How to Make Money Online During the Fourth Quarter 2008

Rob Enderle

Last week I was speaking at a Digital River event and, as you might expect, the companies that were there were very concerned about making money during the fourth quarter and getting the most out of the available demand.


Digital River focuses on creating Web sites and logistics systems for firms that want to market and sell on the Web directly. The firms at the event wanted to learn how to increase their sales both domestically and overseas. Most of the event centered on building a Web presence, handling unique regulatory requirements, and increasing revenue globally. It wasn't hard to drift into a discussion on how to survive the fourth quarter.


Here are some of the ideas that came out of the group discussion.


Cut Prices Early


Inventory will be a major problem by the end of the year, and this is a case where those that have the most will lose out. The planning and build plans for the end of the year were set during better times and virtually everyone over-built.


Come Black Friday -- what a number of us are now calling Red Friday, when everyone is likely to cut prices -- it will be difficult to stand out because the bar will drop for every vendor. But there are buyers who can be captured now, and early sales should assure that when Red Friday comes about, you can be more certain that your inventories are closer to what the market can consume.


Don't Cut Marketing and Don't Repeat Apple's Mistake


Shift everything to demand generation. This is one of the areas where I think, at least with PCs, Apple is screwing up. It continues with a differentiation campaign when it should be focused on demand generation, as it is with iPods and iPhones.


What often happens during a market slowdown is that everyone cuts their marketing budget, which decreases demand and makes the inventory problem much worse. If everyone but you cuts their marketing budget, and you do solid demand generation marketing and incentive programs, you should get a vastly higher percentage of the available sales. Yes, your per-sales margins may be slightly lower, but the cost will be spread over more sales. Your revenue lines will be better and your year-end inventories more manageable.


Focus Like a Laser on Customer Satisfaction


Competitors will be coming at your customers like piranha going after a fresh, bloody side of beef. The happier they are, the more likely they will stay with you. If you haven't adopted NPS, Net Promoter Scores, put that on your to-do list for next year. Things won't be getting any better for a while, and knowing what your customers want from you could help you weather the storm vastly better than your competitors do. I ran into Adam Dorrell from Directness, a company that recently started offering services to help firms implement NPS, at the event and he and his firm would be a great resource to have available.


This is most important for firms providing services. We are already seeing individuals and companies drop redundant services and start to cut back sharply on the vendors, and related expenses, they pay. The more your customers are loyal to you and advise others to buy your goods and services, the better your revenue and profit lines will be.


Create Group Offering Bundles


There are a lot of firms in this leaky boat along with you, and buyers like product bundles if they are done right and appear to be a strong value. Think about pulling a series of products together into a bundle where a single purchase can help you all out. You can pool your marketing and may still have time to collocate your products on end caps to move them as a group. Granted, this is where a Web presence helps you out a lot because there may simply not be enough time to get something like this done in retail, but a few days can create a Web site with special offers.


Focus on Products That Are Green and Save Money


The consumer wants to both save money and feel good at the moment, and products that allow them to do both should have the highest value. Focus on current offerings and possible bundles you can create with your own offerings or third-party offerings that offer these "feel-good" value points.


Wrapping Up


It is interesting to note that those firms that have in place a Web presence, like Apple, Dell and HP, to move products will likely be the best able to respond to this economic threat. Those, like EMC, that have put in place NPS and made it a CEO-driven metric will hold their customers the best during these hard times.


Overall, this is all about agility. IT will be asked to step up to help with reduced resources and ever more demanding line organizations. The good news is that when firms need to do more with less, technology is the most valued. The bad news is that most IT organizations are simply not agile enough to address the near insane level of changes they will face over the coming year.


Remember: "That which doesn't kill you will only make you stronger." It could be worse -- you could be unemployed right now. Driving through, anticipating needs, and making yourself part of the solution will go a long way to ensuring that the worst-case scenario doesn't hit you.


Good luck to all of us.

Add Comment      Leave a comment on this blog post
Nov 11, 2008 1:53 AM avinash avinash  says:
one of the best Reply
Nov 11, 2008 9:08 AM Hemant Hemant  says:
I dont know discounts are good or bad, I think bad.Hemant Reply
Nov 19, 2008 8:02 AM Brandon J. Mendelson Brandon J. Mendelson  says:
I think this is great, and can certainly apply to any quarter. I'm reminded of the line, "Be quick or be dead" to describe the current situation. Reply

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