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How to Increase Your Revenue by Staggering Amounts!
Left on the Editor's Floor...
When I was President of the New Jersey Nets, our General Manager drafted a player from Nigeria. His name was Yinka Dare. In his rookie year, he played only three minutes and took only one shot. It was an airball. It took him one and a half seasons to get his first assist in the NBA. Think about that for a minute. If you placed a dead man on the court during an NBA game, he would probably get an assist before Yinka got one. After all, a ball might bounce off of the body into the hands of a teammate for an easy score.
Early in Yinka's rookie season, he was warming up with the team before a game against the Minnesota Timberwolves. Yinka asked our second string center, Jayson Williams, a question. Yinka pointed to Christian Laettner, the 6-11 forward of the Timberwolves. "What does the 'C' stand for on Christian Laettner's jersey?" Dare asked in British style English. He was referring, of course, to the letter 'C' that is stitched onto the jersey of the player who is the team Captain.
"Caucasian," Williams answered. Laettner was one of the few white players in the NBA. Yinka nodded his head; it made sense to him.
Benoit Benjamin, our big 7-foot center overheard this. After Yinka ran off to take his turn in the lay-up drill, Benoit said to Jayson, "That Dare is really stupid. He thinks Caucasian begins with a 'C' instead of a 'K'."
I gave the same assignment to two different lawyers located in two different law firms in two different cities. One lawyer was the best in his industry. The other was a sleazeball. You would feel uncomfortable with him if you were in the same room together.
Their assignment was easy enough. Find a loophole, any loophole, in the New Jersey Nets lease with the Meadowlands Arena. All 400 pages of it.
This strategyfinding loopholesis a foreign strategy for me. But, I was desperate. The lease was the worst one I had ever seen in sports. If the Nets increased its revenue, they had to pay a fortune to the arena. If there was a loophole, however, maybe we could make things a little bit better.
After a week, the best lawyer in the sports industry, Owen Blank of Portland, called. He said, "That lease is the most unusual that I've ever seen. It's really more like a partnership agreementan agreement that has no loopholes. Not even a hint of a loophole. And, if the Nets owners feel that it is unfair and decide to move, they have penalties written in that would exceed the value of the team."
I was disappointed with Owen's assessment, but I still had the sleazy lawyer. He could figure out how to get out of anything.
The sleazy lawyer didn't call. Finally, I called him.
"I'm embarrassed," he said. "I couldn't find a thing. It's airtight in favor of the arena." Then he added, "Don't tell anybody that I couldn't find something. It will ruin my reputation."
Now we had to go to Plan B. However, we didn't have a Plan B.
We started Plan B by further analyzing the numbers. I've always felt that the numbers will tell a story. The first glance at these numbers, the story ended up as a Greek tragedy. You know, the hero dies at the end. A fifth glance at the numbers gave us a happy ending. I then set up a meeting with the president of the New Jersey Sports Authority (the arena was owned by the state.)
At the beginning of the meeting, I said, "We're not here to try to renegotiate the lease."
The president and his aides all had Chesire cat smiles.
"It's an awful lease," I said. "The owners of the Nets should be embarrassed for negotiating it and signing it. You ought to be embarrassed because it isn't fair. It's not fair to the Nets, and it's not fair to you."
"How's it not fair to us?" the president of the NJSA asked.
"Well, there's a big payday for you if we reach certain attendance numbers. I imagine that the Nets owners backloaded the deal thinking that we could never get to those numbers. But, if those numbers are reached, your percentage of the gate receipts goes way up. Way up."
The president and his aides nodded, smiling.
"I think we can reach those numbers," I said. "This year. But, we need your help."
"What type of help?" the president asked tentatively. He must have felt that I wanted to renegotiate the lease.
"Right now we're physically limited in our ability to sell tickets," I said. "If we could ramp up our sales staff, and spend a little more money on direct response advertising, we can make the numbers where you guys make a fortune."
"So, do it," the president said.
"We can't," I said. "We can't do it for the silliest of reasons. We just don't have the physical space to put the salespeople. As you know, we get our office space for free in the arena as part of our lease. Well, right now we have three people sharing a cubicle. We just can't put more people in there. And, we can't rent space outside the arena."
"Why can't you rent?" one of the president's aides asked.
"Because our rent is for free inside the arena. While the owners have agreed to ramp up the sales staff, they would never agree to pay rent for an office. After all, that's part of the leasefree rent. If you want us to reach our numbersand you should because you'll make a fortuneI need for you to rent us space."
"Isn't that a little outrageous," the president asked, "For us to pay for your rent at an outside building?"
"It only seems outrageous," I said. "Let me show you the numbers."
I then showed them the numbers. The numbers told a story. If they spent about $250,000 on us for rent, furniture, fixtures and some advertising, they could increase their share of the gate receipts by millions. If they didn't invest that money, their chances of the millions were not good at all.
The numbers appealed to them. The numbers also made sense. It wasn't that much of a gamble for them to reach a huge upside. So, they agreed.
It worked well for both the Nets and the NJSA. We made our numbers. The NJSA made a fortune. And, the Nets made a profitthe first in the history of the franchise. You see, even though the lease was unfair, a substantial increase in revenue was still magic waters for the Nets. Even after the NJSA got their bigger share.
We had moved the entire staff to our new offices. It was about a mile away from the arena. Unlike our offices inside the bowels of the arena, we had windows. Lots of them. And, most of all, we had room to grow. No more sharing phones or cubicles for us.
Awhile later, I was having lunch with Owen Blank, the best lawyer in sports. I told him the story.
"Well," he said, "you did indeed find a loophole."
"What was the loophole?" I asked.
"You weren't asking for charity. You were showing them what was in it for themif they helped you."
The sleazy lawyer wouldn't have liked that. No breaking of the lease. No lawsuits. No screaming and shouting and pounding the table. Just finding a way that was fair under the terms of the lease where both sides would benefit.
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