Subject: [NEXTEL-1] A very strange relationship - How Business Gets Done- Revisted

From: NEXTEL-1
Date: Sat, 17 Jul 2004 02:43:16 -0400

A news service from Business Report

Feb. 13, 2001
By Patrick Courreges,
Business Report staff

Authorized dealers are often direct competitors of the companies whose
brands they sell.
If 15 to 100 stores specialize in selling the same widgets, made and
supported by the same company, for about the same price, that sounds
like a franchise operation.

Not so fast, there.

That description could also apply to the "authorized dealer" business
model, where each of those stores could be in competition not only with
each other, but also with the sales force of the manufacturer of their
cash cow product.

"Authorized dealer"-style businesses are a different breed than the
standard franchise chain operations. They have the general shape of
franchises and all the markings of franchises, but they aren’t—not
quite.

In Baton Rouge, the husband and wife team of Charles and Phyllis Goins
seems to have a handle on the vagaries of this quasi-franchise model
with their NexCom Communications, which markets wireless products for
Nextel.

NexCom was Nextel’s top agent in Baton Rouge last year, and ranked best
in the state in 1998—none of which means that Nextel won’t sign up a
dozen competitors if it finds that many with the wherewithal to jump
into the field, or that Nextel won’t beat NexCom for business with its
own direct sales force.

Indirect sellers such as NexCom live in a surreal competitive
environment with the companies they sell equipment for, said Phyllis
Goins, who serves as vice president of NexCom.

Same customers

"It’s a very, very strange relationship we have," she said. "The
indirect channel actually battles the direct channel. We jockey for the
same customers every day."

The difference in licensing between franchises and dealers is what
drives the differences in operating styles. True franchisers make their
money by getting stores open and selling licenses to franchisees, who
move the product under the parent company’s brand.

In the authorized dealer model, the central company does not usually
sell licenses for stores, but makes its money directly from sales of the
product—meaning, in Nextel’s case, the emphasis is on getting as many
people out pushing phones as possible.
In addition, authorized dealers do not enjoy the marketing and business
support that franchisees do—the former operate more on the sink or swim
philosophy.

The Goinses have been getting Nextel phones into circulation since the
company first went after the consumer market in 1995. They started in
Alabama and Florida before selling their stores and moving west when
Nextel opened the Louisiana market.
Though Nextel has ways of rewarding top agents, being an indirect seller
is not without its frustrations, especially when the central company is
breaking into a new market. The parent company tends to be less choosy
when finding independent agents to get brand recognition and sales going
in a new area.

"They always start out with just a handful of people, and maybe two in
10 know what they’re doing," Phyllis Goins said.

Cleanup crew

Opportunists who have no idea how many people and skills are needed to
operate a wireless dealer store come in, fall short on promises and
leave a bad taste in the mouths of customers, she said.

The problem for established companies like NexCom becomes one of
re-educating customers who now hate a product because of lousy service,
Goins said.

"Once Nextel realizes they shouldn’t have signed with this snake charmer
over here, then NexCom has to come behind this snake charmer and all his
customers," she said. "We almost have to beg and bribe them to come
back. It just totally muddies the waters."

Since the main point of competition between dealers who are offering the
same product at about the same price is service, a history of bad
customer relations is a particularly potent poison for which to find an
antidote.

Though Nextel often plays the role of competitor and creator of
competitors, it also can give competitive breaks to agents with a good
track record. When Nextel opened its markets in the Lafayette-Lake
Charles and Alexandria areas, NexCom was already in position to open
offices and put salespeople to work.

Nextel is well aware of who sells its products best, and will even try
to entice agents who might not have the intention to enter a new market,
Goins said.

"They don’t broadcast it to everybody that they’re doing this," she
noted

Part of getting in early on a new Nextel market is keeping up a good
rapport with the general managers and indirect sales managers, Goins
said.

It’s who you know

"I equate it to a sorority or a fraternity, to be honest," she said. "If
you know the right people and you’re in the right clique, you get the
top spots. If you don’t, you’re just going to be a page."

The central company is a little less than forthcoming with information,
even to its top agents, when the area it is opening up has the potential
to be a dog market, Goins said. "You almost have to drag the information
out of them to make the right decision."
NexCom has service centers in Baton Rouge and in the newly opened market
of Lafayette, and it has sales forces in the Morgan City-Houma area and
in the newly opened Alexandria market. The Goinses have also had
expansion attempts blow up in their faces and have learned to be wary of
a market that is not yet ripe, which is why they have decided not to
expand into Lake Charles just yet.

Despite the potential difficulties, Nextel does offer its best sales
agents the chance to expand sales through a nearly risk-free method by
granting some of them the status of master agent. NexCom is one of three
Louisiana Nextel master agents, a designation that gives it the ability
to operate through sub-agents.

A sub-agent can be anyone, be it a dealer of cellular or paging service
or someone in a completely different line of business, who thinks he
sees and meets enough people to sell at least 10 phones a month and who
meets some basic business criteria, Goins said.

"It’s almost a mini-version of what we have to do for Nextel. They have
to put together a business plan," Goins said.
NexCom has 15 sub-agents scattered throughout Baton Rouge, New Orleans,
Houma and Morgan City, and another eight agents working in Lafayette,
Lake Charles and New Iberia.

"We police them. We have a sub-agent manager who does nothing but deal
with them," Goins said.
Competition among sellers, direct and indirect, with and without
sub-agents, while fierce, is tempered by one purely common goal—shifting
as many Nextel phones from boxes to customers as possible.

In any case, the lines of communication between sales agents are always
open in cases where the brand might suffer because of turf
disagreements, Goins emphasized.

"You want to keep your Nextel face as clean as possible," she said.

Copyright © 2004 by Louisiana Business Inc. All rights reserved by LBI.
‘A very strange relationship’

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