For sellers in the digital media marketplace, what can be learned from the dotcom bust that can be applied today? Whether you're a publisher or managing a network, lessons from the last downturn have already been applied with success in today's environment.
Those of us "old-timers" who were in the business in the aftermath of the dotcom bust remember it was a trying time, especially for emerging businesses whether they were new lines of business for traditional companies or a startup. With startups, it was a matter of life and death to get sales acquisition costs as low as possible. For established companies, it was the difference between mere survival and using the downturn to gain competitive advantage. Fortunately, interactive media is much more proven as a business model today than it was earlier this decade. It's a far more competitive space, however, and the market has responded with an array of companies filling every conceivable niche.
On a brighter note, companies such as Procter & Gamble have proven time and again that companies can gain market share in a recession. Pop quiz: What do GE, Disney, HP, and Microsoft all have in common? They were all startups that got off the ground during steep declines in the U.S. economy. GE started during the panic of 1873, Disney started during the recession of 1923-24, HP began during the tail end of the Great Depression, and Bill Gates and Paul Allen founded Microsoft during the recession of 1975. During those same periods, well-established companies shut their doors and startups never got off the ground. On a less grand scale, my firm emerged in the shadow of the dotcom bust with one simple mission -- help emerging businesses gain revenue traction while minimizing cash burn which was particularly apropos in those lean times. The lesson from all of these examples is that forced discipline in a downturn prepares one to thrive after things turn around.
How can you ensure that your business is a success story like HP, Disney, and Microsoft? Naturally, having a runway of cash reserves and a compelling product are absolutes. However, many digital media companies had both of those and didn't thrive in the aftermath of the dotcom bust otherwise referred to as a Nuclear Winter. When access to capital is tight, the cheapest form of capital is sales revenue, thus it's critical to ensure your end-to-end sales and marketing process is operating with maximum efficiency. Here's a list of problems and bad management practices that we frequently encounter when working with emerging businesses:
- Sales and marketing planning and execution are dramatically out of sync.
- Too often, we find companies have significant deficiencies in their end-to-end sales process which decreases the potential yield from their sales and marketing investments. Such process defects often result in wasted precious resources; lead generations methods are too expensive and sales reps are hired to qualify leads.
- Lack of sales and marketing focus on the most profitable "lifetime" customers.
- Superior products are being disqualified as "too risky" due to poor confidence building with the right prospects.
- Real customer input and market trends are not being communicated or addressed by the company.
- Websites that aren't designed or equipped for lead generation and/or customer conversion.
- Chief executives have poor visibility into the sales pipeline and don't understand how to optimize the end-to-end process for increased revenues.
It's worth noting that consumers and businesses don't completely stop spending money during a recession, and that truth runs back through the Great Depression as well. They just want better deals. To enable "deals" on your products, it is vital that your sales process is efficient so that the "deal" can be structured, delivered and profitable. Even before this downturn, prices have been decreasing dramatically over the last 10 years. A byproduct of that shift is that traditional lead generation methods and expensive shoe-leather sales people aren't penciling out the way they once did. In their place, web-driven leads coupled with much heavier use of telesales resources and better sales and marketing processes are enabling businesses to operate with fewer costs while generating strong revenue on the backs of emerging products.
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