I have another story to tell about my friend Danny. He runs an accounting firm in northern Virginia and he looks a lot like a ton of other small businesses. He has half a dozen phone lines and he wants a fast Internet connection. He called me the other day and told me that he had been approached in just the course of one week by three different salespeople who represented Verizon.
His first contact still has me shaking my head. A salesman stopped by and offered to sell him an all-in-one T1. Danny already has FiOS and a symmetrical 35 Mbps Internet connection. This salesperson wanted to sell Danny a T1 from Verizon or from half a dozen other CLECs and resellers. And he could do this for only $1,400 per month, which is 3.5 times what Danny is paying for vastly better service.
I was really surprised by this sales call. This is a flashback to the late 90’s when there were salespeople everywhere selling the all-inclusive T1 that had some channels for voice and the rest of the T1 for data. And in those days since we had all just migrated from the dial-up world, this seemed like fast Internet access. But then DSL and cable modems, and now fiber and 4G have all left T1s far behind and I was surprised that there was a company who would spend the money on a salesperson to go door-to-door with last century’s product. That seems like the telecom’s version of a buggy-whip salesman.
But Danny says that in his CPA practice that he has at least 50 clients who still use T1s. He advises them every year to move to something better, but I guess there are a lot of people in the world who stick with what is comfortable and working. Such customers could save a lot of money moving to something else and would get far faster Internet access to boot. But I guess the fact that these kinds of customers are still out in the market explains the T1 salesman. There is so much profit in a T1 at his prices that one sale per month probably keeps him happy and very profitable.
Next Danny got a visit from Verizon Wireless. They wanted him to ditch his FiOS and go completely wireless with 4G. Danny has had his FiOS for four years and has never had a single problem. During that time Verizon has increased his bandwidth without changing the price. He is completely happy with fiber and he knows that fiber is the ultimate pipe if he wants bigger bandwidth in the future.
4G is an interesting product, but nobody thinks that a wireless network is as reliable as the FiOS fiber. Cell towers sometimes go down or get overwhelmed with service requests. And the 4G speeds vary by how many customers are using it at any given time. 4G is nice, but it is not fiber.
Danny says that the 4G salesperson could not answer some basic questions. For instance, they could not tell him the speeds he could expect at his location but only could talk about a possible range of speeds. And they never asked him any questions about his business. There certainly are going to be businesses where 4G might be the right solution, but Danny is not one of them. His accountants work in the office and clients come to see him. His major concern is reliability and he loves that FiOS stays up and running. Before FiOS he had a Comcast cable modem and had to send employees home several days when the Internet was not working. Danny is a happy Verizon customer and is sold on their fiber. Danny was somewhat amazed that the 4G salesperson did not know that he already had FiOS and it seems like the different parts of Verizon don’t talk to each other.
Finally last week Danny got a call from a FiOS rep. He had not gotten a call about his FiOS since he first bought it, but I guess that the Verizon FiOS group knew that Verizon Wireless was out trying to poach their customers and they called to check on him. So within the span of one week Danny was contacted by three different salespeople, two from Verizon and one who was a Verizon reseller.
This surprised me for a number of reasons. First, I honestly would have thought the day of selling T1s was dead and that visit just has me shaking my head. But the idea that two different parts of Verizon would spend for sales resources to compete for the same customer has me flummoxed. I understand that the Verizon fiber and wireless businesses are separate business units. But at the end of the day their profits all roll up to the same bottom line.
It appears to me that Verizon has missed one of the basic principles of selling – putting the customer first. A lot of my clients are CLECs and they learned a long time ago that the way to get loyal customers is to get to know them and find them a solution that fits what they need. This approach is called consultative sales and involves taking the time to get to know the customers’ needs. In the early days of CLECs they all sold on price and they quickly learned that a customer who changed to them for a lower price would also drop them for the next lowest offer. The CLECs who are still around today are for the most part doing it right and selling in a way to earn trust and loyalty from customers.
It honestly surprises me that Verizon has not learned this simple lesson. Danny says that the wireless salesperson never asked him about his business and only spouted that 4G was the latest and greatest product. It further surprises me that Verizon would put a live sales staff on the street to compete against themselves. Sales teams are expensive and it’s hard to fathom why Verizon would send a wireless salesperson to a place that already has Verizon FiOS. You would think at a minimum they would send salespeople only to those places that don’t already use Verizon. But once they heard he had FiOS they still tried to convert him to wireless.
Why would Verizon compete against itself like this? I know that there are different business units at Verizon and that each group will earn bonuses based upon their own performance, but at the end of the day it is more profitable as a corporation to do this the right way. Verizon ought to be sending out one sales team that can sell their whole product line and who will help the customer find the best solution for their business. In the long run it can’t do Verizon any good having salespeople bashing their own product lines. As a corporation do they really want wireless salespeople telling the public not to use their fiber? That is going to lead customers to pick somebody other than Verizon.
I think Danny has it right. When his receptionist hears the word Verizon now she just tells them, “He doesn’t want to talk to you.” And she is right.
The underlying point of your thesis is a very pertinent question: “Is VERIZON TOO BIG?” What was once a gaggle of regionally-focused Bell Companies — New England Telephone, New York Telephone, and others in the mid-Atlantic and northeastern regions of the U.S. — as well as client-focused long distance companies and other telecom companies, has now morphed into this gigantic, international behemoth.
Having gobbled up MCI, GTE and many others, Verizon has become too big… too big to really care about their customers; too big to care about the communities they are supposed to be serving (just ask the northern New England states!!); and potentially “too big to fail” — as they say about that other bastion of byzantine customer service, the banks…
Many telecom companies such as Verizon send out waves of salespeople to sell as many product and service as they can. These sales reps rarely understand the customers that they sell to, or at least as much as it takes to get them to “sign on the dotted line.” These companies give their reps: a commission-plus-salary or commission-only pay structure; maybe benefits, as prescribed by law; a nominal level of product and service training, and essentially let them loose on the business community in whatever amounts to a geographical footprint. In some cases, Verizon hires their salespeople as employees; in other cases, they contract with independent dealers, who hire and train their own team. In any case, the primary job is to do three things — sell, sell, sell.
This sales coverage is called the “Hermit-Crabs-in-a-Pail” method, many sales reps, all clammering on top of each other. To veterans of war, it might resemble “carpet bombing”. If these sales people succeed, they get promoted to be managers; if not, they move on to another career. Since the sales managerial hierarchy has been brought in through this structure, they perpetuate this process.
Another point of yours — the “poaching” factor — is a good example of a monopolist that has gotten too big. They can “poach” from themselves because the Verizon and Verizon Wireless operations won’t hurt too much with the change. Some aspect of Verizon will still have the customer’s business. The change of service will affect the clients, especially if the install process goes bad, and the change will earn another Verizon sales team a commission (even though Verizon will still have the customer…). One could see this as a type of collusion — Verizon is not really finding “new” customers (you can’t when you are the monopoly provider in a given area), they are just reselling or “upgrading” their existing customer base — and paying themselves commission/bonuses for these “new” sales. In case this smells bad, like three-day old fish in the sun, it is because that is precisely what it is!!
OK, so here are my solutions… there are four potentials here:
(1) Verizon itself could decide to split up. A number of years ago, Marriott did just that when it found that certain ends of their existing business were getting in the way of other ends of their business, and split itself into separate companies. Of course, for Verizon to do that, it would have to commit what would amount to the corporate version of a frontal lobotomy.
(2) The Federal government could split Verizon, as was done with Standard Oil Company and AT&T’s old Bell System, but the Feds would need a real compelling reason to invest years of litigation and resources into that effort. The government in Washington is so hopelessly dysfunctional, they can’t even agree which way is up in the space program!! I doubt anyone there would have the gastro-intestinal fortitude, or the gonadic fortitude — for this fight.
(3) Things could stay the way they are… especially if most everyone is “happy” with what is going on.
(4) Customers could “vote with their feet…” — if they don’t like the way companies such as Verizon are doing business, there are always other competitors available out there to take their business…