Tyco Targeted 'Scummiest Neighborhoods'

NewsMax ^ | 11/15/02 | Limbacher

[Tumbleweed_Connection]

Things started well for Salt Lake City burglar-alarm dealer Edward J. Salmon III when he affiliated himself in 1996 with ADT Security Services Inc. Then Tyco International Ltd. acquired ADT.

That's when ADT started pressuring Salmon to target "the scummiest neighborhoods possible" to boost sales, the Wall Street Journal reported today.

"We wanted them to go into neighborhoods where there were problems, where Mookie was standing on a corner selling rock," said Thomas Davis, an ADT manager in the late 1990s. "Tyco kept pushing. They wanted numbers. They didn't give a crap if the accounts fell off the books later."

Many customers, predictably, stopped paying. "And now the issue of whether Tyco accounted for canceled alarm contracts as if they were valuable assets could come back to haunt the troubled company," the Journal said.

"An internal investigation under way at Tyco has uncovered dubious accounting practices at ADT, including the way the unit handled canceled accounts, according to people familiar with the situation."

Tyco, you might recall, was hit this year with criminal charges that former top executives, including former Chief Executive L. Dennis Kozlowski, looted the company of $600 million in unauthorized pay and stock. All have pleaded not guilty.

"Now, the issue of accounting for worthless alarm contracts is coming under intense scrutiny, not only by Tyco's new management but also by Securities and Exchange Commission investigators who are probing a range of past bookkeeping practices at the parent company and its units, people familiar with these inquiries say," the Journal reported.

[Kerberos]

Having worked for ADT many years ago, before Tyco acquired them, I was convinced then that they were nothing more than a laundering machine.

[Bob]

This is just Sales and Marketing 101: Take your product where the demand is.

In rich neighborhoods, many people want extra security for their families and valuable possessions.
In 'scummy' neighborhoods, many people want extra security from their 'scummy' meighbors.
In ordinary neighborhoods, most people don't see a great need for any extra security.

Where would you expect to get the most bang-for-the-buck for your sales efforts?

[SamAdams76]

I'm not getting the controversy here. Isn't the "scummiest" neighborhoods precisely where you would want to have an alarm system?

I have an ADT system in my house (no, I don't live in a scummy neighborhood) that has three smoke alarms, two motion detectors and five door detectors. The whole setup costs me $32.95 a month. I've had a few alarms but one time the police were called and they found a window open while we weren't home. Evidently a burglar had climbed through the window and set off the motion detector, whereafter he made a hasty retreat and never came back. So these ADT systems are definitely worth it.

[Alberta's Child]

The controversy was that ADT would sign these customers up to long-term contracts at $32.95 per month. They would then report that $32.95 per month as future earnings even though they knew most of these kinds of customers would let their accounts lapse after a few months.

[Tumbleweed_Connection]

People don't seem to understand sales, amazingly most sales people don't either. The buyer will purchase anything for any price as long as he realizes a desired benefit.

I came into a crowded market starting from a dead stop 7 years ago listening to my competition whine about margins. For personal reasons I was forced to sell the damn thing, but at that point my prices were absurd in comparison to competition. No doubt I paid the price learning what I did, but eventually it hit me. People were buying more than my products and I had to understand what they wanted on an individual basis, provide it, and tell them up front there obviously was an associated cost. And I chose my victims carefully, for I too prayed on the mfg businesses and avoided the high rent office companies. The mfg companies were 24/7 and very concerned about their employees. Give them everything they want and they'll pay for it. And they grow.