Star Search - Multichannel Merchant

EVERY TIME I SEE high-tech gifts and gadgets merchant The Sharper Image’s direct response television commercials for its Ionic Breeze air purifier, I wonder why more companies aren’t testing products via infomercials and short-form commercials. Do they fear it’s too expensive? Are they confused about the financial projections and afraid to take a risk? Do they worry about losing control of the product and exclusive rights? Are they unsure about the suitability of their product line?

Marketers that understand the integrated relationship between DRTV, catalog, and retail know that DRTV can drive revenue in all channels. In a Multichannel Merchant article last year (“Tuning in,” July 2005), consultant Shari Altman noted that a changing marketplace means now may be the time to consider DRTV and radio.

But whereas Altman’s article discussed DRTV in the context of other media options, here we’ll home in on your merchandise in the context of DRTV. There are steps to help you take the guesswork out of determining whether you should be considering DRTV for your product line. If you have a unique product or service, and it passes these litmus tests, you may have a DRTV winner on your hands.

First and foremost you should look at the size of your potential market. Very narrow niches rarely work on DRTV because TV is a broad marketing channel. Kitchen products can be successful, because everyone has a kitchen, and consumers are always looking for products to help make food preparation easier, better, or quicker. Along the same lines, with more than 10% of homeowners replacing their vacuums every year, vacuum cleaners and other home appliances also work well on DRTV.

Just make sure that the product you are considering really does solve a significant problem. For example, I once marketed a battery-operated appliance that picked up spills on the kitchen floor. The demonstrations were great, but the commercial still failed, because the consumer could easily use a paper napkin to do the same thing.

Of course, your product must be unique. Look around.If your product is a “me too” it’s not likely to be a good DRTV candidate. Also try to determine if the product has features or benefits that really provide value to make it significantly superior to competitive merchandise.

Even if your product is unique, it may not be for long: The DRTV marketplace is rife with companies that monitor DRTV products. Repetitive airings are an indication of success, so these companies will knock off apparently successful products, often within weeks or months of the initial airing.

There are basically two ways to protect against competition: intellectual patents or speed to market. Carefully consider the risks of investing in a DRTV project without having one or the other.

Wowing consumers

IF YOUR PRODUCT is a better mousetrap, do you have to educate the consumer before he will buy it? Remember, education can be expensive.

A company once approached us with a breakthrough glue that was actually two glues in one. When dispensed, it worked like any other glue, permanently joining two items together. But when you applied the glue on a single piece of paper and waited 30 seconds for it to turn the color blue, it became like the adhesive on a Post-it Note — you could easily reposition the item from one surface to another. After some initial excitement, we passed on the product because we felt it was too expensive to educate consumers on changing their existing behavior of using tape, magnets, and the like.

A key requirement of a good DR spot is the “wow” factor. With so many ads hitting viewers on a daily basis, consumers are quick to click the remote control. You have precious little time to grab their attention and motivate them to watch the balance of your commercial or infomercial. Ideally you should be able to package the product’s value proposition into an attention-getting opening that can be communicated in about 12 seconds.

Here’s a quick test: Present the product to some friends taking no more than 12 seconds. If you don’t get some “wow” type of comments, your product may lack the sensationalism to break through of the clutter.

It’s also important to remember that winning DRTV products, whether kitchen gadgets or fitness equipment, can be successfully demonstrated to help consumers understand the major benefits quickly. Since TV is a visual medium, showing how something works is infinitely better than describing how it works. That’s why you see dramatic before-and-after photos and footage for weight-loss programs and beauty products, and why you see carpet sweepers and vacuums picking up everything from nuts and bolts to wood chips. If you can’t dramatically demo your product, it may not be viable on the small screen.

An offer they can’t refuse

HOW MANY TIMES have you seen and heard “But wait, there’s more!” followed by “If you order now we’ll double your order!” This doubling of the initial product for the same price is designed to make a good deal irresistible. In many cases, the consumer may pay shipping and handling for the second item. Of course, the cost of goods needs to be only a small percentage of the retail selling price for you to be able to double the order in this way. This is more feasible with a product such as software and less likely with electronics and many other hard goods.

On average, 10%-40% of all buyers of DRTV products will also purchase something else during the order process on the phone and online. The key to a high upsell rate is a strong affinity between the core offer and the upsell offers presented. These additional revenue add-ons typically make the difference between financial success and failure. It’s not unusual today to structure a least three upsells in the order path, including rush delivery. Also, many DRTV advertisers are engaging a call transfer program at the end of their order path to generate additional incremental revenue to offset their inbound operating expenses.

Testimonials play a key important role in DRTV advertising; they ask and answer the questions viewers are thinking. Hopefully you’ve been saving written testimonials from customers so that you can contact them to see if they would be interested in providing an on-camera testimonial. What you don’t want to do is to hand a script to someone who has never seen or barely used your product and put him on camera. His lack of belief will show.

The price is right

YOU MAY ALREADY know that the ideal price point for short-form DRTV products is $19.95-$29.95 and $59.95 at a minimum for infomercials. DRTV marketers have sold products from $19.95 to hundreds of dollars. Some require two to five “easy payments,” while marketers of other higher-priced products use DRTV to generate leads that are then closed in person and/or by phone.

Regardless of the actual item price, a the end of the day the consumer must feel that the perceived value is significantly greater than the price for admission. If it’s close, you won’t generate a response large enough to offset the media cost, let alone cover the cost of goods and operating expense.

In the good old days of cheaper airtime, if a $19.95 product had a cost of goods sold (COGS) of less than $5, you might take a run at it. But times have changed. Nowadays the rock-bottom minimum COGS ratio for most products is 5:1, and closer to 7:1 or higher is preferred. Of course, there are exceptions, but if the ratio for your product isn’t at the higher end of the scale, it’s probably not going to work.

Multipay options are essential for DRTV products selling for more than $29.95. They increase the take rate from impulse buyers. From a financial point of view, you will have to make sure your bank or credit-card processor has no issue with multipays, as it will start to see the same amounts charged to the same cards over and over. You will have to set up an automated process for various payment programs and build in a factor for bad debt — credit cards that worked for the first payment but didn’t work for successive ones. We have found that when a card is declined, it’s worth the effort to try it again a week later, especially on Fridays, when many people are paid.

Many retail TV advertisers air commercials heavily for the holiday shopping season. As a result, media costs for all TV advertisers, including the DRTV folks, are at their highest during the fourth quarter. To make matters worse, if you have a product that is not a year-round product and needs to be advertised in the fourth quarter, that’s most likely not going to work, in part because of the heated competition for airtime, and in part because you want your investment in creative and airtime to have a shelf life of more than three months. The product you choose should be one that sells well throughout the year, not only during holiday shopping season.

At any time of the year, you’ll need ample supply of the product, especially if there’s a chance it may take off. There are stories galore of DRTV products that failed because there was only one supplier of the product. Make sure your supply line is set up to manage rolling out a successful DRTV program and that you’ve thought through the cash flow implications.

And don’t forget about disclaimers. DRTV success yields additional exposure, so make sure that you address any and all safety issues and advertising claims. If your DRTV product is one that could be the subject of consumer complaints, make sure you have liability insurance in place.

In your catalog or store you may not have much room for claims and testimonials. In a spot or long-form infomercial, however, you will have time to make clearly stated and provable claims as well as to air as many quality testimonials as possible. Because the Federal Trade Commission (FTC) watches TV, you’re more likely to be questioned than if you were not doing any TV. You need to learn the rules and play by them.

Angling for customers

WHEN YOU ACQUIRE a customer using DRTV, don’t neglect to build in additional revenue into the initial cost of acquiring that customer. One of our clients, cleaning and sewing products brand Euro-Pro, generates extensive business after the initial DRTV sale by selling a wide range of consumables and accessories. This ongoing revenue is produced on its Websites and via direct mail and telemarketing. Developing a strong sales model using DRTV as the anchor can allow you to generate a significant lifetime value (LTV) from every DRTV customer acquired.

To facilitate Web and contact center activity, make sure your ads prominently display both a toll-free number and a unique URL for tracking. The Web results in lower order-taking costs and, in many cases, higher average order sizes. The unique URL allows you to accurately track Web orders resulting from DRTV airings. You should also create a stand-alone Website just for the product, so that DRTV respondents don’t have to scour your entire site for the item in question. You should also use a DRTV-to-Web tracking system to see a true picture of total DRTV orders resulting from phone and Web combined. (To learn more about this tracking issue, download a free whitepaper at: http://offline2online.com.)

Many DRTV marketers use the medium to drive retail sales. For our client Punch Software, the goal was to break even on DRTV in order to support the national sales of its products in stores. If you have an existing retail distribution channel for a product that meets the other criteria, consider a strategy along these lines. Remember, you can buy DRTV media time for significantly less than the retail cost of TV media time. This provides a tremendous way to lift the water level across your entire enterprise.

The considerations that go into evaluating a DRTV product can be daunting, but the medium is well worth it. Many of the processes can be easily automated, and specialized services can be outsourced. If you’re serious about moving forward, put your product through a checklist using these factors and confer with an experienced DR agency. Moreover, a professional DRTV agency will take on only projects they feel have a reasonable chance for success.

Here’s one more idea: Consider producing a DRTV commercial for enrolling new catalog buyers, perhaps by giving these DRTV shoppers a discount on their first catalog offer. This is potentially a great way to generate qualified catalog buyers while driving brand awareness.

Paul Soltoff is CEO of SendTec, a St. Petersburg, FL-based direct marketing services provider.

In my household, the ringing of the telephone after 10 p.m. can only mean that someone is dead or dying. So when my sister called at 10:30 one evening last year, I braced myself for bad news. Instead, she shouted into the phone, Are you watching The Practice? Put on The Practice right now! It ends up that a friend of ours from high school had a guest spot on the show.

Like my sister, most of us relish those I knew him when moments. And when you can say not just I knew him when but also I gave him his big break, then you’ve hit the jackpot. Not only can you boast of your proximity to greatness, but you can assume some of the responsibility for it: If you hadn’t hired/promoted/mentored/assisted him, he may not be where he is today.

Of course, it’s tacky to brag unprompted about this sort of thing. Plus, it’s easy for people to pretend that they knew him when too. So Catalog Age is offering you the opportunity to prove that you have a nose for sniffing out tomorrow’s leaders today.

For our upcoming June issue, which coincides with the Annual Catalog Conference, we’re putting together a feature that will look at industry stars of the past, the present, and the future. If someone you know is going places, let us know too. Drop us a fax, a letter, or an e-mail heck, you can even phone us to tell us who this person is and why he or she is destined to make a mark on cataloging. We’ll check out the rising stars and spotlight the best and brightest in our article.

And we’ll be sure to mention in the article who brought these future movers and shakers to our attention. That way, in two or five or 10 years, when the person whose potential you recognized makes the cover of Time, Fortune, and People simultaneously, you’ll be able to pull out the article and prove, beyond a doubt, that you knew him or her when.

Just don’t phone after 10 p.m. to tell me.

To let us know about a rising star, include his or her name, job title, and company, and a brief explanation of why he or she is someone to watch. Also include your name and phone number or e-mail address. You can e-mail the information to [email protected], fax it to 203-358-5823, or mail it to P.O. Box 4242, Stamford, CT 06907-0242. The deadline is March 30.