Getting E-tailers Approved for a Merchant Account

Your payment solution is as important as determining your product’s price point and advertising format. I am using the term “payment” because it’s no longer just your Visa and MasterCard processing that is important, although they remain the heavyweights. Dependent upon your product and customer base, ACH, Discover, American Express and potentially Pay Pal and Bill Me Later are payment alternatives you may consider. Additionally, it is critical to fully understand the options and restrictions on your payment accounts so you do not spend time during your most responsive period discussing how much you are able to process and whether your funds might be held. While certainly there are additional nuances that determine an e-tailer’s ability to obtain a payment account, the primary areas for concern for merchant processors are: i) Product, ii) Compliance and iii) Credit.

Knowing the Risks
The product determines the price range, contingent (or forward) liability and relative risk to the payment processor. All else being equal, a smaller ticket translates into less payment risk. This makes sense as each of us are more concerned about a $499 item on our bank statement than we are a $49 item and consequently, we are more apt to charge back the higher ticketed item. Moreover, we will expect more from the higher ticketed item. If I purchased a $499 juicer, I am expecting far more from that product than I am from a lesser-priced utility knife. I am more inclined to return or charge back the higher ticketed juicer if I didn’t receive my full-perceived value while I am willing to let the knife slide on a couple of expectations because I do not have nearly as much invested in it.

Similarly, products that have a contingent liability or delayed delivery risk because of extended warranties or extended return periods pose a greater risk to you and your merchant processor. If, for example, I am selling a laptop computer with a three-year warranty or a weight-loss formula that has a six-month return policy, I am exposing myself and my merchant processor to a greater risk because the chargeback rules allow for a chargeback time frame of 120+ days beyond the date the product could have been returned (or put under warranty). As a result, the longer the warranty or return policy, the greater the liability. From a payment processor’s stand point, the most risky products are travel certificates that may be utilized for up to XX months in the future or a coaching or multi-level initiation fee that allows the consumer to be a wholesaler and receive coaching, benefits or income opportunities in perpetuity.

The last product risk factor is the relative satisfaction rate. If my product fails to live up to my advertising because either the product is inferior or is damaged during shipment or arrives beyond expected time frames, I am more likely to see returns. Greater returns indicate greater risk for the payment processor. Consequently, to the extent that your product meets your advertisements and fulfillment time frames and/or the benefits are easily measurable, then you lessen the risk for your payment processor. Products, on the other hand, requiring action in concert with your product (such as moderate exercise) lead to more dissatisfied customers and higher return rates.

General Guidelines

Compliance risk is a hot button among payment processors today. The FTC is applying pressure on the Card Networks, which are, in turn, applying pressure on payment processors who exact a price from the e-tailer. Unfortunately, e-tailers can not take it out on the end consumer and many e-tailers and payment processors have paid significant fines because of non-compliance with rules that were only half enforced until the first of the year. Since then, however, nearly all payment processors have been enforcing them. The good news is there are some general guidelines e-tailers can follow to ensure compliance.

Additionally, it is easier to obtain a payment account if your site is complete (or near completion). While you can use a mock-up of your website for review and approval, it is easier for the payment processor to review the actual site. The general rules that apply to all sites include:

• Listing the denomination of the currency in which the charge will appear;
• Clearly indicating the merchant’s DBA name and how the charge will appear on the consumer’s statement and in compliance with the Card Network’s descriptor rules;
• Clearly stating the return policy, (even if returns are not allowed);
• No Cross sales to other businesses where the credit card number is provided to the other business; and
• At all times, maintaining compliance with the Payment Card Industry (PCI) Data Security Standards (DSS).

Moreover, the Card Networks are taking a particular interest in continuity accounts. Any e-tailer advertising in this segment should also:

• Place the terms and conditions adjacent to the submit or ‘buy’ button;
• Place the terms and conditions in 12-point easy to read font;
• Clearly state that the consumer is enrolling into a continuity, if applicable;
• Require the consumer to check the terms and conditions boxes before proceeding;
• Maintain that any trial period be for at least 10 business days;
• Ensure billing cycles are clear and at least 30 days apart for the core product;
• Refrain from the term ‘free’ if the consumer has any product payments;
• Ensure all claims are truthful and substantiated by clinical research, if warranted; and
• Refrain from placing celebrities on the site unless their legal consent for endorsement has been obtained.

While the above are not all inclusive, it is a general guideline that will expedite the review and approval of your site.

The credit risk is the most straightforward. Payment processors seek to ensure that the business is financially able to absorb any chargebacks and returns. The amount of expected returns and chargebacks can be determined from statements for an existing merchant and are estimated for new merchants. Ideally, a payment processor obtains and reviews two years income statements, balance statements and statement of cash flows. Tax returns are ideal as they assist the payment processor in validating the financial statements and in demonstrating the amount of taxes paid. Because many eTailers do not have two years’ history, a forecast can be helpful, especially for start up businesses.

Regardless of whether your business is new or existing, you will likely need to sign a personal guarantee. The personal guarantee is a secondary source of repayment for the payment processor should the e-tailer not be able to pay their credits or returns. To properly evaluate the credit worthiness of the personal guarantor, a personal credit report is reviewed.

Should either the financial statements of the business or the personal guarantor’s credit be insufficient for approval, the payment processor may ask for either i) a second guarantor, ii) a rolling reserve or iii) a letter of credit for the benefit of the payment processor. Alternatively, sometimes the payment processor will approve the account, but at a lower processing limit than requested. While none of these solutions may be ideal, they may facilitate your payment processing account and allow you to proceed with your program.

My hope is now that you have a general understanding of how payment providers evaluate e-tailers, you can best position yourself for approval. If you are pitching a product that is inherently more difficult to get approved, then get your payment processing established well before your launch date and ensure your marketing is in compliance. Recognize your personal credit report may impact your approval. By working with a professional that has access to multiple payment processors you can maximize your ability to match your account with the payment processor that is optimal for you. Finally, e-tailing is a unique business. Be sure to work with a payment provider that specializes in your business type to save you time and allow you to achieve the most efficient cost for processing. Your payment account is critical to your business. Understand what payment processors expect from you and you will have one less obstacle in your business.

Ken Musante is president of Direct Response Payments in Eureka, Calif. Contact Musante at (877) 476-0570 or at kenm@eurekapayments.com.

Every Campaign Should Do a 4-to-1 Ratio

Talk about the good old days in our industry, and eventually someone mentions how campaigns used to deliver 4-to-1 ratios (four times the amount of revenue than the cost of media) or better, that every campaign back then was a hit and how much easier it was to have a success in direct response. Well, things have changed. Today, we talk about the fragmentation of media, the consumers’ numbness to the clutter of direct response offers, the need to go to retail quickly, the increasing cost of media, the increasing cost of goods, telemarketing costs, shipping costs and the list goes on.

Crunching the Numbers
In the current direct response environment, generating impressive ratios on initial product sales has, in fact, become tougher to do, but what we do have today that we didn’t have in the good old days is the technology to help us achieve efficiencies that we have never seen before. Depending on your margins, most direct response items in the $29-$39 retail price range require roughly a 1.4 to 1.7 ratio of dollars generated over media cost to breakeven, and generating the calls/visits and orders to achieve those ratios has become increasingly difficult.

Enter technological efficiencies. Let’s say, for instance, that a campaign that breaks even at a 1.4 ratio generates a 1.2 ratio after months of testing. Does that mean it’s a failed campaign, not worth rolling out? Should we be on to the next gadget? Absolutely not! Today’s technology allows us to manage data in ways that can create incredibly successful campaigns from what would have previously been considered a failure. Take the 1.2-ratio campaign and assume it’s a set of kitchen knives. Now imagine the consumer data captured from this campaign being monetized over a period of time—say the next 12 months, by providing those newly acquired customers with offers for some of the marketer’s other items like pasta pots, blenders, countertop ovens or whatever makes sense for the demographic profile of your newly acquired consumer data. It’s called re-marketing and it maximizes the Lifetime Value of customers over a period of time with no media cost. That’s correct, no media cost.

To clarify, let’s take the media campaign for the kitchen knives item and look at a specific airing that generated a .9 ratio (media cost $1,000, revenue generated $900). When you have a system that can pinpoint the actual individuals who purchased that product from that airing and you can track how many additional items and how much additional revenue those individuals generated by responding to re-marketing offers over the 12 months following that initial purchase, you can see that the airing that generated a .9 ratio initially may have been one of the most profitable airings of the campaign when you calculate in the Lifetime Value of the acquired customers. That one airing may have resulted in a 4-to-1 ratio over that period of time.

Re-marketing and data management are increasingly more critical today for our industry. Utilizing front-end media data, backend transaction data and re-marketing technology that allows you to communicate with your newly acquired customers and generate the maximum Lifetime Value from your campaigns will be the key to achieving ratios and profit margins our industry has never seen before…not even in the good old days.

Scott Paternoster is president of Chief Media in New York, N.Y. Contact Paternoster at 212-300-8970 or at spaternoster@chiefmedia.com.

What Is Trade Dress Law?

In the April issue, I wrote a column, “Copyright Litigation Over TV Commercials and Infomercials,” about the legal protections provided by the United States Copyright Act for creative works such as DRTV spots and infomercials. I explained how, when one is faced with a knockoff but regrettably one lacks “hard IP” protection; i.e., a patent, one nevertheless, can win in court. What’s more, in the right case, one can win millions of dollars in damages by using copyright law, the patent law’s lesser known, but not to be underestimated, “soft IP” step-sibling. Too many people in our industry focus on patents, or on the lack thereof, when faced with a competitor with a knockoff, and don’t think enough about their “soft IP” rights, such as their copyrights.

In this column, I will address another equally powerful non-patent remedy for dealing with a knockoff: trade dress law. In the absence of a patent, trademark or copyright that has been infringed, a knockoff lawsuit likely is going to invoke “trade dress.” But what exactly is that?

Trade Dress Law Basics
The best way to understand trade dress law is to first understand trademark law. Everyone is familiar with trademarks. We all recognize brand names like Snuggie, Proactiv, Extenze, etc. If a name is distinctive because it’s unique or different from others–or, if it isn’t inherently distinctive but it has had enough advertising behind it to develop “acquired distinctiveness,” also known as “secondary meaning”–it is protectable, because it means something to the consumer. It is an identifier of source. It is a brand. The less inherently distinctive a mark is, the harder it is, in litigation, to persuade a judge that it is protectable. If it is descriptive, for instance, the judge will require proof that it has been used enough in commerce, for instance, through significant advertising on television, to achieve “secondary meaning.”

After one has established the basic protectability of one’s trademark, then one has to prove that the junior user–the second-comer who is the alleged infringer–is using a mark that is so similar to the senior one that it is “likely to cause confusion” among the consumers the parties are targeting with their ad campaigns. Judges look at many factors to decide whether there is such a likelihood of confusion, such as: (a) whether there has been any actual confusion; and (b) the similarity between the appearance, sound and meaning of the two marks, in the specific manner in which those marks are usually seen or heard by the consumer, e.g., on TV, online, etc. (Context matters. Thus, even in the case of similar marks if there is something else about the junior user’s presentation of its product that would eliminate or greatly reduce the risk of confusion, then it can be an uphill battle to prove infringement. Every case is fact-specific.)

The same basic procedure, explained above, is followed in a trade dress case. In a trade dress case, you are required to first, prove the basic protectability of the alleged trade dress; and second, that there is a likelihood of confusion.

So what is protectable as trade dress? Trade dress can be anything that’s used in the “dressing up” of one’s product, to make it attractive or to help in making the sale. It can be the packaging of the product, it can be the product’s color scheme, and in some cases, it can even be the product’s own unique design features or configuration.

Are there limitations? Yes. For one thing, there is no protectable trade dress right in anything that is functional. If it’s a feature of your claimed trade dress and it’s found to be functional, as opposed to artistic, it won’t count as trade dress. Second, if the trade dress you’re claiming is the design or configuration of the product itself–as opposed to some aspect of its “dressing up”–then, just as you would have to do with a non-distinctive descriptive mark in a trademark case, you must prove that your trade dress has obtained “secondary meaning” among the consumers.

The same is true if it’s the color or color scheme that you’re claiming as your trade dress. You’ll need to prove “secondary meaning.”

Thus, if the trade dress you’re claiming is your product’s design itself, you can’t win just by saying the design is novel or unique; that’s what a patent is for. Rather, you’ll need to prove, first, that the design is non-functional; and second, that the public associates it with one source, so it’s operating like a trademark would operate. That mental association is secondary meaning.

One thing to be aware of, though, if your claimed trade dress is your product’s configuration or design, is that the U.S. Supreme Court has said that those things are almost never perceived by consumers as an identifier of source, the way a trademark would be. The same judicial skepticism occurs when the claimed trade dress is a color or color scheme. Those cases are winnable, but not easy. To win, you may need to invest in a professional survey, to test whether the public reacts to your trade dress just as it would react to a trademark, seeing it as identifying one source.

The next element to prove is “likelihood of confusion.” Just as they would do in a trademark case, the judge or jury in your trade dress case will compare your trade dress to your competitor’s, by looking at the ads of the parties in the same manner as those ads are usually encountered by consumers in the real world, after which the judge or jury will decide whether or not consumers are likely to become confused as to who’s who.

Proving Infringement
In a trade dress case though, there often is an extra issue to consider and it is the issue of the parties using different names. What I mean is, while the knockoff may have a similar trade dress, at the same time, it might have a different name. Some judges and juries have found that having a different name can reduce or even eliminate the risk of consumer confusion, depending on the facts of the case. Again, if there is no finding of a likelihood of confusion, then there is no infringement.

The first thing to do, in any situation in which you believe your product or campaign are being infringed, is to retain a good attorney who has had trade dress litigation experience. Note, that’s not the same thing as experience with utility patent litigation; the two are very different. The attorney should review the facts and advise you on your rights, chances of success, and, importantly, estimated attorneys’ fees and costs of suit. Trade dress cases are not for the faint of heart, nor for the light of wallet: they often are hotly contested; they turn on factual findings (like whether there is, or isn’t, a likelihood of confusion) that can remain in limbo undecided for many months, until those findings are finally made by a judge or jury; they can require a lot of discovery, depositions and expert witness work; and therefore, can become very expensive very quickly, if they don’t settle.

What do you win in a trade dress case, if you win? Depending on the facts, the answer can be, a lot! You can win the same or even more than you can win on a patent. “Soft IP” cases such as trademark, trade dress and copyright cases can be every bit as potent. You can win a temporary restraining order, which stops the infringement; you can win a permanent injunction; you can win damages in an amount sufficient to make you whole for whatever lost profits or other harms you can persuade the judge or jury you suffered as a result of the infringement (something that often requires a lot of expert testimony, with “dueling experts” from both sides disagreeing on the damages); you can win all of the profits that the accused infringer obtained due to the infringement; and in some cases, you can win your attorneys’ fees and costs at the end.

That’s if the case doesn’t settle. Statistically, as you may know, the reality is that most such cases do end in a settlement. Someone changes some agreed upon aspect of their product or its name or “trade dress,” someone writes a check, parties agree to coexist on certain conditions, etc.

The upshot is, if you think you’ve been infringed but you don’t have a patent, or a very strong patent, don’t give up hope. Consider your “soft IP” rights. Those rights, when wielded in the right way, could prove to be a lifesaver for you and your campaign.

Greg Sater is an attorney with Rutter Hobbs & Davidoff, a law firm based in Los Angeles. Contact Sater at (310) 286-1700 or at gsater@rutterhobbs.com.

Facebook’s Free Lunch with Trimmings

We’ve all heard the expression, “There’s no such thing as a free lunch,” but do you know where it originated? During the mid-19th century, saloonkeepers would offer free food for the price of a drink, based on the gamble that folks wouldn’t stop at one. Today’s watering hole lies at the intersection of curiosity and compulsion. It’s a destination called Facebook, and its patrons will soon number half a billion–legions with an insatiable thirst for triple shots of creative expression, kinship and validation. But just like yesterday’s barkeep, the man behind Facebook’s counter, CEO Mark Zuckerberg, wants something in return for access to his social networking smorgasbord: the ability to use another kind of counter–one that adds up your likes and dislikes to serve up targeted ads.

Zuckerberg’s definition of quid pro quo has gotten the company into hot water with privacy advocates, one of the many topics explored in the fascinating new book “The Facebook Effect: The Inside Story of the Company That Is Connecting the World” by David Kirkpatrick. As Kirkpatrick points out, Zuckerberg’s vision has been to relentlessly pursue growth through dominance and worry about profitability later.

The proof of Facebook’s success lies in a cursory review of some of its astonishing statistics: users spend 500 billion minutes per month using the site with the average user posting 70 pieces of content. They add up to 25 billion per month. And while Nielsen reports that 125 million Americans spend roughly seven hours a month sharing the likes of political rants on Zuckerberg’s brainchild, over 70 percent of its users are outside the U.S. The Private Equity Data Center speculates that the breadth and depth of such devotion may be worth as much as a staggering $35 billion.

Clearly, the future profitability of Facebook lies in its ability to navigate the delicate balance between personal expression and the lifeblood of marketers’ commercial interests. Although Facebook execs admit that past efforts to alter privacy settings have created confusion and consternation, they vow to do better. In a June interview in The New York Times, Eliot Schrage, vice president for public policy at Facebook, admitted that the privacy implications of their ads are widely misunderstood, “People assume we’re sharing or even selling data to advertisers. We’re not. We have no intention of doing so. If an advertiser targets someone interested in boats, we’ll serve ad impressions to people with ‘boats’ on their profile somewhere.” Schrage explains that the site relies on “anonymized demographically targeted ads.” Specific names and personal information of users aren’t disclosed to advertisers.

What Facebook is doing is no different than what television broadcasters have done for decades: pushing ads aimed at appealing to the targeted demography of a show. The key difference is that with Facebook, the content is user generated and personal. But with statistics suggesting that the average consumer is bombarded by thousands of ads a day, it’s not too cynical to suggest that such relevancy is one more positive aspect of Facebook. And with its user base, regulators and management working in concert, perhaps such wry wish fulfillment can take an optimistic turn; one that will benefit the marketers who pick up the lunch tab for this ultimate soapbox, as well as those who shout atop it.

Rick Petry is a freelance writer who specializes in direct marketing. Contact Petry at (503) 740-9065, at rickpetry.com, or on Twitter at http://twitter.com/thepetrydish.

The Short Cut to Riches Is a Long Road

One of the hallmarks of many successful “As Seen On TV” products is that they provide a short cut for consumers. Whether it’s the amount of effort necessary to prepare a meal in the kitchen, the degree of sweat and toil required to get fit or a do-it-yourself beauty product that replaces the need for expensive salon makeovers, such products frequently promise to save time and money. It makes perfect sense that such appeals would be attractive–people lead busy lives. They are looking for ways to economize their time, not to mention their pocketbook. Hence, the Kymaro Body Shaper is an inexpensive and instant way to look slimmer, just as the MicroSteamer reduces the amount of time and energy required to cook a healthy meal.

Such claims of efficiency are simple enough to make, but in today’s world of social networking, they had better stand up to scrutiny. And that’s where the short cuts end, because the time span required to develop a truly innovative product that delivers as promised can seem like an eon. Certainly, there are many “me too” products that ride the coattails of other successes, but nothing replaces the rush of being the first to market nor the reward that goes with it: the lion’s share of sales.

The Fundamentals
But when it comes to products that are introduced via DRTV, one of the first questions a product inventor or marketer should do is size up the market. It sounds so basic, but many innovators are inspired by a burning desire to solve a problem that is personally relevant to them. Yet DRTV is the broadest of mass media, so the better mousetrap they’re inventing needs to appeal to a lot of mice. In practical terms, it means that if there are approximately 115 million U.S. TV households, according to Nielsen, the product should appeal to no less than 20 percent of them. Otherwise, one could be wasting money on a medium that is simply too broad.

For example, if you have a tool for training dogs, you would research the fact that there are slightly less than 46 million U.S. homes with pooches. Voila! Your product passes the DRTV litmus test. It sounds fundamental, but many inventors make the mistake of relying on what is known as mother-in-law research: the mother-in-law said she’d buy, therefore, the assumption that an entire universe of purchasers awaits the product is extrapolated from this one bit of anecdotal data.

Frankly, the loss of perspective this illustrates is why it’s important to partner with experts who understand the marketing side of the equation. While creating a product from thin air requires tremendous creativity–what is traditionally thought of as right-brain activity–the engineering and tooling aspects of product development can be very analytical or left-brained. Few people can navigate both hemispheres with equal dexterity. Great direct marketing is no different. It requires the ability to make a persuasive, rational value argument, yet must engage a consumer emotionally to move a product from the category of “nice to have” to “must own.” It’s a road best paved with knowledge. Save the short cuts for the consumer to ensure you don’t detour your own success.

BJ Fazeli is president of BJ Global Direct and Concept 2 Consumer in Irvine, Calif. Contact Fazeli at (949) 825-5822.

Is There a Fourth Screen in Direct Marketing’s Future?

A recent report by Nielsen concluded that the sum total of screens that occupy such public places as elevators, health clubs, gas pumps and movie theaters deliver a larger total audience than primetime television. The “Fourth Screen Network Audience Report” examines the impact of place-based media–what it refers to as the fourth screen–after televisions, computers and mobile devices. While at first blush the opportunities for direct marketers might seem limited by the venues and, in some cases, the lack of sound accompanying the sight and motion, it is yet another example of media fragmentation that cannot be ignored, and ought to be explored.

Who, What, Where, When, How
While the merits of direct response television media have traditionally been evaluated on the basis of cost-per-lead and cost-per-sale data, this is changing with the migratory habits of consumers to the web. With as much as 70 percent of total sales now occurring via Internet-based e-commerce, the ability to attribute specific consumer inquiry or buying behavior by television broadcast airing is being significantly eroded. In addition, many brand advertisers are using direct response as a hybrid of direct and brand image advertising, and seek to measure their efforts using traditional Madison Avenue yardsticks such as reach and frequency and cost-per-rating point. It is into this atmosphere that the new Nielsen report steps in, giving place-based networks the opportunity to compete head-to-head with broadcast and cable television networks.

The initial report, which will be updated quarterly, measured audience data for 10 of the largest such networks including the dominant movie theater advertising networks NCM and Screenvision, bar and restaurant networks Zoom Social and AMI, even The Hotel Network, during the fourth quarter of 2009. Remarkably, these networks delivered audiences that ranged from roughly 9 to 35 million adults 18+ during the period measured and, collectively, at least one impression against half of the entire U.S. adult population (see chart).

Given the disparate manner in which the various networks are distributed and viewed, not to mention such variables as the size of screens and the ability for the consumer to control channel, sound and the like, the validity of the report has been questioned by some in the advertising community. For example in health clubs, not everyone who checked in at the front desk was counted among the audience, just the hearty folks huffing in front of the screens on cardio machines. A sampling of participating audience members were interviewed to extrapolate demographic data for each of the networks, much like Nielsen does with its in-home TV “Nielsen family” sampling.

Nonetheless, according to a Nielsen press release that quotes SVP Terrie Brennan, “For the first time ad buyers and sellers have a single source to evaluate digital place-based advertising networks in reaching key age and sex demographics, and compare these to other video sources such as TV.” And the numbers compared to TV are impressive, although not exactly apples-to-apples: as reported in The New York Times, a typical primetime TV spot delivers an average of 3 million adults 18+. That means the delivery of eyeballs from a monthly flight on the two largest in-cinema networks delivers an audience that is the equivalent of 20 commercial airings in primetime broadcast TV. The former aggregates repeated airings across the span of 30 days, much like cable TV broadcasters would combine audience data from multiple airings in its fledgling days when it could barely garner a Nielsen pulse.

Act Now or Act Later?
Because DR media does not carry an audience guarantee liability for the broadcaster, it is heavily discounted by as much as 50 percent or more. It remains to be seen whether the place-based media outlets will be willing to conduct business on the same basis, particularly given the heady nature of this new Nielsen data. And while evaluating such opportunities strictly based on a cost per action seems unlikely to pay out in the traditional direct marketing sense, the idea that a single DRTV impression–regardless of length–is going to close the sale as it once could, seems quaint amid the modern universe of consumer choice and limitless access to opinion.

In today’s environment, multiple consumer touch points are the new necessity, and such place-based networks simply represent additional opportunities to reach and influence the public. Like direct response radio, locales that include dark cinemas and even elevators can become new venues for direct pitches where consumers will use their smart phones to punch in toll-free numbers they will then act upon later. Alternatively, the impression may convert to an online sale later, a scenario that will be challenging to measure, but one that reflects the new direct-to-consumer reality. Still, on a venue such as The Hotel Network, there’s no reason why a buyer might not call and order on the spot, as he or she sometimes does with a traditional DRTV buy.

Nielsen has plans to add other location-based networks to the mix that will hopefully include the ubiquitous screens in retailers such as Bed, Bath and Beyond, Costco and Walmart, that are so vital to “As Seen On TV” products. Given the compression of time in the product distribution life cycle from “exclusive TV offer” to the appearance of a product on the shelf at mass retailers, the ability to measure such opportunities with sophistication has already rendered the loop running on a combo 10-inch TV/DVD player obsolete.

Lest anyone think these opportunities sound far-fetched as a direct marketing proposition, recall that some 25 years ago cable was considered a joke. Today, Comcast is buying one of the crown jewels of that formerly dominant broadcast world, NBC. Times change–and so to the media usage habits of consumers–as evidenced by this latest Nielsen report. If history has taught the direct response community anything, it is this: as attention spans go wider, the opportunities expand as well.

Peter Koeppel is president of Koeppel Direct, a full-service media buying agency based in Dallas. Contact Koeppel at (972) 732-6110, at pkoeppel@koeppelinc.com or twitter.com/DRTVBUYER.

Pennies Wise, Pound Foolish

Ever see one of those ads from the credit card company? You know, the ones that say something like “Cab ride to stadium $20…Grandson’s team uniform $40…Getting to the stadium, reaching for your pocket and realizing the tickets to opening day are on your bed stand…Priceless!” Well, that’s what I think of when I watch electronic retailers launch their campaigns today. They spend tens of thousands of dollars getting ready to launch a campaign, only to cut corners at one of the most important parts: the conversion side—that is the call center and the web. This is a mistake made every day, even by “the big guys,” and many of them don’t even realize it’s a mistake.

IVR vs. Live Agent
George Smith of GWS Consulting Inc., a 35-year veteran in the call center business, has seen his fair share of this over the years. Seeing companies launch a campaign using IVR is like scratching fingernails on a chalkboard for George. Although it seems smart to go to IVR since it’s oftentimes a great, effective order-taking tool for DR, it doesn’t provide any help or feedback to the retailer. You can’t listen to calls, and you don’t know what consumers were thinking. If there is confusion in the ad creative, or an aversion to a price point, the only thing the marketer knows with IVR is that people hung up—that there weren’t orders. With live agents, the marketer could listen to calls and actually hear, firsthand, what consumers were thinking.

This exact situation occurred for a large direct response marketing company, Infomercials Inc. The company ran a test on TV and used live agents out of the gate. Although he was initially against it due to costs, George showed the executives of Infomercials Inc. the benefits of using live agent, at least during testing and optimization. The ad ran on TV and the calls came in. At first glance, the numbers on the campaign didn’t look good. If this were an IVR-only campaign, the folks at Infomercials Inc. would have thought they had a dog on their hands and would’ve walked away from the project. All the time, money and energy spent over the past several months would have led to an abrupt end of the project.

But, this didn’t happen. The team listened to calls and in pretty short order, realized what was wrong. One thing was the commercial confused people. The item was not only a standalone product, but “an expandable system.” Although it seemed like a great advantage to sell during the commercial, in the end it confused the consumer. In a short two-minute spot and short call, the consumer couldn’t grasp the concept and not many people ordered. Further, it seemed there weren’t many calls. After examining the data and listening to customers, there was a decision to go back to the drawing board and re-do the commercial. It was also decided that the offer would change—the value of the offer was increased.

Meanwhile, the website was designed in such a way that there would be multivariate testing of upsells and upsell paths. The idea there was to find out what clicked with the consumer, and just as importantly, what did not. Did more people take the offer at a higher price point? Was an upsell that was being considered actually look attractive to consumers—did they buy it? By using a complicated set of “sites,” and a robust reporting tool, the Infomercials people were able to find the perfect campaign dynamic (upsells and upsell paths) that would deliver a $62-average-revenue per order amount. This was on a $19.99-base offer. It was fantastic! It would contribute to the overall MER and allow for more margins on the media CPO and cost per call.

If Infomercials Inc. went with IVR and a site that was put together by the accountant’s son over at the local community college, this campaign would have died an early death. Instead, the client gained imperative knowledge and was able to fix what was broken. After the knowledge was gained and the campaign was optimized, the team could consider using IVR, or an IVR with live agent opt-out solution. They would realize more costs upfront, but that small amount of money spent would deliver invaluable information. And, since the web was set up to create the right backend structure (upsells and upsell paths), that learning could be brought over to the new IVR script.

As an entrepreneur, I know what it is like to take on risk—and actually invest money in order to obtain success and make more money. And, I know as part of that we all try to cut corners and find ways to leverage what little assets we have to work with. But, I urge DRTV marketers to consider this story and the lessons that came from it. Consider spending a few extra dollars on the conversion side of your campaign and you may find that instead of chalking it up as another loss, you’re moving forward with a successful campaign. Although there are many factors contributing to what we all see as a lower overall success rate, using the right tools from the get-go might bring that number back in line—and may help us all see success where we saw failure before.

Ken Osborn is president and CEO of Liquid Focus in Bridgeport, Conn. Contact Osborn at (866) 892-0259 or at kosborn@liquidfocus.com.

Coordinated Advocacy Produces Results

The regulatory and legislative activity surrounding data-pass and advance-consent marketing practices has been a frequent topic in this column in recent months–and for good reason. Not only is the issue extremely fluid and fast-moving, it’s also of critical importance to the many ERA members who have ethically leveraged these established business practices for years.

As most of you know, in May, Senator Rockefeller (D-WV) introduced the Restore Online Shoppers’ Confidence Act, which would impose significant restrictions on online negative options and other advance-consent marketing practices.

It’s my pleasure to report a huge win regarding this proposed legislation. Thanks to an extensive and well orchestrated advocacy effort undertaken by ERA members and staff, a particularly onerous provision has been stricken from the bill. Specifically, the Senate Commerce Committee removed language requiring a seller to provide 10 days’ notice (including cancellation instructions) each time a consumer’s account is to be charged.

Although, as mentioned above, the issue remains quite fluid, given this revision and the legislative calendar leading up to the August recess, I am cautiously optimistic that we will be able to contain this issue.

I am extremely pleased by this development, not only for what it means in practical terms for our industry, but also for what it represents for ERA and its membership. It’s a direct result of member engagement that began with a special session held in New Orleans at The Great Ideas Summit in early February, which led to the formation of a task force that has met numerous times and–together with other ERA volunteers–powerfully communicated our position directly to policy makers on Capitol Hill during ERA’s annual Government Affairs Fly-In. It’s a shining example of the impact an association can have when its members come together, provide their expertise and “feet on the street,” stay committed and support association staff as they carry the message forward. It’s extremely gratifying and I thank all those involved for their tireless work.

As we continue to increase ERA’s reach and impact in our effort to advocate for and defend the industry, government affairs and regulatory issues will play a larger role at the 2010 ERA D2C Convention, held this year at the Wynn Las Vegas on Sept. 21-23. We will now offer a full education track dedicated to these issues, including sessions on combating counterfeiting, an important new state law that could have nationwide implications regarding e-commerce taxation, as well as one updating the activity surrounding data-pass and advance-consent marketing. Combined with other tracks on best practices in direct response, digital marketing intelligence and operations and profitability–all in addition to the popular DRTV 101 class and four on-floor “spotlight sessions”–we’re confident that this year’s will be our strongest education program ever.

All other indicators are pointing to another record-setting show. As we go to press–and more than three months out–the show floor is over 80 percent sold and pre-registration is out-pacing last year’s by more than 400 registrants, putting us on target to meet our goal of drawing more than 3,600 members of the direct-to-consumer commerce community to Las Vegas this fall. It’s another positive indication of the health and engagement level of the membership and the industry at large. If you’ve yet to register, please do so at www.D2Cshow.org.

I look forward to seeing you there.

Social Media and SEM: Friends or Foes?

The explosion of social media and the steep growth trajectories of sites such as Twitter, Facebook and, more recently, FourSquare, have created huge opportunities and challenges for marketers in equal measure. According to the SEMPO “State of Search Report 2010,” based on a global survey of nearly 1,500 digital marketers, 59 percent of client-side respondents said social media budgets will increase over the next year compared to only 4 percent who said budgets will be less. Agencies are even more bullish, with 85 percent saying they expect increased client-spend this year.

Although social media marketing budgets are still modest compared to those for search engine optimization and paid search, many companies are starting to take this relatively new channel very seriously.

Social Media’s Impact
Effective social media marketing can help drive website visitors by giving companies and brands more visibility on search engines and social media sites. A good social media strategy can have SEOs licking their lips at the prospect of new links and opportunities for visibility on social media-friendly search engines. Three quarters of agencies surveyed (74 percent) for the SEMPO survey, carried out by Econsultancy, say the rise of social media has had an impact on their clients’ search engine marketing activity.

It should be noted that while social media marketing can help search efforts, the main objectives of social media marketing, and the skill-sets required, are often very different from search.

Although the research found that the primary objectives for search marketing are most likely to be “selling products” (for paid search – see Figure 1) and “generating leads” (for SEO – see Figure 2), the primary objective for social media marketing is most commonly increasing brand awareness and enhancing reputation (see Figure 3).

The skills required for social media marketing, where creativity is paramount, are not the same for paid search marketing, which generally speaking, requires deeper analysis and left-brain thinking. Similarly, the metrics used to measure success are very different.

The primary skills required for a staff member managing SEM, search advertising campaigns include: the ability to stay on top of the latest campaign management and analytics tools, the ability to convert campaign performance data into action plans and the ability to execute exact and different campaign best practices based on the advertising channel.

By contrast, the core skills required for a new staff member to develop and execute effective social media campaigns include: be adept at listening and understanding what your target audience is saying about your company’s product; be able to work with the appropriate social media tracking tools to effectively monitor dialogue and answer questions; know how to drive community conversation; and recognize that successful social media marketing takes time as you work to expand your customer base.

Where SEO and paid search success can be worked out on a more tangible return-on-investment basis, measuring the success of social media campaigns often requires more intricate analysis. The metrics will likely vary based on the objectives.

These differences don’t mean that the same agencies and same people cannot be well equipped to help a company with both search engine and social media marketing. But what should be clear is that social media marketing should be seen as something more than just a search-marketing tactic.

Linus Gregoriadis is research director at Econsultancy, which carried out and published the SEMPO “State of Search Report 2010.” Contact Gregoriadis at linus.gregoriadis@econsultancy.com.

What You Should Know to Safeguard Brands in an Online Advertising World

BY FREDERICK FELMAN

Search advertising is a fast-growing marketing channel for brand advertisers and is only getting larger in 2010. According to the Search Engine Marketing Professional Organiz-ation’s annual “State of the Market Survey,” search-marketing spending will grow from $14.6 billion to $16.6 billion in 2010. The lion’s share of this spending will go to pay-per-click advertising campaigns, staff and software solutions. Unfortunately for brand advertisers, there are thousands of online scammers who leech traffic and new customers from legitimate e-commerce brand campaigns.

Illegitimate pay-per-click advertising activities range from click fraud (the practice of a person or computer program clicking on an advertisement for the sole purpose of generating a charge per click) to pay-per-click scams. A pay-per-click scam occurs when a brand name and its derivations are used in such a way that traffic is diverted away from the actual site belonging to the brand, often infringing on the brand’s trademarks. In some cases, these scams even drive traffic to sites that sell counterfeit products. What’s the bottom line? The scammer is driving traffic to his or her own site so he or she can profit at the expense of the legitimate brand.

A variant of this practice occurs when an affiliate uses a branded search term to drive traffic to its own site. While an affiliate grabbing traffic from a brand is not a scam, it adds cost to the brand’s pay-per-click advertising campaigns and often results in the brand paying the affiliate for traffic that the brand itself generated!

According to the recent SEMPO “State of the Market Survey,” the value of the North American search engine marketing industry is projected to increase $2 billion from $14.6 billion to $16.6 billion in 2010.

Scale of the Problem
The amount of traffic diverted from branded pay-per-click advertising campaigns is staggering. In the U.S. alone, there are 4.2 billion brand-based searches on major search engines every day. One in seven of these searches lures searchers to a destination other than the brand’s site. As a result, over 600 million searches are hijacked every month. This affects brands in several ways, beginning with diminished traffic and lower ad campaign ROI. In addition, scammers can bid up the costs on branded keywords. Last but not least, a brand can suffer by being falsely associated with a counterfeit site.

The leading search engines all have programs in place to provide pay-per-click advertisers options for dealing with intentional click fraud or pay-per-click scams. However, it is incumbent on the brand’s ad campaign managers to be proactive in monitoring and reporting problems to the search engines.

It is also notable that not every pay-per-click scam occurs with the use of a branded term. A good example to illustrate this point is the term: “designer handbags.” In a recent survey of 20 popular online product searches, this item stood out. A startling 32 percent of paid search ads that appeared on a search of this term led to sites appearing to sell counterfeit handbags. The misleading ads worked in several different ways. Some ads would inappropriately use branded terms, while some used generic terms. But in every case, counterfeiters are taking advantage of paid search–and brand names–to intercept traffic and profits. Legitimate brands are faced with the reality that they are competing every day with those who would divert traffic from their sites to illegitimate destinations.

How to Fight Back
To fight scammers, ad campaign managers have two options: build an in-house monitoring and detection team with dedicated staff, or outsource to specialized vendors that provide automated detection, auditing and reporting solutions. For large global brand companies, in-house solutions can be extremely labor intensive to implement and manage. In contrast, products from third-party solutions providers are continually updated to address the latest manifestations of pay-per-click advertising scams, are able to prioritize offenses based on the brand’s criteria and can provide automated reporting methods tailored to the brand’s needs.

Remember that pay-per-click scams are borne of and reliant on technology, so they can be prevented and fought through technological means as well. Highly effective automated solutions can be highly adept at detecting search-advertising abuse, and most will prioritize for the worst offenders and immediately take action. Any e-tail brand wishing to maximize its ROI should consider initiating these strategies and making them a top priority.

Some Important Tips
Given the seriousness of pay-per-click scams and the solutions available, brand advertising professionals should consider implementing the following:

Conduct an informal, qualitative audit to assess if your company is a potential victim of pay-per-click advertising scams. A simple way to start is to search for your branded terms on one of the leading search engines and follow the ads that are presented.

If your company sells house-brand goods, your supply chain may also be contributing to a related facet of the problem–counterfeit goods. As part of your informal audit, examine business-to-business exchange sites to see if your house-branded goods are being sold in bulk. A variety of offshore suppliers often make use of these B2B exchanges to sell overruns and ‘name brand’ goods, which could be counterfeit.

Research the third-party software solution providers that can help your company address pay-per-click advertising fraud and scams. Look for the solutions that can help to address the full range of abuse that your company’s brand is experiencing.

Finally, as pay-per-click advertising budgets increase, there are a growing number of educational webinars and e-commerce conference panels to assist brand-advertising managers with addressing these problems. Great places to monitor how pay-per-click advertising problems evolve and how to manage them include e-commerce association blogs and publications, LinkedIn groups comprised of thousands of pay-per-click professionals at www.linkedin.com/in/ppcmarketing and conferences and training events that specialize in pay-per-click and search advertising.

Frederick Felman is the CMO at MarkMonitor, a leader in enterprise brand protection, where he is responsible for promoting the company’s brand protection products. Contact Felman at (415) 278-8400.