DM News: July 19, 1993 Timothy R. Hawthorne
As Seen On TV: The New World of Infomercials
The early history of infomercials has been entrepreneurial. Entrepreneurs from all kinds of fields, such as franchising, computer hardware and print advertising were getting into the television marketing field selling new and unique products not available at retail. In 1984, infomercials could be produced for $15,000 to $25,000 per production and generate as much as $50-million in sales, and one out of three could he a hit. Our sales-to-media ratio often was 10-to-1. These infomercials were often "one-step" and one payment offers. But most importantly, we would only pay an average of $50 per half hour for the media.
In fact, when we first purchased the six hours-per-night Discovery Channel in 1985, it cost us only $50 per half-hour. That time now resells front Regal For up to $5,000 per half hour. And currently our overall half-hour average media buy cost is not $400, but $1,200 - 200% increase in just 8 years. More than any one factor, these increases in media costs are driving the infomercial to be a "major advertiser" marketing channel that supports and drives retail sales. In 1986 it appeared that this media trend would rapidly drive the "one-step" infomercial and the entrepreneurs out of the business.
But it was not until four years later -1990- that a major advertiser, Time-Life, tried direct sales via infomercials. And not until 1992 did the industry see genuine interest from other mainstream advertisers.
There have been three reasons for the slow entry of these major advertisers in to the infomercial marketing world.
The major advertisers' failure to accept direct marketing techniques in general. The negative image of infomercials as a huckster medium - which is rapidly changing. The continued success of infomercial direct marketers. Despite media-expense increases, the big four or five infomercial direct marketers were prospering because they were pioneering back-end selling - upsells, cross-sells and continuity - to the point where as much as 50% or more of their total sales were backend-generated. So despite the media cost increases, these direct marketing infomercial companies could still be profitable.
Then in 1989 and 1990, a unique kitchen product was reintroduced to TV direct marketing - the Chinese Wok and the Daily Mixer. The infomercials for these products had dramatic impact on retail sales and suddenly provided new reasons for major advertisers to use infomercials.
The following points illustrate how retailers have come to recognize the value of infomercials:
"As Seen On TV" products represent the fastest-growing category in retail sales. Most stores now have an "As Seen On TV" department. Retailers can sell up to 40 times the products sold through the infomercials. Sales for juice extractors totaled $10 million in 1989. After two years of infomercial exposure, retail sales of juicers reached $380 million in 1992. Who will be the new players in retail infomercials?
Many of us are aware of the ventures by Kodak, Estee Lauder and MCA. But soon joining them will he Revlon, Chrysler, General Motors, major computer and electronics manufacturers, computer direct marketers and even packaged-goods companies. These and other companies will be using infomercials for:
Product introductions Reviving existing product lines Product-line extensions Couponing Public relations for damage control. General Motors is already doing it for their pickup trucks-Exxon should have done it for the Valdez-and IBM needs to do it, right now. Image campaigns The ultimate in retail-the selling of politicians. Beginning in 1994, we will be inundated undoubtedly with Ross Perot-type candidates and their flip charts. Whatever the product, it's important to remember that an infomercial's success is based on credibility. A purchasing decision is one that is emotionally sparked but rationally concluded. Infomercial creatives need to attract viewer attention through entertaining and well-paced story lines or information. But the entertainment factor should never take the viewer so totally a way from their real world so as to hamper their ability to make a rational decision to buy. Atlantic Bell produced ‘The Ringers" for $375,000. This "sitcom" drew numerous leads, but a reality-based infomercial could have generated at least twice as many at half the production price.
The American population truly craves information-witness the enormous success of "60 Minutes." infomercial producers must have faith in the television viewers'/consumers' intelligence. The great infomercials of the future will not he "creative accomplish merits" of television directors so much as the success of competent producer / writers who understand how to structure product information in fascinating and entertaining ways.
Major advertisers are getting the message-there's new ground to he tilled in relationship and database marketing, where an infomercial viewer is suddenly a qualified prospect. Tile primary facts that push infomercials as a viable retail marketing tool are:
The longer you keep someone's attention in the selling process, the more likely they are to buy. Only about 30 percent of Americans are TV buyers. The rest may love your product but will wait until they can touch and feel it at retail before purchasing. Look at the numbers: the average infomercial rating is between 0.5% to 1% of all TV households. The average response rate, depending on price point, one-tenth of 1% to 2% of all viewers of the show. That means 99% on average of the consumers who watch and learn about your product are not immediately buying from television. There is a huge, informed consumer audience developing in TV-land and they are just waiting to buy your infomercial product right from their local retailers' shelves.
If you're already using infomercials and your product isn't available at retail-or your products are at retail but not on infomercials significant dollars are being left on the table.