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The Customer Trap: How to Avoid the Biggest Mistake in Business

Book Description

American business is dysfunctional. Companies of all sizes follow the mistaken belief that their products and services are best sold through mega-customers with pervasive market reach, such as Amazon and Walmart. Far too many business leaders fail to realize—until it is too late—that the relentless pursuit of volume at all cost is not the key to long-term profits and success.

The Customer Trap: How to Avoid the Biggest Mistake in Business is Thomas and Wilkinson’s sequel to The Distribution Trap: Keeping Your Innovations from Becoming Commodities, which won the Berry-American Marketing Association Prize for the best marketing book of 2010. The Distribution Trap contended that cracking the big-box channel is not necessarily the Holy Grail that many marketers assume it is. The Customer Trap takes this thesis to the next level by arguing that all companies, regardless of the industry there are in, should maintain control over their sales and distribution channels. Volume forgone by avoiding the mass market is more than offset by higher margins and stronger brand equity.

The Customer Trap shows that giving power to a customer who violates "the ten percent rule" sets a company up for ruin. Yet, when presented with the opportunity to push more sales through large customers, most decision-makers jump at the chance. As a result, marketing has come to resemble a relentless quest for efficiency and scale. Demands from mega-customers in the form of discounts, deals, and incentives erode the integrity of the brand and what it originally stood for. Lower margins become the norm and cost-saving compromises on quality take over. In time, the brand suffers and, in some cases, fails outright. Stark examples from Oreck Vacuum Cleaners, Rubbermaid, Goodyear, Levi’s, and others illustrate the perils of falling into the "customer trap."

This book demonstrates in vivid detail how to thrive by controlling your sales and distribution. The authors show how many firms, such as STIHL Inc., etailz, Apple, Red Ant Pants, and Columbia Paints & Coatings, have prospered by avoiding the "customer trap"—and how your company can have similar success.

Table of Contents

  1. Cover
  2. Title
  3. Copyright
  4. Apress Business
  5. Dedication
  6. Contents
  7. About the Authors
  8. Acknowledgments
  9. Preface
  10. Part I: Setting Up for Failure
    1. Chapter 1: The Biggest Business Mistake
      1. It’s a Common Story
      2. So What, Exactly, Is a Mega-Customer?
      3. The 10 Percent Rule
      4. But It’s Not the Mega-Customer’s Fault!
      5. Who Is Responsible?
    2. Chapter 2: The Customer Trap and Brand Destruction
      1. Levi Strauss Gives It Away
      2. Goodyear: The Rubber Hits the Parking Lot
    3. Chapter 3: Turning Your Innovations into Commodities
      1. The Example from Detroit
      2. Rubbermaid Abrogates Control
        1. Little Tikes
        2. The Acceleration of Commoditization
        3. The Dye is Cast
      3. Perfecting the Customer Trap
    4. Chapter 4: When Sales Channels Get Hijacked
      1. A Step Back Before Moving Forward
      2. Holding Data Hostage
    5. Chapter 5: Living the Outsourcing Compulsion
      1. Globalization: A Mostly Necessary Evil
      2. Sales and Distribution: A Look Back
        1. Emergence of Mass Retailing
        2. Arrival of the Megas
        3. “Strategic Thinking”
      3. The Current American System
      4. Foreign Direct Investment
        1. Walmart in China
        2. And the Others Soon Follow
        3. Mexico: The New (Old?) China
      5. The Outsourcing Compulsion
  11. Part II: Avoiding the Trap
    1. Chapter 6: The STIHL Story
      1. Origins
      2. Service
      3. The Dealer’s Perspective
      4. Avoiding the Customer Trap
      5. The Advertising Campaign
      6. Seeking Out New Retailers
    2. Chapter 7: Innovation’s Second Step
      1. Model of Innovator/Distributor Relationship
      2. Sources of Power for the Megas
        1. Scale
        2. Markets
        3. Legal Context
      3. Power of Producers
        1. Product
        2. Scale or Size
        3. Legal Context
      4. The Second Step
        1. Phase 1: Low Scale
        2. Phase 2: Low-to-Medium Scale
        3. Phase 3: Medium-to-Large Scale
        4. Phase 4: Large-to-Large-Plus Scale
        5. Phase Summary
    3. Chapter 8: Getting the Data and Doing Marketing Right
      1. Not All Customers Are Equal
      2. Typologies of Customers
        1. Assessment Criteria
        2. The Questions to Ask
      3. Getting the Data: The Foundation of Good Marketing
        1. The Emergence of Channel Data Management
        2. Head, Torso, and Tail
      4. The 12 Steps
        1. What Are the 12 Steps?
        2. A Bookstore Sets Itself Apart
    4. Chapter 9: Going Global and Keeping the Faith
      1. Exporting the Dysfunctional Model
      2. Hope Outside the United States
        1. See It from the Distributor’s Perspective
        2. Set Minimal and Ideal Criteria
        3. Focus on Potential Complementors
        4. Explicitly Spell Out Responsibilities
        5. Construct the Relationship
        6. Constantly Scrutinize the Relationship
        7. Manage Communication
        8. Incentivize the Relationship
      3. You Get Only One Chance in a Market
    5. Chapter 10: Staying Local and Independent
      1. The Battle Is Joined
      2. A Dying Idea
      3. Back to History
      4. Smaller Is Better
      5. The Future Is Brighter Than Ever Before
      6. Our Last Thought
  12. Index
  13. Other Apress Business Titles You Will Find Useful