use a quick procedure.

We took the "Yellow Pages" and called the headquarters of each of the Entities to find out and we found out. We did more, our entrepreneur visited old acquaintances, talked to friends, conducted a random survey, and in short the conclusion about the market that awaited him was as follows.

The market

Summary that I once wrote:

The Market is mainly occupied by 2 specialized companies that control 56% of the total and the other 16%.

The price levels are agreed between both companies. The one with the lowest quota, has positioned itself as a high-level, high-price service company with a portfolio of loyal customers, mainly in the business and service sector, and the other, is positioned as the alternative of adequate service at a reasonable price, being its clients mainly banks, and more specifically bank offices of entities that do not have this centralized service - at the time of which we speak (1998), this meant some 5,500 bank offices, taking into account that 2,225 corresponded to only 2 entities.

This equilibrium situation lasted more than 15 years

The largest of them with a structure of about 40 employees, had a commercial department of 4 people and a single manager - the owner of the company -.

The deadline for the work was 5 days, the commercials do not visit clients.

The smallest of them with a structure of 5 employees, had a commercial department formed directly by the 2 owners at 50% and 3 administrative. The delivery deadline for the works was 7 days.

What would you do?

The final decision:

Our entrepreneur decided and did several things.

He would face the leader. He would focus on a single product (the preliminary reports) - the one with the highest commercial margin - offering the other products only as added value. He decided to focus on a narrow market sector. Specifically, he decided to focus on a single Banking Institution with 1,500 branches, of which he selected the 900 largest, all of which he personally visited within 4 months. Keep in mind that the distances from one office to the next could be between 100-150 meters, that is, they were next to each other. In addition, commercially, in an office, either the director or the agent, they are always there, which means that they are also in a position to receive the visit. No prior visit agreement was ever required or made.10 zones were traced over the city based on the ease of travel to maximize the number of daily visits. He collected requests on the spot or received them by fax at the office. Our entrepreneur simply left each morning for his route, visited the office, introduced, spoke to the director or attorney, left the documentation, said goodbye and entered the next office. Furthermore, for our entrepreneur, going to this market niche had another advantage, since when he opened the bank offices only in the morning, his day was perfectly ogranized. In the mornings I visited, in the afternoons I did the work.He introduced himself, spoke to the director or attorney, left the documentation, said goodbye and entered the next office. Furthermore, for our entrepreneur, going to this market niche had another advantage, since when he opened the bank offices only in the morning, his day was perfectly ogranized. In the mornings I visited, in the afternoons I did the work.He introduced himself, spoke to the director or attorney, left the documentation, said goodbye and entered the next office. Furthermore, for our entrepreneur, going to this market niche had another advantage, since when he opened the bank offices only in the morning, his day was perfectly ogranized. In the mornings I visited, in the afternoons I did the work.

While he did the work, we focused on innovating the service that the offices had received until then. Some example:

Where the competition put only the company name in large black letters on folio paper, we created a modern design logo on color and glossy paper. Where the competition used a dot matrix printer, we used inkjet. Where the competition delivered all the reports with a handwritten detail on the outside in a brown envelope, we would forward the report by fax and mail the original. Each letter, each document (not in the reports) carried a different phrase of the style "That things go wrong does not mean that it cannot go worse" which had just outlined what was a different treatment and relationship with the client. (In fact I still remember that some attorney collected the phrases, they even asked us for the origin book)

Our entrepreneur worked a lot and was already earning a living, but he was determined to make a permanent dent for himself.

His turnover was insignificant compared to the leader, so insignificant that the latter had not yet learned of the existence of his new competitor.

7. The first commercial attack

Our entrepreneur hired his first employee, reduced the price of the product by 30% over the competition, and guaranteed the delivery of the report on the third day, with a penalty for one day of delay in delivery, loyalty to almost 80 agencies for the procedure for joint review of commercial files, helping managers to establish their priorities, free of charge. They reviewed the files and jointly decided which were capable of writing a report and which were not.

In summary, it focused on providing a better service at a better price, to a very specific market niche.

His strategy worked perfectly, after the sixth month, with one more administrative contract and one sales representative, and he continued with the same strategy, increasing the number of contacts to the entire network of that entity, the 1500 offices.

At the end of the seventh month, 60% of the reports of said entity were channeled by our entrepreneur.

8. The first counterattack and tie

The market leader, who had seen his business volume decrease by around 15%, reacted in the eighth month. It equaled prices - thus seeing its commercial margin reduced -, guaranteed delivery on the third day - for which it had to increase personnel, thus increasing its structure expense - and focused the 4 commercials of the house on that single client.

Our entrepreneur did not lose market share, but he did not gain it either.

9. The general offensive

At the tenth month he did the following:

He hired a new salesperson and acquired specific computer equipment to send information daily via fax. Information that was relevant for the executives of the offices. He loyalized 40 more clients by the same procedure of joint meeting to review files without charge. And he personally focused on a new Entity with 725 offices. At the end of the 11th month on 66 % of the reports of the first Entity and 15% of the second were channeled by our entrepreneur.

What would you do if you were the attacked leader?

10. The counteroffensive

The leader at the beginning of month twelve, and using the contacts and experience that 10 years of working with the Entities gave him, put pressure on the managers of the offices through the Entity leadership at the local level. He personally visited most of the the 120 loyal customers offering them the same service, at the same price. He hired 1 more sales representative and established a route system that allowed him to make commercial contact with all the offices of the largest Entity at least once a month. He matched the information service By fax, he contacted confidential information providers stating that the newcomer should not be worked with.

Is there discouragement?

In the fourteenth month our entrepreneur found a decrease in the volume of business close to 40%, he found that half of his suppliers did not serve him information.

It was found that in just over 100 offices they did not get on the phone and did not receive him. Discouragement spread!

11. Time to reflect and the final offensive

At the end of the month, with a further decrease in turnover, he carried out an unexpected act - at least we did not expect it -,… he went on vacation for 20 days.

At the beginning of the 16th month, it started a courtesy telephone reception / reception center (actually commercial).

He started a 3 × 2 sales system, you ask me for 3 reports, I charge you 2.

He admitted voiding orders, knowing that he could serve reports much more quickly. (This was a masterpiece of strategy)

Commercially he pressed those offices that did not work with him so that the leading company was forced to accept the cancellation of orders.

In practice, this led a minimum of 80 offices to pass requests for commercial reports to both companies.

Our entrepreneur delivered them before and the offices canceled the order to the leading company, causing indirect damage due to the time spent and lost and the additional expense that this caused.

It modified the system for sending relevant information by fax, including commercial offers on the rest of the products that it had not been promoting, at the rate of 1 different offer per week. Offers of the type:

20% discount for registration checks during this week For 5 preliminary reports we give you 5 commercial reports. Get up to 50% discount buying credits now and you will spend them later.

etc etc.

At the age of one and a half, the entrepreneur was happy with his nearly 75% share in the largest entity and 25% in the second.

We had a great time

The managers of the banking entities had a great time, even organizing bets on what would be next…

Guess who was not happy at all ??? Who did not sleep at night ???

What would you do?

12. What did the leading company do next?

At the age of 20 months, the owner of the leading company contacted the entrepreneur and made him an irrefutable purchase offer.

The leading company bought 100% of the shares of our entrepreneur and tried to hire him.

After 3 weeks the new company no longer existed. It should be said that everyone ended up content and happy, even the customers because the leader had been forced to raise his own service bar.

We even had a farewell party to celebrate this finale to which 50 of the best clients were invited, because "you never know if an end can be a new beginning."

Did you imagine this ending?

13. Conclusion

"You should never underestimate the small enemy"; and as we said at the beginning:

"With the right strategy, the right tactics, the right paces, and a healthy dose of innovation, creativity, imagination, perseverance, and hard work, the smallest company or entrepreneur can win, achieve their goals, and achieve success."

14. Bibliography to expand concepts

Since the narrated is a real experience, I have not used any bibliography for the elaboration of the article; however, I include the following internet references to expand on some of the concepts that we have handled.

Positioning - Summary of the book by Al Ries and Jack Trout

Are the strategies used in warfare, business, and marketing applicable or comparable?

The Marketing War