---
title: "How Can a Company Turn Around? For Those Markets That Have Been Through the Wringer (Part 2)"
description: "This article is authorized for publication by the WeChat public account \"Weizhi\". The vastness of the Chinese market is irresistibly attractive to almost all consumer goods companies. Companies hope to occupy more regional markets as quickly as possible, leading to wave after wave of regional market coverage offensives. However, the complexity of regional markets often far exceeds the expectations of decision-makers. If a company is not careful, it can fall into the awkward situation of \"neither scale nor profit.\" At this point, various problems come thick and fast: terminal products lacking \"care\" sell even worse; channel customers are worried and \"waiting with money in hand\"..."
author: "老挺"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-07-13"
language: "en"
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# How Can a Company Turn Around? For Those Markets That Have Been Through the Wringer (Part 2)

> This article is authorized for publication by the WeChat public account "Weizhi". The vastness of the Chinese market is irresistibly attractive to almost all consumer goods companies. Companies hope to occupy more regional markets as quickly as possible, leading to wave after wave of regional market coverage offensives. However, the complexity of regional markets often far exceeds the expectations of decision-makers. If a company is not careful, it can fall into the awkward situation of "neither scale nor profit." At this point, various problems come thick and fast: terminal products lacking "care" sell even worse; channel customers are worried and "waiting with money in hand"...

This article is authorized for publication by the WeChat public account "Weizhi"

> _The vastness of the Chinese market is irresistibly attractive to almost all consumer goods companies. Companies hope to occupy more regional markets as quickly as possible, leading to wave after wave of regional market coverage offensives._
>
> _However, the complexity of regional markets often far exceeds the expectations of decision-makers. If a company is not careful, it can fall into the awkward situation of "neither scale nor profit." At this point, various problems come thick and fast: terminal products lacking "care" sell even worse; channel customers are worried and "waiting with money in hand"; the sales team is forced to downsize, and those who remain are fighting to keep their basic salary... No matter who is sent to the expansion areas, they find these places surrounded by high walls, full of difficulties and lifelessness!_
>
> _Reviving a market that has been through the wringer is a huge challenge for any management team. Fortunately, we never lack heroes. Outstanding decision-makers and management teams begin their brilliant counterattack!_

A daily necessities company had just ended its second failed market expansion, and the company was suffering huge losses for three consecutive months. Layoffs had already begun. Regional manager Lao Li felt unprecedented confusion during this period, as if he was waiting every day for worse news. However, what happened next was beyond his expectations.

The layoffs did not come as he imagined. After merging one or two offices, reducing some regional warehouses and warehouse staff, and cutting two salespeople who indeed had operational problems, the layoffs seemed to stop.

At the same time, a series of regional execution competitions began, closely targeting a competitor. After one month of suspended promotional expenses, each region received a new market promotion budget, mainly used for terminal buy-one-get-one activities for products with large inventory. The intensity was so high that people wondered if the company was desperate.

**This activity lasted for a full two months.** Just as everyone was puzzled, the company issued a notice to regional staff, inviting important local distributors to the headquarters for a new product launch. At that time, the sales staff knew almost nothing about the new products. For a moment, not only customers but also salespeople's curiosity was piqued.

**<Month 4>**
At the end of the month, the company held a grand new product launch. The products were almost fully upgraded—old products were repackaged, new products were eye-catching, and they formed a series of two tiers: high and mid-range. Accompanying the new products were new sales policies: across-the-board price increases, greater support for distributors, faster expense reimbursement, but the initial stocking (floor stock) was reduced by more than half.

Two weeks before the launch, the main regional leaders were summoned to headquarters for training. It was then that Lao Li noticed many differences from previous new product launches. All task personnel received a complete set of samples, along with a series of policies and sales explanations, each no more than two pages.

More interestingly, all supporting materials and expenses were allocated in advance, requiring no separate application—only reimbursement as required. The strangest thing was that there were no sales targets for the new products, only launch time requirements by channel and display requirements for key stores.

**<Month 5>**
The new products were launched one after another. The regional sales staff's focus shifted to promoting the new products. This time, there was no requirement for the breadth of distribution; instead, distributors were urging their own salespeople to open new channels and new customers.

**<Month 6>**
Regional sales volume recovered to nearly the level of six months ago, but the overall gross profit margin of products increased significantly. Over the past six months, sales staff had been under a policy of "only exits, no entries," and the sales competitions had eliminated some people, leaving the sales teams quite lean. This month, the company began to gradually resolve legacy issues with some customers who had strong resistance.

**<Month 7>**
Regional expense budget control and cost-effectiveness ratio competitions began; some places started pilot coverage of new channels; some regions began clearing up legacy customer cooperation issues one by one.

**At this point, the company had turned from loss to profit!**

Lao Li didn't fully understand what had happened, but he felt some differences from before. The most obvious was that he saw "company leaders" much more often. Besides marketing personnel, some headquarters staff he had never seen before, such as from R&D and even production management, occasionally appeared in the region.

The above story is just one real case of a market revival. Each company's specific situation is different, and the handling methods will also differ. Generally speaking, to revitalize a market, it goes through two stages, with the following steps:

**Stage 1: Stop the Decline**

**Step 1: Re-examine the regional market, clarify the direction before acting**
Once a regional market enters a half-dead state, the company often first thinks of adjusting strategy: either quickly shrink to stop the bleeding, or continue to increase investment to fight their way out. Some companies, to be safe, try both methods, thinking at least one should work. But the fact is that both methods often lead to an even more unmanageable situation. Why? Because this is not the first issue the company should consider.

**The previous market expansion failed because of various mismatches: product, channel, time, team, resources, etc. It can be said that the right time and place were never fully satisfied. If you hastily make drastic decisions without carefully analyzing the regional market situation, you may plunge the company into an even more difficult predicament.**

Often, what is called "direction" is just a flash of inspiration in the minds of a few "wise men" in the company. It must be admitted that no matter how rigorous the market analysis, the final decision still relies on that flash of "inspiration," which is the risk of decision-making. But some stones cannot be touched, and some walls cannot be bumped into. Although we cannot hope that market analysis can completely avoid hitting walls, we can at least reduce the chances of hitting them.

Whether we like it or not, we must calm down and objectively review our market.

In this story, the "company leaders" that Lao Li saw went deep into the regions to understand the most basic questions:
1. What products sell well in the local market? How big is the market?
2. Who are the main competitors in the local market? How big is the gap?
3. Which channels are the most important sales channels? What is their share? What is the input-output ratio?
4. What are the key factors influencing these channel customers' purchases? How are we doing? How are competitors doing?
5. In which channels do our products, team, and customer network have advantages?

This is actually a process of market segmentation. The answers to these questions differ by region. When the situations from various places are aggregated, the regions can be roughly divided into different types. Then we can judge why we cannot take root in the local market and where we need to concentrate resources on specific measures in which market segments.

**Step 2: Remove what should be removed, keep what should be kept**
As long as we analyze objectively, we can quickly determine in which products, regions, and channel types we have advantages, and in which we are completely passive. At this point, the first thing to do is to make trade-offs between regions and channels. **When a company is in trouble, the principle of judgment becomes simple and cruel: try to keep those regions and channels that can be profitable, and even if you covet others, you have to temporarily give them up.**

**The handling of personnel retention is not so easy; it requires delicate operation like embroidery.**

For example, in the above story, the company found that in the region, most distributors' own salespeople and delivery capabilities could cover more than 80% of sales volume, but they had no good solution for product sell-through.

Newly added salespeople were unfamiliar with the region and could only follow the distributors' routes, which only took away the jobs of the distributors' salespeople. The regional warehouses did not help solve the sell-through problem but increased expenses. When it came to reducing these expenses, some companies were reluctant to give up the regional offices they had worked hard to set up, so they first cut people, and only when absolutely necessary would they close the offices.

In fact, many functions of the offices can be undertaken by distributors, but the reduction of salespeople should not be a simple one-size-fits-all approach. If we need to open new markets, we should keep those salespeople with market development capabilities and arrange more challenging work, such as the competitions mentioned earlier.

For those with weaker development capabilities, we can keep some who are better at terminal operations and follow-up execution to help distributors execute terminal activities well. The rest are truly redundant and should be laid off as soon as possible.

As mentioned in the previous article, people are the most critical. **Even if personnel adjustments are necessary, all adjustment actions should be open and transparent, so that everyone knows why some people are laid off and others are promoted instead. The more difficult the times, the more important team confidence is.** Avoid creating an atmosphere of "the sky is falling" within the team. People should still see hope, and even if you have to bite the bullet and put on a brave face, it is necessary.

The most important and difficult trade-off decision is about products. This decision depends not only on external market analysis but also on the company's own competitive advantages, which will be repeatedly involved in the subsequent steps. I won't elaborate here; I will dedicate a special topic to discuss it in the future.

**Step 3: Overall mobilization, combine defense with offense**
To grit your teeth and hold on, the most important thing is to have resources! So where do resources come from?

Perhaps only at the moment of life and death can a company truly see its own potential and opportunities.

A company is sometimes like a big guy with excess fat and insufficient muscle, seemingly large but weak. **The weakness of its own management capabilities is the fundamental problem that keeps a company in trouble, and this problem is not just a marketing issue, as many companies think, but a problem of the entire chain from design, production to sales.**

In the story, a company, after analyzing production-sales coordination, found that due to inaccurate sales forecasts and arbitrary production plans, a large amount of semi-finished products occupied inventory; because market coverage was too fast and sell-through was insufficient, returns were high, even requiring a dedicated warehouse area to handle returns; the product structure was unreasonable, with less than one-third of products selling well, and a large backlog of slow-moving products in the warehouse.

So a series of production-sales coordination actions began. First, the accuracy of salespeople's sales forecasts began to be assessed, and the quantity of semi-finished products in production was strictly limited. Second, for slow-moving goods, the company identified those that were still sellable, converted some suitable products into gift expenses for the regions, while reducing terminal returns; another part was sold at low prices to suitable external customers. Products that could not be sold were quickly scrapped. The quantity of slow-moving products in regional warehouses was counted, and inter-regional transfers were made, with some discounted as promotional expenses for the market.

For a time, these seemingly "loss-making" practices actually saved several warehouses' rent and injected a large promotional budget into the market without new expenses. More importantly, during this period, the factory bore tremendous pressure, and the previously loose management became compact. The improvement in production efficiency laid a good foundation for the rapid launch of new products later.

**Stage 2: Recovery**

**Step 4: Change appearance, take the lead**
**When regional customers have lost confidence in the company, using old methods to communicate with them will only lead to constant setbacks. Talking too much will also annoy distributors and terminals. At this time, what they need most is to see the company's change—an exciting, tangible change.**

The company in this article took measures starting with products, completely updating the product line. In fact, this is not the only option. As long as the manufacturer makes positive moves rather than just retreating, it can rekindle the enthusiasm of the regional market. However, the way to ignite this fire must be clearly different from past practices. It must convey a message to the regional market: "We have not failed; we are actively adjusting. We are different now, and working with us holds great promise!"

There are many options for these differences: product upgrades, packaging changes, changes in marketing methods, or new cooperation incentive mechanisms. It can be one item or a combination of several. Generally speaking, starting with products and adjusting channel incentive policies is a good method. This approach can take into account the needs of both end consumers and channel customers, is more thorough, and is easier to make up for the shortcoming of insufficient sell-through—after all, good products are the cheapest promotion method.

The key to doing this step well is "first." "First" means taking the lead: the company's backend should move ahead of the frontend, ensuring all sales support work is in place, so that frontline sales no longer lack support; the sales team should move ahead of customers, helping customers prepare all the groundwork, calculating accounts, setting action plans, and preparing for selling into various channel customers.

In short, customers must feel that the company is well-prepared this time, that the company is continuously improving, and that it is a "potential stock." The fundamental purpose of this is **to use new excitement points to divert the attention of the team and customers, so that everyone focuses more on "how to make money" rather than "how to divide money."**

**Step 5: Make a comeback, consolidate the market foundation**
After Step 4, the regional market has begun to restart. This process may be fast or slow, but the overall trend is upward. However, things are far from over. After a period of recuperation, regional sales staff can begin to try, together with distributors, to re-open some channels and terminals that were previously exited. But this expansion must not be rushed; instead, it should aim to occupy the regional market and achieve good profitability, advancing steadily—attack where conditions are ripe, and do not force where they are not.

In addition, when the customer's profitability has been thoroughly improved, we can deal with some legacy market issues. At this time, customers will be much more cooperative, and the company will pay much less.

It should be emphasized that do not try to avoid the heavy and take the light, or even turn a deaf ear, hoping to let issues fade away just because the market is improving. Because customers, although they may not say it, will still feel quite unhappy. If a market crisis occurs again, the company may not have another chance to turn things around.

**Step 6: Learn from experience, strengthen internal capabilities**
Finally, if the company can successfully revive those dying markets, it will surely feel relieved and see a bright future. Looking back, you will find that the entire company has undergone profound changes in many aspects.

It can be said that such a disaster is also an opportunity for the company's rebirth. After finally getting out of trouble, the company must fully absorb the lessons from the last time and gradually replace the temporary measures of the transition period with more standardized and scientific management methods. We paid a huge price for the last mistakes, so what we need to do is to make the gains from that price more and more lasting.

**Reflections from the Story**
No company never makes mistakes. Any great company has scars that are admirable and enviable.

To get out of trouble, the most important thing is to persist in facing challenges with a positive attitude, solve problems with a developmental perspective, and let confidence always overcome frustration.

**Believe that there is always a way; you just haven't thought of it yet.**

The story here will not be exactly the same as any company's experience, but the issues involved—products, regions, channels, terminals, resources, teams, etc.—are common problems that most consumer goods companies often encounter.

Currently, countless companies are still practicing even more exciting development stories. China is moving towards becoming the world's largest consumer goods market. In this process, we believe that world-leading corporate management practices will inevitably emerge, which is an even more exciting thing.

-END-

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