TUNING IN

Jul 01, 2005 9:30 PM  By

Catalogers and retailers have traditionally shied away from direct response television (DRTV) and direct response radio for a number of reasons. Many marketers feel that their product line won’t support a DRTV or radio promotion; they’re also uncertain about which approach to try and where to start. And, of course, they have concerns about the cost and the return on investment. ▪ Indeed, the typical direct marketer’s approach of targeting a consumer niche may seem at odds with the mass nature of TV and radio. But as TV and radio continue to fragment into more and more niche channels and stations, they offer even specialty merchants greater opportunities to find an appropriate audience. That could be why the Direct Marketing Association’s economic impact studies show projected spending on DRTV between 2003 and 2007 growing 20% faster than spending on direct mail; DR radio’s anticipated growth during that period is 26% greater than direct mail’s.

Perhaps the most compelling reason to test DRTV and radio now is the anticipated development and growth of interactive TV and digital radio. According to Cambridge, MA-based technology research firm Forrester, by the end of 2006 nearly 39 million households will have uniquely identifiable digital cable boxes; by 2008 household-level ad targeting is expected to become widely available to advertisers. By the end of 2004 there were more than 4 million digital radio subscribers, and Scottsdale, AZ-based researcher InStat/MDR expects that number to increase to 19 million by 2007. Testing DRTV and radio now will enable you to take advantage as more capabilities for targeting and consumer interaction become available.

The ABCs of DRTV

You have three primary formats to consider with DRTV: spots, infomercials, and home shopping channels. Spot commercials run 30, 60, 90, or 120 seconds; infomercials run 28 minutes, 30 seconds; and home shopping channels usually air one product or company segment for 5-15 minutes, unless you have a proven track record to justify longer time slots. Each of these formats have rules of thumb and pointers you’ll want to evaluate in light of your brand and product line:

Like any other prospecting efforts, with DRTV you need to start by determining your goals. Most marketers consider both the sales and brand-building benefits of DRTV because of its broad reach. Given the testing costs involved for spots and infomercials, most catalogers will not be willing to pursue DRTV efforts solely to generate leads or catalog requests and will conclude that the best approach is one that results in direct sales or a mix of sales and catalog requests.

John Boris, vice president, brand communications for Westbury, NY-based gifts merchant 1-800-Flowers.com, cautions that it is vital “not to sacrifice brand for the sake of sales, or vice versa.” Both are important in every DRTV effort. To that end, 1-800-Flowers’ spots feature specific products but also show the breadth of the product line to generate leads for future sales. Whatever items you show in your DRTV efforts serve as examples for the rest of your brand, helping to generate inquiries for your catalog and visits to your Website.

Products promoted via DRTV have the greatest opportunity for success if they are unique. In repeated surveys, lack of availability elsewhere is the number-one reason consumers buy from any DRTV offers — spots, infomercials, or shopping channels.

DRTV practitioners recommend selecting products with a 5-to-1 ratio of price to cost of goods in order to pay for media and other costs. How rigidly you apply this rule depends on factors unique to your brand’s goals. For example, if you have stores and DRTV will drive store traffic in addition to producing direct sales, you may be willing to take a loss or merely break even on the DRTV direct sales. The same may be true if you are promoting a product on an auto-replenishment basis, such as skincare or vitamins. Other factors to consider in determining a viable margin are return rates, upsell items, shipping and handling rates, and overall customer lifetime value. The key here is to pay attention to the numbers and know what average price, margin, and contribution you are estimating for each order so that you have a benchmark against which to compare test results.

Shopping channels present unique challenges. They buy from you at wholesale, generally on consignment. Gauging the amount of inventory to provide can be nerve-wracking: too little and you run out before demand is satiated, too much and you will be absorbing a large volume of returns.

Eileen Schlagenhaft, marketing manager of West Palm Beach, FL-based Cushman’s Fruit Co., works with home shopping channel QVC to promote the cataloger’s tangerine/grapefruit hybrid HoneyBells to the QVC audience. She notes that QVC requests unique bundles of products so that consumers can’t find the same configuration of merchandise — let alone at a cheaper price — elsewhere. A food gifts merchant, for instance, might bundle together multiple products it ordinarily sells separately — say, an apple pie and apple butter — to create a unique item. To avoid challenges with excess inventory in the case of items that do not sell on air, you should be prepared to quickly sell the leftovers; doing so may mean breaking down the combination SKU — the apple pie and apple butter combo, in this case — back into its component parts.

Creatively speaking, effective testimonials are crucial for successful DRTV spots and infomercials. Mark Olson, president of Canton, OH-based Direct 2 TV, an infomercial production firm, recommends shooting testimonials before the rest of your creative because customers often provide insights into benefits you were unaware of; these help focus the rest of your DRTV effort. And don’t forget to speak up if you see shots or footage that you don’t like. “Your producer knows how to sell on TV,” Olson says, “but you’re the product expert.”

There is limited creative planning in working with the shopping channels due to the live nature of the production. But shopping channel announcers do have their own following. Their support of your product can be akin to receiving celebrity endorsements. Ensure you have sufficient time to meet with the announcers for your product to help familiarize them with its features and benefits.

DRTV media buying generally requires experts, though Boris of 1-800-Flowers says that if you’re a good negotiator you could try it yourself. But don’t forget to overbuy the amount of airtime you want, because DRTV is preemptible — in other words, a station that has agreed to air your spot can cancel if another advertiser offers to pay more for the same airtime.

Your DRTV media buyer should also work toward finding and placing your spot or infomercial into per-inquiry (PI) opportunities. In these cases, rather than charging the typical flat fee for airtime, the broadcaster will accept a commission for each lead the ad generates for the merchant. PI deals are usually lucrative, though they’ll typically form only a small percentage of your bookings.

By the way, DRTV does exhibit seasonality worth noting. Data from Hawthorne Direct, a Fairfield, IA-based DRTV agency, show that January is the best month in terms of response, followed by November and February, then March, July, and August. May and October generate the lowest response. Keep this seasonality data in mind when planning ongoing media spending or the timing of your initial test.

Even if you do everything right in creating and producing your spot or infomercial, operational issues could end up being your Achilles heel. DRTV response requires a call center that can handle dramatic spikes in volume. The spikes that result from major national cable-TV airings will overwhelm even third-party centers not designed for handling DRTV response. And you’ll want to track the source of each call, so that you can determine which stations are generating the best response. You can do this by having each station’s ad broadcast a unique 800-number: Ads on Cable Network A may say “call 1-800-555-1234” while ads on Cable Network B say “call 1-800-555-5678.”

Likewise, for Web orders you will likely want to develop a landing page or microsite with its own URL specifically to capture your DRTV orders and answer questions those prospects may have. Sending DRTV buyers to your standard home page will result in lost sales as DRTV buyers roam around on your site and don’t necessarily see the item they are responding to from TV.

Listen up for DR radio

With DR radio, you have fewer options to consider than DRTV, as well as lower costs to test. Generally speaking, spots run 30 or 60 seconds, though a limited number of 30-minute infomercial slots are available. Creative and media costs will run roughly $15,000-$25,000. Unlike DRTV, there is not much PI media available on radio. But like TV, DR radio rates are significantly lower than general advertising rates and should be negotiated.

Mark Lipsky of Radio Direct Response, a Media, PA-based radio-focused ad agency, says to be sure that whatever you promote on radio can be succinctly explained rather than visually demonstrated. If you have a single hero product that can be described on air you could suggest that callers contact you for both the item and a free catalog. But if no one product stands out and can be described in words, then focus on catalog inquiries, taking the same steps to convert these inquiries to buyers as you would for any other lead generation efforts.

The most effective way to communicate on radio, says Jeffrey Hedquist of Hedquist Productions, a Fairfield, IA-based audio and radio creative and production firm, is with a story about the listener. A winning script will come from a scriptwriter familiar with both radio storytelling and direct response salesmanship. To ensure that the story element doesn’t get lost amid the sales pitch, he says, simplify and narrow the benefits you focus on.

Prerecorded spots allow you maximum control. But Irene Steiner, vice president of marketing at Vermont Teddy Bear Co., which has used DR radio advertising for more than 15 years, recommends that you get strong radio personalities with loyal listeners to do live commercials wherever possible. The implied or stated endorsement of a personality whom listeners respect helps boost response.

Whether or not media frequency is important is a debated subject. Hedquist feels that radio is a “long-distance runner” and that response will build over time if the medium is used effectively. Lipsky agrees; he believes that a four-week test is critical to get your point across because radio listeners are often doing other things while listening and need to hear your offer three, four, or five times to be spurred to action.

It’s true that advertisers new to radio may not see the same results on the first day as they do three or four weeks later with some frequency behind them. On the other hand, radio listeners tend to listen to the same stations repeatedly, often at the same times every day. Once a certain level of awareness and familiarity exists for an advertiser, more frequency doesn’t translate into additional sales with that audience.

A clear and straightforward call to action is, of course, key to DR radio advertising. But where should you drive response: to the phone or to your Website? Vermont Teddy Bear promotes both channels. Depending on which of its brands is being promoted (in addition to the eponymous brand, the company includes PajamaGram, TastyGram, and Calyx & Corolla), it sees 60%-87% of response coming to the Website. For his part, Hedquist has seen stronger response when either a Web URL or a phone number is used, rather than when both options are featured in the same ad, so test to see what works best for you.

Most important, your phone number must be easy to remember, and your URL must be easy to spell. And realize that prospects responding to radio need more information to make that purchasing decision than do prospects from other media. Radio Direct Response’s Lipsky notes that call center reps trained for handling radio respondents should help the caller buy, as opposed to trying to sell him. Whether it’s a dedicated Website or a specially trained inbound telemarketing staff, be sure you have the appropriate information or rep training in place to convert calls or Web visitors into customers.

Not every product line and customer base are suited to DRTV or DR radio. But given the large prospect universe and the future development of interactive TV and digital radio, these are definitely media worth considering. DRTV and DR radio can boost awareness and reach for multichannel retailers. Together with catalog, Web, and retail, says 1-800-Flowers’ Boris, “the pieces all work together like a mosaic.”


Shari Altman is president of Altman Dedicated Direct, a direct marketing consultancy specializing in acquisition and loyalty marketing based in Rural Hall, NC.

Spots

Testing costs: $50,000-$300,000 (average $75,000-$150,000) for creative, production, and media

Product price: $29.95 or less

Product characteristics: must be simple to describe and order

Dominant product categories: housewares and appliances, personal development products, and education

Infomercials

Testing costs: $200,000-$750,000 (average $300,000) for creative, production, and media

Product price: $19.99-$49.99 price or per payment (the total number of payments will vary)

Product characteristics: suited to complex products that require demonstration, new merchandise categories where awareness and knowledge are low, or skeptical markets where testimonials are key

Dominant product categories: health and fitness, cosmetics and personal care

Shopping channels

Testing costs: no creative, production, or media costs required

Product price: varies

Product characteristics: a moderate amount of complexity can be explained

Dominant product categories: historically jewelry, cosmetics, apparel, and cook-ware, but expanding to electronics, food, and nearly every other category