Chapter 10
Inventing a New Business

The Emotional Triggers That Turned a Popular Activity Into a National Industry

Every path to a new understanding begins in confusion.

—Mason Cooley

What happens when a new business idea becomes so successful that the very people who helped you launch it and know every aspect of the operation inside-out suddenly are among your fiercest competition? That’s exactly what happened when the owner of a regional gym chain capitalized on a grassroots interest in cheerleading. He repositioned his business as a major tournament organizer and joined forces with other industry leaders. Then former employees, eager to replicate the business model, opened independent gyms and began to sponsor competitions of their own. As these competitions mushroomed, they started to eat away at the tournament organizer’s customer base. This is the story of how emotional-trigger research led to an innovative strategic solution.

LESSON #7

If the competition threatens your market share, redefine your market.

Rah, Rah! Sis, Boom, Bah!

For decades, a Southwest-based, gym-chain owner had profited from a widespread interest in cheerleading. His gyms gave young people the opportunity to develop cheerleading skills outside of school by providing them with a special place to learn and practice. At first, his focus was exclusively on professional instruction. Before long, recognizing the natural inclination of athletes is to compete, he diversified by organizing local, then regional, and, finally, national competitions. Soon the competitions eclipsed professional instruction as his primary business.

The events caught on quickly and became enormously popular. Parents embraced a positive alternative for children who wanted to be cheerleaders without having to endure the indignity of high school popularity contests. Young people gained a newfound self-esteem. It wasn’t necessary to be part of the “in” crowd to join the gym, learn a skill, or go on to compete locally, perhaps even nationally. Everyone had an opportunity to experience some of the same satisfaction and prestige that “popular” kids did.

Parents, keen to support their children’s dream, represented a lucrative market waiting to be tapped. Regional and national tournaments offered multiple new revenue streams that far surpassed the potential of neighborhood gyms. The tournament organizer opened summer cheerleading camps, charged fees for event participation, sold admission tickets, branched out into uniform sales, and received commissions on all related concession enterprises. Everyone was happy. The organizer’s business was growing by leaps and bounds. Young people, thrilled to be cheerleaders complete with uniforms, ribbons, and trophies, found acceptance as part of a new community of friends. Parents were pleased to see their children succeed at something they loved.

There was only one problem: the competitions were not legitimate. So the tournament organizer, determined to rectify the problem, launched a campaign to elevate cheerleading to a nationally accredited sport. He joined forces with the other major event owners and sponsors around the country who dominated this small but growing industry. Together, they established uniform standards and created a national organization to ensure that the tournaments were officially sanctioned. Rules and regulations were adopted regarding what constituted an acceptable performance, how many contests were permissible, and the authorized levels of participation. All the pieces appeared to be in place.

But appearances can be deceiving. Establishing uniform standards proved to be a two-edged sword. Although it did guarantee that a win would be sanctioned as legitimate, it also reduced the number of opportunities to win. The upshot was that as cheerleading edged closer to being a nationally accredited sport, two groups with conflicting priorities emerged. Those who valued recognition over exclusivity found themselves at odds.

Too Much of a Good Thing

Some parents, accustomed to having their child win, did not welcome new rules and more stringent regulations. They resisted the drive for creating a nationally accredited sport if it came at the expense of their child’s ego gratification. At the same time this struggle was unfolding, the confluence of two other factors occurred that dramatically changed the marketplace dynamics. Smaller groups of gyms were forced to consolidate in order to gain a more powerful voice. Simultaneously, larger cheerleading companies, seeking to establish dominance in this burgeoning industry, either merged with their rivals or acquired them. The dual consolidation left many employees without jobs.

A number of former employees, well aware that “winning” often fueled a parent’s willingness to pay considerable sums of money for their child to participate, wanted to cash in on this profitable and rapidly growing new industry. In record numbers, employees who had been laid off joined by many others who had chosen to resign, opened cheerleading gyms. They were already intimately familiar with how cheerleading companies made their money, and they were confident of their ability to leverage this knowledge. The business had no certification requirements, the cost of entry was low, and it demanded little or no training. It had all the earmarks of an attractive low-risk proposition with a large built-in pool of customers who would generously “ante up” for their child to learn new skills.

From the start, these new gym owners launched their own local and regional cheerleading competitions. Sponsoring these events generated additional revenue and provided their members with more opportunities to “win.” For a time, the strategy was effective. It brought new members to their gyms and helped them retain existing ones. Eventually, the inevitable happened. Independent gym owners had flooded the market with competitions. It was too much of a good thing. Large and small event organizers alike experienced an erosion of business. But the fledgling entrepreneurs, lacking management expertise and not knowing how else to proceed, continued on their self-destructive course.

No Way to Fight It, No Way to Win

“Rather than achieving their aim of a nationally accredited sport, the industry was splintering before their eyes.”

The desire for recognition had finally collided with the desire for exclusivity. As the number of competitions exploded, major event organizers and sponsors saw a decline in interest. Rather than becoming a nationally accredited sport, the industry was splintering before their eyes. Even parents who had previously supported the influx of more competitive venues became disgruntled. Everyone seemed to be sponsoring a competition. A child might win first place in one event, only to have a friend win first place in an event sponsored by a different gym across town. Ribbons and trophies became increasingly meaningless. The sheer volume of cheerleading events undermined any sense of legitimacy. Contestants felt robbed of the opportunity to ever be recognized as “best in class.”

This presented an ominous threat to the major tournament organizer. Although he was embroiled in a difficult effort to standardize and accredit cheerleading as a national sport, his business was thrust into a battle for survival. Competitions were losing credibility, his customer base was shrinking, and profits were being eroded. He was deeply upset with former employees who were destroying the business. Battling feelings of betrayal, he vacillated between wanting to crush them, plotting to acquire them, or figuring out how to work with them.

In Chapter 9, we shared the story of a mid-sized moving company in danger of being squeezed out of business by a giant consolidator. In this instance, the tournament organizer confronted the opposite problem. Now it was the giant under siege. The encroachment of small independent gyms, each hosting their own competitions, was severely jeopardizing the future of his business. Former employees had stolen “trade secrets” and over-saturated the market. The industry was riddled with confusion. Dreams of national accreditation were fading.

The tournament organizer was confounded by new gym owners. What could they possibly be thinking? What was driving them? And more importantly, what should he do about it? Somehow he had to block them from hosting their own competitions, while maintaining their goodwill. It was a delicate balancing act, but it was a necessary one if they were ever to support his goal of a nationally accredited sport. In frustration, the tournament organizer turned to emotional-trigger research to find a strategic solution.

The Cheer Had Gone Out of Cheerleading

“All they wanted was a small piece of this new industry. They assumed the opportunities were limitless.”

Many former employees, now independent gym owners, realized they had bitten off more than they could chew. They never intended to pit themselves against the major tournament organizers. Nor was it their intention to damage or diminish anyone’s business. All they wanted was a small piece of this dynamic new industry. They assumed the opportunities were limitless. Unfortunately, they never realized, until it was too late, how so many different competitions would overwhelm the marketplace. Like it or not, they were boxed into a corner. Their own competitions were suffering. Worse yet, they had inadvertently alienated their former employers and the industry’s major tournament organizers. For them, the cheer had definitely gone out of cheerleading.

Sponsoring competitions was not even the priority for new gym owners. They were simply looking for ways to improve profits, and hosting tournaments seemed like a logical move. There was never any animosity involved, only a desire to make more money. Now they found themselves in an impossible situation. Admittedly, they were no match for the major tournament organizers, but they had invested their life savings in their gyms and had to survive.

From the beginning, emotional-trigger research exposed a disconnect between what the Southwest-based tournament organizer presumed and what was really motivating former employees. New gym owners had sincerely believed there was plenty of business to go around. As small independent operators, they never imagined they would be seen as “the competition.” The predicament left them worried and feeling extremely vulnerable. Although they understood cheerleading and knew how to attract and train new customers, many were struggling to manage other aspects of their operation. They lacked experience running a business and were unprepared for the day-to-day problems of managing cash flow, promoting their gym, or effectively competing against neighboring facilities. They had no idea how to develop a marketing plan or run a budget. A great many were under funded. The fear of losing their business was a constant. Rather than finding security in being their own boss, they felt unprotected and in over their heads.

Give Us Some H-E-L-P!

What initially seemed like a sure-fire business proposition had turned into something more daunting. Accustomed to a steady stream of customers attracted to the major organizers’ tournaments, these new gym owners had no idea what to do when demand for their own events dried up. Matters were further complicated, because sponsoring cheerleading tournaments was a fairly new industry. Many of the established processes that typically help keep a business on track were missing.

In this mom-and-pop environment, new owners did not always have sufficient, well-trained staff, adequate systems and procedures, or established customer-service policies. Communications were infrequent and inconsistent. They were at a loss, without one reliable source for gathering timely information about all upcoming events. As these gym owners let down their guard and spoke about their experiences, they made a startling admission. It was an admission that stunned the tournament organizer and was to have far-reaching implications. They needed help. They longed for a support system.

Contrary to the organizer’s previous assumptions, independent gym owners conceded the folly of continuing to sponsor their own events. They knew professionally managed competitions that were well-organized, began on schedule, had respected judges, and were deemed safe were more important to attracting customers—and to protecting their revenue stream—than managing their own local tournaments. If these elements could be guaranteed, they were confident they’d be more successful. But as long as cheerleading events continued to inundate the market, disillusioned customers would not consider them legitimate.

Emotional-trigger research provided the tournament organizer with a more sympathetic view of independent-gym owners. Once he saw them as vulnerable, rather than predatory, he was able to get past his anger and arrive at a mutually beneficial solution.

United We Stand

New gym owners were interested in a program that supported their business goals, offered much-needed training, and provided operational expertise. They were more emotionally invested in finding help, than in hosting their own local competitions. Driven by a need to be rescued, their dominant emotional triggers were a sense of vulnerability, inadequacy, and fear. Once these triggers were exposed, the solution was obvious. It turned out to be a mirror image of the one presented in Chapter 9. The mid-size moving company affiliated with a national organization to protect itself from the predatory practices of the industry’s leading consolidator.

Although the tables were reversed, an affiliate program proved to be the answer for the major tournament organizer as well. Coming at it from the opposite perspective, his plans for elevating cheerleading to a nationally accredited sport had been thrown into disarray. He desperately needed to blunt the encroachment of small-gym owners, who had created a chaotic marketplace and were draining his profit base. Emotional-trigger research pointed him in the right direction. Draconian measures were unnecessary. He didn’t have to quash the competition or scheme to acquire them for pennies on the dollar. New gym owners were joiners, not fighters. They could be united under one umbrella that would both advance the national accreditation objective and represent a new source of income.

Small-gym owners welcomed the idea of an affiliation with peers that would provide an opportunity to exchange knowledge and to socialize. They were willing to pay a reasonable fee in exchange for access to essential practices and operating systems. They wanted the ability to participate in co-op advertising programs, and they immediately saw the benefit of leveraging their purchasing power to get better deals on everything from supplies to computers, telephone service, and office equipment. Locking these gym owners into a mutually dependent relationship gave the tournament organizer a network of gyms committed to supporting his need for standardization. Armed with that insight, he was determined to craft an affiliate program that was more valuable to independent gyms than the opportunity to host their own local events.

He hosted regional meetings to outline the affiliate program and gage the level of interest. Care was taken to provide adequate time for reviewing the program and holding open discussions. No longer concerned that independent gym owners were the “enemy,” the major tournament organizer listened carefully to what they needed and structured the affiliate program accordingly. In exchange for the advantages of affiliation, gym owners agreed to comply with standardized industry regulations. As both relief and excitement grew, affiliates sought to become the new gold standard for industry performance.

Emotional-trigger research helped the tournament organizer dissect and diffuse a complex problem. It enabled him to empathize with his competition, because, for the first time, he saw the challenge through their emotional prism. The insights he gained taught him a valuable lesson: if the competition threatens your market share, redefine your market. And that’s exactly what he did. To everyone’s benefit, he was well on his way to establishing cheerleading as a nationally accredited sport.

SUMMING UP
INVENTING A NEW BUSINESS

Situation

For decades, the owner of a Southwest-based gym had capitalized on a grassroots interest in cheerleading. At first, he focused exclusively on instruction. However, recognizing that the natural inclination of athletes is to compete, he soon repositioned his business and became a major tournament organizer. He joined forces with other tournament organizers and developed new revenue streams, including summer cheerleading camps, uniform sales, event participation fees, entrance fees, concessions, and advertising commissions. As interest in these competitions grew, his business was hugely successful. But a problem developed: the competitions weren’t legitimate. So he launched a campaign to establish cheerleading as a nationally accredited sport. Along with the other major event organizers who dominated this small, but growing, industry, he established uniform standards and created a national organization to ensure that the tournaments were officially sanctioned. All the pieces seemed to be in place. Then the industry consolidated and many employees lost their jobs. These former employees, eager to replicate the business model they had observed firsthand, opened independent cheerleading gyms and began to sponsor competitions of their own. Soon the market was flooded with so many events, customers grew disillusioned and participation declined. The Southwest-based organizer watched with alarm as his profits and customer base eroded. Not knowing whether to crush, acquire, or seek to work with the new gym owners who were threatening his business, he turned to emotional-trigger research to find a strategic solution.

The Small-Gym Owners’ Emotional Triggers

Independent, small-gym owners, eager to cash in on this rapidly growing industry, thought they had invested in a low risk venture. It didn’t turn out that way. As the market became saturated, they were afraid of losing their life’s savings and terrified that the major organizers wanted to destroy them. They felt vulnerable and unprotected. With little or no management experience, they felt inadequately prepared to manage their business in a volatile environment.

Genuine Insight

New gym owners were focused exclusively on maximizing their sources of revenue. They never intended to compete with their former employers. What they really wanted was a mutually beneficial working relationship. They just didn’t know how to accomplish their goal.

Solution

The Southwest-based organizer established an affiliate program. Under this arrangement, local gyms benefited from best practices and operating systems, leveraged their purchasing power, and participated in co-op advertising campaigns. In exchange, they agreed to comply with standardized industry regulations and refrained from hosting competing tournaments. The organizer regained customers, profits increased, and he created a lucrative new revenue stream.