Full Speed Ahead?

Proceed With Caution

Nassar was lucky. In crisis situations, many companies have to spend big bucks to keep up with customer demands--meaning the opportunity can prove to be far from a windfall.

Tracy Calvillo, 36, owner of Capital Delivery System Inc., a shipping company in Sacramento, California, says the UPS strike in August 1997 added little to her company's bottom line. Although she turned away new customers, her business still increased almost 30 percent because of extra orders from existing clients. The sales boost, however, was offset by the funds Calvillo had to spend to hire extra trucks and drivers. "The strike did not contribute to our profits," she says.

In fact, Calvillo says the strike was more of a hindrance than a help. Many people who thought the strike would be resolved quickly were left with large orders to fill. "It was a hassle," she says, "because there was that huge sense of urgency with companies holding on to freight hoping the crisis would be resolved--then realizing it wasn't going to be and saying, `Oh my God, help us.' "

Like many of her competitors, Calvillo opted not to try to snag those customers the strike left hanging because of the expense involved. "I didn't go out and solicit business," she says. "But I was still inundated with calls from individuals whom I had to turn down because there was just no way to gear up for that big a rush."

Calvillo says turning away customers was also a sound strategic decision because she didn't want to risk losing her hard-won customer base. Robert Andoh notes that FedEx did the same thing at the top of the food chain. "FedEx concentrated on customer allegiance," Andoh says. "They felt comfortable with their current market share, so they came out and said they weren't taking on any new accounts. If companies take on considerably more work, they're putting the quality of their service in jeopardy."

So even though UPS transports more than 3 billion parcels each year and has revenues of $22.5 billion, according to U.S. News & World Report, Calvillo and many others who could have snagged some of that business chose to stay away from the shipping giant's trouble.

Besides, there's no guarantee that customers will stay in your camp after your competitor gets back on its feet. "People don't like change," Andoh says. "They also forget easily, and Americans in general forgive quickly and move on--meaning a customer might use your company temporarily and then go back to UPS, for example, when the crisis is over."

Nassar agrees the only way to gain repeat customers is to earn them. "The customer that left somebody else will leave you if you don't provide the proper service," he says.

The Center for Entrepreneurial Management's Mancuso, meanwhile, says it's important to remember that a crisis rarely lasts forever. He says, "You have to get ready for the fact the competition will come back eventually."

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This article was originally published in the April 1999 print edition of Entrepreneur with the headline: Full Speed Ahead?.

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