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How to Go Out of Business – A (Basket) Case Study

 

 

By Karl Robinson

 

 

A few years ago I watched a segment of “CBS Sunday Morning” that left me shaking my head in disbelief.  The story revolved around the Longaberger Basket Company and its basket-shaped headquarters building in Newark, Ohio.  The company’s history was explained along with photos and videos of their facilities, products, and people.  At their peak, they had 15,000 employees and did a BILLION dollars in sales.

 

The baskets they made were striking in their quality and beauty.  They came in all shapes and sizes, from huge double-handled picnic baskets to intricately woven wicker vases.  I immediately thought of at least ten people who would love such a gift, so I grabbed a pen and paper to jot down their info.

 

That’s why I was so appalled to learn that the crux of the story was that the company was going out of business and they were having trouble finding a buyer for their headquarters building due to its unique architecture (it was shaped like a picnic basket.)  Two questions came to mind as I heard this:

 

1.     What, NOBODY wants to buy these beautiful American hand-made baskets?  I want to buy several right now and I’ve never bought a basket in my life.

 

2.    Why have I never heard of this company or its products? 

 

The “President of Marketing”, Brenton Baker was shown in the nearly deserted offices lamenting the fact that they would soon be closed forever and all the remaining employees would be out of work.  He said he spent those last few months meeting with bankruptcy lawyers, liquidating assets, and letting people go.  The narrator made it all sound so sad. I found it absolutely pathetic.  It was like watching a ship’s captain saluting as he goes down with all hands while the lifeboats and helicopters sat unused on the deck.

 

Instead of going about the business of going OUT of business, he could have been focused on, oh, I don’t know, maybe selling some #@&%$ BASKETS!  I can’t imagine what fatal problem they had that couldn’t be fixed that way.

 

So why does a company with a long history of success and fine products with broad appeal slowly die like this?  I’ll lay out three reasons, and I wouldn’t be surprised if all three applied in this scenario.

 

1. Loss of Marketing Momentum.

A business often experiences steady and even rapid growth after start-up due to aggressive marketing and sales tactics.  After this initial success, however, they tend to get entangled in the frantic activity of daily operations.  The momentum slows and they hit a plateau. 

 


If action isn’t taken and they remain on the plateau for too long, friction overtakes inertia and they begin to slow to a stop.  This is how companies die.

 

 

In the case of our basket company, their marketing was either ineffective or non-existent.  Probably the latter.  After all, I wanted to purchase several of their products once I saw them, learned how they were made, and heard the story behind them.  And though I can’t be sure, I doubt I’m their primary demographic of purchasers.  Yet until this report on the company’s demise, I’d never even heard of these baskets, seen them in a catalog, received a piece of mail or email about them, seen them advertised online, seen them advertised in any magazines or newspapers, nothing.

 

You can’t just have a “build it and they will come” mentality.  You have to tell them you’ve built it, then keep telling them.  It’s difficult regaining momentum once you’ve lost it – much more so than maintaining it.

 

Remember:  When marketing stops, sales stop.  Then everything else stops.  You must keep the momentum going.

 

2. Bean Counters Calling the Shots.

This problem could very well tie into #1.  I can just imagine the meetings that took place at our basket company:

 

CEO:  “Sales are down 20% this year.  How do we fix it?”

 

Marketing VP:  “I’d suggest a massive catalog mailing.  That’s always paid off in the past.”

 

Accountant:  “Too expensive.  Didn’t you just hear?  Revenue is down sharply.”

 

Sales VP:  “Our best sales people keep leaving for greener pastures.  We need to replace them and take a hard look at our compensation plan.”

 

Accountant:  “No can do.  We’ve used up almost the entire sales budget for the year already.”

 

Marketing VP:  “How about re-running our top performing ads in a few publications?”

Accountant:  “Hasn’t anyone been listening?  We don’t have money for that kind of stuff!”

 

CEO:  “Well, what do you suggest?”

 

Accountant:  “In light of these recent numbers, I think we should lay off 15% of our workforce and sell part of the manufacturing operation.”

 

You get the idea.  Never let bean counters make business decisions or even influence them.  They just don’t think in the right terms.  Walt Disney wanted a train tunnel at Disneyland to have a snaking curve so guests couldn’t see through it as they entered.  He thought this would make the experience much more mysterious and fun for the them.  An accountant advised him, “It would be a lot cheaper if the tunnel was straight.”  To which Walt replied, “Heck, it would be a lot cheaper not to build it at all.”

 

If you give the wrong people decision-making or influence powers, you’ll soon find yourself with a dwindling number of beans until there are no more beans to count.

 

3. Allowing Competition to Occur.

I don’t advocate beating your competition, outsmarting your competition, or outpricing your competition.  I advocate eliminating competition.  This is one of the core principles of my firm. 

 

You’ve undoubtedly heard of using differentiation to set yourself apart, but it’s usually mentioned in the context of standing out in a crowd.  While others in your field claw and clamber to be the leader of the pack – a difficult position to achieve and even more difficult to maintain – strive instead to be a lone wolf without a pack.

 

Example:  Say our basket company retails their baskets on store shelves right alongside much cheaper Chinese baskets.  That’s allowing competition to occur.  The customer sees only two baskets with two different prices and nobody is there to explain the difference.

Alternative:  They could completely eliminate that competition by selling to consumers with a glossy print “magalog” (magazine plus catalog) that:

  •  Tells the company’s story.

  •  Demonstrates their baskets’ uniqueness and quality.

  •  Profiles the artisans that make them right here in the good ol’ US of A.

  •  Suggests many creative uses for them.

  •  Provides pictures and testimonials of happy customers.

 

Do you think someone is going to take all this in then go price compare to a cheap Chinese basket at Walmart?  Me either.

There are many ways to put yourself in a “category of one”.  Yes, even for your business.   Whether you are a plumber, a florist, a dry cleaner, a lawyer… competition CAN be eliminated.

 

In Conclusion

I am troubled by how many fine businesses raise the white flag of surrender and die unnecessarily.  If you find yourself on a plateau or in decline, action must be take immediately.  If you’re not exactly sure what that action should be, then by all means let’s have a discussion about it.