February 2010 – Columns: Ask the Expert

Countering Copycats

Q: What precautions should I take to protect my product from copycats?

A: Like every great product that hits big-time, your direct response blockbuster can fall victim to its own epic success as knockoffs proliferate with startling speed. While it’s a nice problem to have–nobody mimics a loser, after all–it remains a plague to creative marketers forced to watch the fruits of their labor land in copycats’ pockets. A 2009 study by British Brands Group concluded that about a third of consumers have purchased a copycat, believing they’d actually bought the better-known brand.

Economists like to call this “perfect competition,” and celebrate the benefit to consumers: new producers lower prices to siphon off market share. Alas, the original producers beg to differ, adding colorful descriptors to the term “knockoff artists.”

Breakthrough DRTV products are particularly susceptible to Me Too Merchandising. Low manufacturing costs allow would-be competitors to ramp up production quickly, online search advertising provides a low-cost direct response channel, and the global marketplace guarantees that even the most meticulously patented and copyrighted concepts and brand names will attract admiring imitators and charlatan counterfeiters.

But since forewarned is forearmed, you can plan proactively to protect your position and remain King of the New Product Hill. Here are five suggestions, in marketing cycle order:

1 Craft memorable, feature-driven product names and slogans. That way, when you become one of 10 battling brands, the original still defines the product category.

2 Employ what protections you can, such as copyrights and patents. While the ever-resourceful Chinese will still counterfeit M&Ms with “S&Ms,” and fill butter dishes with “Unbelievable – This Is Not Butter,” American product plagiarizers will at least have to introduce minor improvements or options–zebra-patterned fleece, or possibly blankets with slipper bottoms.

3 Saturate direct response media. Blanket broadcast airwaves so consumers can call now; advertise contextually so they can buy with a click. That’s what your competitors will do–so afford them less opportunity by doing it first. Get the superaffiliates on board; let them take your online brand into the stratosphere.

4 Tweak the product continuously. Keeping it new and fresh also denies competitors an “in.” But tread carefully. If you make too many changes to your trendsetting product, you risk morphing into the imitator you’re trying to fight off.

5 Expand the brand. There is no greater asset than a popular and recognized brand. Conduct follow-up research to learn what your current customers want. The principle driving continuity programs is that it’s easier to keep existing clients than it is to acquire new ones.

Admittedly, these are commonsensical best practices. But even savvy direct marketers can focus so myopically on breaking through, that they’re caught without a battle plan when they do. That’s not only embarrassing, it’s unnecessary. Think positive and plan ahead; expect the copycats to come catting around as soon as you roll out your DRTV hit.

Tim Hawthorne is founder, chairman and executive creative director of Hawthorne Direct, a full-service DRTV and new media ad agency founded in 1986.

November 2009 – Cover Story: 35 Years of Direct Response

Well into its fourth decade of selling hair-restoration products and procedures exclusively through direct response, Bosley is a company that has evolved along with the DR industry as a whole. Bosley’s George Fettig reflects on the maturation of the DR industry and his company’s keys to success.

By Tom Dellner

In 1974, Dr. L. Lee Bosley wasn’t looking to build a business on a grand scale–he simply wanted to grow his personal Los Angeles-based medical practice and provide for his family. Today, Bosley is not only the global leader in hair restoration, it’s the largest cosmetic surgery practice in the world. Two dozen Bosley physicians practice in 72 offices throughout North America and the company is eyeing further expansion into international markets.

Vice President of Marketing George Fettig has headed all of Bosley’s marketing initiatives for the past decade, a decade which has seen the company double in size. With a 30-plus-year career bridging brand marketing (he’s worked with such household names as Dial Soap, Armour Meats and NordicTrack) and a stint working directly for business icon Lee Iacocca, ERA Board Member Fettig offers a unique and fascinating perspective on the direct response business, as well as candid insights into one of the industry’s most enduring success stories.

Electronic Retailer: So few companies make it to their first anniversary–to reach your 35th is beyond impressive. Could you take us back to the company’s earliest days?

George Fettig: Dr. Bosley would be the first to acknowledge he really didn’t have a “vision” in the classic sense. He simply wanted to take his personal interest in the emerging medical science of hair transplantation and build a successful local medical practice right here in Beverly Hills, to help patients and build a good life for his family. Thirty-five years, 200,000 patients and hundreds of millions of dollars later, it’s fair to say that he’s satisfied those goals.

ER: Why the interest in hair restoration?

GF: Dr. Bosley did have hair loss in his family and, as he says in his commercials, he is a patient, but I don’t think that’s what drove him. He’s simply an entrepreneur at heart. He’s a dermatologist and spent years in general dermatology before learning about this technique, which he then significantly refined and made his specialty.

ER: What was the competitive landscape like at the time?

Bosley also offers a full line of hair-growth products, including the Bosley LaserComb.

GF: When Dr. Bosley opened the practice, there were very few physicians offering hair-restoration procedures–perhaps half a dozen across the country. He was truly one of the early pioneers and one of the first to recognize that the artistry of the procedure was as important as the actual medical science. Producing a natural look was his forte and differentiator. Back then, the primary “solution” to hair loss was wigs or hair pieces; Sy Sperling’s “Hair Club for Men” was the only nationally branded solution.

ER: What were some of the company’s early challenges?

GF: When Bosley opened its doors in 1974, advertising in the medical industry was frowned upon. In fact, prior to the ’70s, doctors were prohibited from advertising by state laws. Advertising was seen as incompatible with a doctor’s professional status. This prohibition extended to attorneys, as well.

In the mid-’70s, the ban was challenged on First Amendment grounds, and overturned by a slim margin. But despite the change in the law, most doctors still shunned advertising. Negative sentiments about advertising among the medical establishment were deep-rooted. It was in this hostile environment that Dr. Bosley decided to advertise his new service to the public. And because of this advertising–and his commitment to providing excellent medical care–the Bosley hair-restoration practice grew rapidly. The growth has never stopped.

The other major obstacle in the early days was the public’s negative image of hair transplantation. During the ’70s and ’80s, many new doctors moved into the field, perhaps to capitalize on demand created by Bosley’s advertising strategy. But back then, the technology was quite different than it is today. Hairs were transplanted in unnatural groupings (as opposed to Bosley’s technique of transplanting much smaller groupings in an artistic way), with results that were anything but natural-looking. Of course, these were the transplants that were very visible to the public and created an enormous PR problem for the industry.

Dr. Bosley pushed forward, though. I guess it was the quality of the procedure and the consistent and compelling DR messaging that allowed the business to succeed in spite of this stigma. Dr. Bosley’s primary message is one we still use today: “When patients tell me they’ve never seen a good hair transplant, I simply tell them, ‘That’s because you can’t see a good hair transplant!’”

ER: Tell us a bit about your early marketing strategies. Did Bosley pursue a direct-response strategy from the start?

GF: Bosley employed direct-marketing practices from its very first newspaper ad in 1974. The company recognized that the tracking of individual responses, in order to maximize what was then a fairly meager ad budget, was essential to financial success. In the ’70s, with offices in a few major markets, local newspaper and Yellow Pages advertising was sufficient to drive local demand.

In ’80s and early ’90s, the company had become large enough and widespread enough to support ads in regional magazines as well as a few well-targeted national publications (primarily bodybuilding, fitness and airline magazines). But Bosley was 100-percent direct response–right from the beginning. In fact, we still use essentially the same offer 35 years later: a 45-page guidebook and free informative video (now a DVD, of course). Patients wanted to be educated and informed back then, and they still do today.

ER: When did the company first test the waters of DRTV?

GF: John Ohanesian–Bosley’s CEO for the past 20 years–had the initial vision to create a truly national cosmetic surgery practice. He reasoned correctly that television advertising could take the company and the brand to the next level. So in 1992, Bosley produced its first infomercial. John told me that many industry “experts” informed him that introducing a $10,000 medical procedure with a 30-minute late-night infomercial was paramount to corporate suicide, certainly risking the company’s reputation. But John believed that if the show was produced at a high quality, including honest patient testimonials with compelling results, and if it featured Dr. Bosley himself, it couldn’t miss. He was right. We’ve now been on the air continuously for 17 years.

We learned a lot from those early infomercials. Creatively, we learned to always keep the production values very high (we shot on film for the first 15 years or so), the testimonials real and compelling and to deliver the message in a professional, informative way. We were promoting an important medical procedure. There was no place for cheesy scenes showing women falling all over guys with their new hair–that became clear to us early on. Our customers needed real information about a serious medical decision. The show had to reflect–and respect–that.

We also discovered the value in having an in-house call center with thoroughly trained patient-service representatives. Ours is a particularly complicated process, requiring a lot of listening, consultation and education–and a long call time. The callers, mostly men, can be nervous and apprehensive. Training, monitoring and mentoring of our patient services team was a key to success. When we brought the function in house, our conversion rate doubled. Dr. Bosley would frequently walk the floor himself and provide on-the-spot training.

ER: What are some of the most important ways DRTV has evolved over the time you’ve been on air? How did you adapt?

GF: After more than 25 years of watching direct-response infomercials and commercials (and frankly, being duped by many!), the consumer has grown more jaded, skeptical and suspicious, and at the same time more savvy, educated and intelligent about the purchase decision. The direct-response industry–for the most part–has responded with better products and more honest, intelligent and effective advertising. The ERA has played an important role, encouraging self regulation and, when necessary, taking action to remove offending advertisers from the Association and reporting fraudulent product claims to the FTC.

Another way the industry has evolved is in the sophistication of response analysis. We’ve always tracked leads, of course, and calculated media efficiency ratios, but today’s technology allows us all to be so much smarter in the ways we allocate media dollars. For example, we now use a hosted call-center solution that allows us to integrate our toll-free numbers directly to our database through computer telephony integration. So we no longer have to rely on our agents to enter campaign codes; the system does it in split seconds, with near-100-percent accuracy. The end result is more efficient agents and more efficient media buying. With 800 different 800 numbers in use–and 30,000 to 40,000 calls every month–you can only imagine how valuable this technology is to Bosley.

ER: Yours is truly a multichannel marketing strategy–would you mind outlining some of the elements for us?

A new line of Bosley Professional Strength products will be available in more than 30,000 salon locations.

GF: Bosley utilizes all of the major DR channels, and we are testing emerging technologies, as well. Bosley’s primary channel remains DRTV. Infomercials still deliver very well-qualified leads with high conversion rates. However, the infomercial strategy is not totally scalable for us. We also run short form to increase brand exposure, but more importantly to generate more leads. As you might expect, those leads are a little less informed and convert at a lower rate, but then again, they cost much less to acquire. At the right cost-per-lead, we are pretty much agnostic between infomercial and spot.

Of course, online marketing has become critically important to the overall acquisition strategy. In fact, nearly 50 percent of Bosley’s overall revenue is tied to an online lead in one way or another. The majority of our website traffic is generated by liberal promotion of Bosley.com in all of our offline advertising (TV, radio and print).

While the Internet provides countless advertising formats and opportunities, not all are appropriate for Bosley. For example, mobile advertising, while technically exciting, is not yet appropriate for us, because of its inability to deliver an information-intensive ad to a broad consumer base. Likewise, community-based social media platforms may not work for Bosley, since hair-restoration patients are not as likely to share their successful results with the community. That said, we are testing the waters.

Our remaining web efforts include SEO–optimizing our website to maximize quality traffic and conversion–PPC advertising, cost-per-lead advertising (generating leads through e-mail and affiliate marketing), social media (including our own “Battle Against Bald” blog) and display advertising, which we use sparingly.

The final strategy is mining our database of over one million names. The decision cycle for hair restoration is lengthy–several years, in many cases. It’s critical to our business that we stay in constant touch with these patients and leads, through a well-coordinated, constant flow of telephone, e-mail and direct-mail communication. It takes powerful CRM software and a dedicated staff to manage the process. We have both.

ER: How do you pull the right levers to keep all of these channels working together synergistically?

GF: We hire the right people. Our marketing director, Steve Aquavia, has the perfect balance of creative and analytical skills. Steve and his staff constantly monitor results from every lead-generation category. We look at cost-per-lead, mix ratios, conversion rates and cost-per-procedure. Steve reports weekly and we discuss what shifts need to be made to maximize short-term results. We constantly test, evaluate and then re-set the dials. It never stops.

ER: I understand that you’re launching a line of branded products. Could you tell us a bit about this initiative?

GF: We’re taking the Bosley brand to new channels of distribution. Earlier this year, we reached a licensing agreement with a salon-products company to produce a full line of “Bosley Professional Strength” products. Our plan is to have these products sold in over 30,000 salon locations over the next several years. Salon stylists are the most trusted source (other than a doctor) for information and advice on thinning hair. This expansion to retail will further expose the Bosley brand name to millions of men and women with thinning hair. The synergism with our base business is clear.

ER: To what do you attribute Bosley’s longevity?

GF: As a company, every Bosley team member, from the patient service representatives to our senior counselors to our incredible medical staff, strives to meet or exceed the consumers’ expectations set in the advertising message. When you do that, you create satisfied patients, generate repeat procedures and stimulate positive word of mouth.

ER: What are some of the other future plans for the brand?

GF: With the economic downturn, we’ve had to focus on cost containment, improved efficiency and more effective advertising. However, we’ll continue our efforts to extend the Bosley brand to relevant product categories. Beyond that, I think you’ll see the company turning its attention to further expansion internationally.

September 2009 – Feature: Creating a DR Hit

Best practices for effectively bringing a product to the
marketplace and avoiding the pitfalls that can
derail your DR campaign

By Peter B. Aronow

OK. We’ve all seen “Pitchmen” and it sure is entertaining. But bringing a product to market is challenging, and no matter what anyone tells you, no one can predict whether it will be a success. Industry veterans will tell you that some marketers have a better average than others, but that the average changes year-to-year and product-to-product. Successful marketing firms hit one in five; most hit one in 10. When speaking with Anthony Sullivan–star of Pitchmen–at last year’s ERA Annual Convention, he inquired about my success with the Ped-Egg, asking if I knew it would be such a big hit. I replied that although we had high hopes, no one ever really knows. He echoed the sentiment.

So what are inventors or product developers to do with their products? Most people think there are only two options–market it themselves or get someone else to do it. But those are not the only options.

WEIGHING YOUR OPTIONS
“Doing it yourself” includes inventing, designing, patenting, developing prototypes, manufacturing or sourcing, creating a website, advertising–which usually involves the web, print and TV–and getting inventory to retail. This process requires countless hours of work and lots of money. If you have the time, connections and resources–and your product is a success–you can make the most money this way. If it is not an immediate success, however, you stand to lose the most time and money with this approach.

Also, there is the unfortunate reality that time is your enemy. Even if you have a great idea and the timing seems right, chances are that in the time it takes you to bring your product to market yourself, someone else with more experience and resources will have already successfully introduced a version of your product and reap most of the rewards.

There are experts who can help with all or part of the process. You can find them among the ranks of ERA. They include a variety of direct marketing companies that “do it all” such as Telebrands, Ontel, Allstar Marketing Group LLC and IdeaVillage, among others. There are also smaller companies that specialize in various aspects of the process. Deciding which approach or company is right for you is a very personal decision. However, their know-how, experience and resources can be invaluable.

The least costly and fastest way to market your product is to simply license it to a large consumer products or marketing company and have them do everything for you.

“The way things have evolved in the marketplace, it’s very difficult to be small and go it alone,” says Scott Boilen, president of Allstar Marketing Group LLC in Hawthorne, N.Y. “Five to eight years ago, money was being made on TV and retail was a bonus. Nowadays, you’re losing money on TV to make money at retail, and retailers are not looking to work with new one-off vendors they haven’t heard of before.”

“People don’t really understand what it takes to market a product,” says AJ Khubani, president of Telebrands in Fairfield, N.J., one of the largest direct marketing companies in the world. “Over the 25 years we’ve been in business, I’ve seen it time and time again. Someone has a great product–their baby–but never gets it to market because they underestimate what it takes and do it all wrong, or they get bogged down and are not willing to let experts take over. There’s a reason our average is better than most–we’ve already made all the mistakes that novices will make.”

Direct marketing companies like Telebrands, Allstar, Ontel and IdeaVillage have tremendous resources, and can invest incredible amounts of time, money and resources into your product. If there is any indication from a test that your product has potential, they will do everything they can to make it a success. A product with potential will be subjected to the process of testing offers, upsells and price points, changing names or creative, and building websites and marketing programs in order to get the product to retail quickly. Retail sales, in turn, support advertising, which continues to generate additional sales.

A benefit of licensing your product is that you only have to interest one company in it. That company then puts up all the money and does all the work for you. And since they’re experts in this business, it’s usually safe to say that if they can’t make it work, it won’t work. The primary drawback to licensing is that you receive a much smaller portion of the profits than you would have had you invested your own time and capital. But you know the adage–1 percent of something is better than 100 percent of nothing.

There are numerous options in between these two ends of the direct response spectrum. One option I often suggest to inventors who have confidence, want more control and believe they know how to market their product is to test their product themselves and then make a deal with a major marketer.

TESTING THE WATERS
Let’s say you believe you have the next big winner and you have already invested years of your life and thousands of dollars into making a presentable and demonstrable product. You own the patent and you’re ready to go. If you’re prepared to take the next step yourself or are having trouble getting a marketing company interested in your product, consider doing a small marketing test yourself. If the test proves to be a success, you will be in a much better position to either proceed on your own or negotiate a more lucrative deal with a major marketing company, assuming you executed a professional test that will convince experienced marketers that your results are reliable.

OK, so what does it take to do this? Let’s assume you have prototypes of your product. Maybe you have a patent or patent pending. You’re confident that your product is ready to go. Now you need a test marketing plan and creative for a small on-air test. You’ll also need a telemarketing firm to answer the phone and a fulfillment company to process and fill the orders (assuming you are actually filling orders and not doing a “dry” test where you never actually finalize and fulfill the orders). Finally, you need someone, usually a media-buying company, to buy the media to air your commercial. These services can be handled by one company (e.g., an advertising agency); often, they’re handled by several companies.

The creative you need is traditionally a two-minute direct response commercial (often incorrectly called an infomercial; technically, infomercials are one half-hour long). If you cannot sell it in two minutes, it will never sell in 60 or 30 seconds. Many inventors believe they can produce the commercial themselves and a few have successfully, but I suggest using a DRTV creative shop that will help with development and production of the commercial and ensure that you have the elements necessary for success. Although you’re spending your own money and don’t want to waste it, you need to get it right. Regardless who you may choose to work with, there are several important things to consider when developing a spot:

• What are the key selling points of your product? Often, inventors think their product does everything. Focus on the one, two or, at most, three most important features and communicate them clearly.
• Consider your offer. This is key. Of course, the product has to be something your audience wants to buy. And to work on TV, it has to have mass appeal. However, you also need to make the package compelling so that people pick up the phone and order. Consider your price. What are the upsells? Are there any premiums?
• Be prepared to test several price points. Also, if possible, record them when you are in production. Make sure to test your best, most compelling offer first. If that doesn’t work, take a step back and try to find out why. Currently, $10 is the magic number; many things that are working are selling on TV for $10. However, if it works at $10, it may have the elasticity to go to $14.99 or even $19.99.
• Upsells are very important. If you have products to upsell already, great. If not, find them. Be prepared to test several things. Remember, in order to make this whole program work, you need to get your average order up to $30, $40 or even $50 and you can’t do that simply by offering additional units of your primary product at a discount.

Here’s how it works: Assume that 10 percent to 30 percent of people ordering will take a second unit at a discount or be up-sold a better, more expensive version of your product at a higher price. That’s great, but starting at $10 your average sale will still be too low to support your advertising. So you need to offer other things to get to $40 or $50, because you need that much revenue to keep TV going long enough to generate and support demand at retail.

TV advertising drives this whole program. It builds awareness, your brand and sales. Without TV advertising, consumers are less aware, retailers are less interested and you sell less product. The trick is getting TV to be profitable (or at least to break even) so that you can fill the retail chain, where you make the bulk–if not all–of your profit.

Whatever route you decide to follow, remember that it’s safe to assume that only about 10 percent of products are successful. That means 90 percent fail. However, those that are successful can generate a tremendous number of sales–two current examples include Ped-Egg, with 30 million units sold, and Snuggie, with 10 million units sold. Even a small percentage of these sales can translate into a lot of money.

Peter B. Aronow is a 30-year DR veteran and executive creative director at PBandJ Partners. Aronow can be reached at (631) 329-9912.

September 2009 – Cover Story: A Personal Journey

Emmy Award-winning talk show host and best-selling author
Montel Williams discusses how living with a chronic disease
transformed his life, prompting him to share what he’s learned
with others through his Living Well with Montel brand
of health and wellness products.

By Vitisia Paynich

Photos Courtesy of Montel Media Group

Montel Williams was in the fast lane on the road to success in the early 1990s with a popular talk show, which would later earn him a coveted Daytime Emmy Award. Each day, television audiences tuned in as Williams would lend a sympathetic ear to his guests who revealed their real-life problems and gripping stories on air. The talk show host, however, would later find himself facing his own personal struggle.

In 1999, Williams was diagnosed with multiple sclerosis, a debilitating disease that attacks the central nervous system. Williams battled depression and his illness privately while still maintaining a busy schedule hosting and producing the “Montel Williams Show” and working on other projects. Eventually, Williams chose to go public with his secret by writing such books as “Climbing Higher” and “Living Well: 21 Days to Transform Your Life, Supercharge Your Health, and Feel Spectacular.” In total, he has published eight books, four of which became New York Times best sellers.

His latest book, “Living Well Emotionally” debuted in bookstores on January 6, 2009 to favorable reviews.

Williams also signed a multi-year deal with syndicated radio network Air America to host a daily three-hour talk radio program called “Montel Across America.” The program premiered on April 6, 2009, addressing social, political and health issues.

On May 16, 2008, the “Montel Williams Show” aired its final episode after a 17-year run. This paved the way for the TV and radio personality to work on launching a product line and brand–Living Well with Montel–teaming with DR company Tristar Products to help market the line using an innovative format called a talkmercial, which integrates a talk show with long-form DRTV.

Tristar and Williams rolled out a test campaign in December 2008 to promote his healthy living products. “The results were exactly what I was hoping they would be,” notes Keith Mirchandani, president and CEO of Tristar Products Inc. in Fairfield, N.J. “In our business, it’s very hard to come out with a winner–you begin with a concept and when you have a winner, you get very, very excited.”

What is it about Montel Williams that has drawn interest among television viewers? As Mirchandani explains: “People believe Montel because he’s a real person who has problems just like anyone else. He’s got passion and believes in what he’s saying.”

Electronic Retailer spoke to Williams to learn more about the life experiences that inspired his Living Well products and why he believes the talkmercial format will help transform the direct response industry.

Electronic Retailer: Tell us about the Living Well with Montel brand.

In 2008, Emmy Award-winning talk show host Montel Williams ventured into DRTV to promote his Living Well with Montel products.

Montel Williams: I wrote the book “Living Well” about three years ago, which was book number seven for me. And it really was the follow-up to the book I wrote right before that, called “Climbing Higher,” which chronicled my journey with MS. But what I wanted to do was to give people some information about why I think I am doing well and why I have been credited by doctors as doing well based on the routine that I follow. So, I wrote the very first “Living Well” book to share with people what I have learned along the way from some of the top experts around the world on how to deal with chronic illness and continue to flourish and thrive.

ER: What led you to partner with Tristar and Keith Mirchandani?

Williams: I liquify about 60 to 70 percent of my what I consume every single day. And I was doing so utilizing one particular product, which was the only emulsifying blender in the marketplace at the time, the Vita-Mix blender, and I wrote about that in my book. I received letters from people all over the country who said, “Montel, I would really love to try to do what you do, but there’s no way I could possibly afford a $580 blender–it’s not happening.” That’s what really started this entire venture that’s culminated into a partnership with Tristar Products to create infomercials that would provide people with things that could help their lifestyle, help their healthcare footprint and at a price that people could afford. And truthfully, I approached Keith Mirchandani and Tristar because I had information from some people who said the company had been working on an emulsifier that had at least the same–or better–capabilities as a Vita-Mix blender. We got into a conversation about it and then Tristar got working as hard as they could. They did it and that’s what this entire process was borne out of.

ER: Was this your first foray into direct response? If so, why DR?

Williams: I’ve never really been involved with direct response. The first program that I got involved in was a commercial for pharma. It was called the PPA program–Partnership for Prescription Assistance–which was a commercial that ran for two-and-a-half years and in that period of time the program was in existence, this program ended up providing assistance for about 6 million of America’s 44 million uninsured and underinsured citizens by giving them free or nearly free prescription medication to a tune of almost $14 billion worth of medications. That’s the only television commercial that I had ever done.

And then when given an opportunity to get the information out about health and wellness, I had to look at some ways to do that. The DR method is not only a tried, true and proven strategy for getting information out, but also for getting response on products that might, in some ways, help people improve the way they live every day. And then I, of course, reached out to Tristar, which is one of the biggest DR companies in the world, and their reach seemed to be perfect. We were able to come to some unbelievable terms immediately and started identifying other products that we could develop and get to the consumer in a way that was not only going to save them money, but also make their life easier.

ER: According to a recent study, obesity rates are on the rise in 23 states. How do startling statistics like these affect a catalyst like yourself who is trying to spread the word about living a healthier lifestyle?

Williams: Well, it’s not just the obesity rate. We are the leading nation in type 2 diabetes; we have some of the highest rates of osteoarthritis; and we have some of the highest rates of heart disease. As a matter of fact, it’s one of the leading killers of women in America today. And so, as the President and the country look to impact everyone’s individual healthcare footprint through an aggressive reform of the healthcare program, [these plans] won’t come into play until 2013. Insurance companies don’t have to change their rules and regulations until 2013. Yet, there are things that people can start doing immediately. And that’s the reason why I’ve been so aggressively trying to help people get the information that I have learned. What’s that old saying: “To whom much is given, much is expected”? How can you have information that you know can have a substantial impact on people’s lives and not share it with them? That’s part of the reason why I’ve embarked on this mission. The HealthMaster emulsifier helps get into your body more nutritious foods than what people are consuming.

Because I’m putting food through my body in a liquid form, I’m cleaning my colon and digestive tract. I’m also eating fruits and vegetables–so therefore, I’ve lost weight and body fat percentage and I am definitely trying my best to maintain as healthy a form as I possibly can. This is what other people can do with products that we have through this partnership with Tristar. One of the other products that I’m very proud of is a pressure cooker. Pressure-cooking has been something that’s been on the periphery of cooking in America. Although it’s been widely accepted in Europe and around the world for the last 30 to 40 years, it’s really not an item that a lot of people have in their homes. They don’t know how easy these items are to use and cook a nutritious, healthy meal in less time to serve their entire family. So, I’m looking for items that I know are going to impact not only our health, but also save people time.

ER: What is the talkmercial format?

Williams: I produced and owned “The Montel Williams Show” for 17 years. And I thought we could blend the two formats–talk show and infomercial–together a little differently than what has been done before, given that most infomercials run half-hour installments. It was a pretty aggressive idea, but we thought if the half hour works, there’s a way to meld the two and turn it into a full hour. In an hour, you can provide so much more information than just calls to action.

So, what is the talkmercial format? It’s really taking an issue, identifying all its associated problems, attempting to come up with solutions, and marrying a product to that. Most infomercials don’t allow enough time to be able to actually spell out, delineate and identify what the full problem is and we wanted to be able to come up with a format that would give a little bit more flexibility in being able to outline those things and offer some solutions.

ER: On your show, you stress the fact that you use all the products being promoted. How involved are you in the product development phase?

Williams: Any product that I’m going to do that has my name on it, I’m going to be in on from beginning to end.

ER: You’ve been a part of the television medium since 1991. Of course much has changed in the past 18 years with the introduction of the Internet, social networking and satellite radio. As a television figure, what are your thoughts about this fragmentation of media?

Williams: I think it’s for the best. I mean, there was a time when there were two games in town: television and radio. Now, because of the fact that networks are having an inordinately tough time trying to come up with programming to fill their hours of the day, they can’t afford the $10 and $20 million per year dramatic series or the $20 million per year comedic experiences. That’s the reason why television has shifted over to this reality format, which is cheaper and easier for them to produce. And that’s why I thought about the talkmercial format: 1) The idea is stations need programming and if it’s quality programming that’s going to help people, stations will probably gravitate to us as a vendor to see if they can participate; and 2) the fact that people aren’t going to television any more for appointments makes a format like that perfect for the talkmercial because it’s on at various times of the day. You don’t actually have to pop in and see it at 3 o’clock in the afternoon, just check your local listings because it’s on 15 times a day. Also, people get an opportunity to see it through other mediums. I mean, right now if you go online to the Tristar website, Living Well website and various other places, you can get snippets of every one of our infomercials and find information about each one of our products. That’s doing nothing but helping drive people to take a look at the long form when it airs.

ER: What have you learned from your experience working in DR?

Williams: I’m glad that Keith Mirchandani and Tristar offered us the opportunity to partner because I’ve learned so much. This has helped me understand that in this world, there are some things that have been formulaic in the past, but they don’t have to be formulaic as we continue on. I’ve also learned the difficulty of making sure that in that 30 minutes or one hour, you get across all the information that you want to get across and at the same time do it in a way that’s not offensive to your viewers, doesn’t make them feel as if this is something being crammed down their throats. They can walk away at the end of that hour–even if they don’t buy your product–with some knowledge that could help them better their lives. And that’s another reason why I’ve been so excited about this format. Information is what’s important, and I don’t think information is mutually exclusive with the infomercial format.

July 2009 – Channel Crossing: Radio

Testing’s Self-Fulfilling Prophecy

By Buck Robinson

“How much do we need to spend in order to test radio?” We’re asked this question on a daily basis by potential clients–and the answer almost always knocks them back in their seat. “That much? I thought you could test radio for five grand or less!”

Therein lies the rub. Because most people looking at radio do so through TV-centric vision, their approach to our medium is completely based on their TV experience.

If the client asks, “Can I get on the air for $5,000 or less?” the answer is certainly yes. But will $5,000 allow for a comprehensive test of the medium? Not even close. Would you ever run a single spot on one outlet on TV and assume that those results are indicative of the entire medium of television? No. But that’s exactly the kind of miracle that we are constantly asked to perform on radio.

GET REAL ABOUT YOUR BUDGET
My first question is often, “What’s your real testing budget?” Let’s say they tell me that they can test a TV spot for $10,000 to $20,000 and know whether or not it works. Fair enough. However, that’s not the real testing budget–it’s just the media portion. Before they spent that investment on the placement of the spot, they spent another $10,000 to $20,000 (at least) on the spot itself.

So in reality, the testing budget is closer to $40,000. So if that’s what the client knows to be a minimal testing budget for TV, why do they assume that radio can get by on a fraction of that amount? While we don’t have that enormous production cost associated with radio, we do still need those funds to procure a far more robust media bed. Radio is a fractured, format-driven medium, and in order to know whether or not you have a potential hit, you need to go fishing for response with a net, not a fishing pole.

The ugly truth is that most DRTV marketers who consider radio don’t have high expectations for the medium. It’s a shame, because when a first-time radio advertiser walks into that self-fulfilling prophecy, he or she usually walks away jaded and unwilling to give radio a second try.

With TV, everyone knows that only one in eight, 10 or even 20 campaigns will be a hit, and yet most DRTV marketers are comfortable with those odds. But when it comes to radio, they expect it to hit it out of the park on the first or second try or else “it just doesn’t work.” Why there is such an egregious double standard set for radio I’ll never understand, but it’s one that we face daily.

Remember, the concept of a self-fulfilling prophecy works both ways. If you come into radio excited about its potential, optimistic about what it can provide to your greater marketing strategy, committed to solid DR principles and armed with a sufficient budget and gameplan for validly testing your creative, media and offer, then don’t be surprised when the end result meets or exceeds your high expectations!

On Sunday, September 13, Buck Robinson will speak on “The Secret Selling Power of Sound” during a special Power Session from 10:00 a.m. to 12:30 p.m. at ERA’s D2C Convention in Las Vegas.

Buck Robinson is president and CEO of Robinson Radio Inc., a full-service, radio-only advertising agency based in Glen Allen, Va. He can be reached via e-mail at buck@robinsonradio.com.

July 2009 – Cover Story: Breaking Barriers in Canada

A look at how ERA’s new Canadian Council will bring new awareness to members and global marketers about the opportunities that lie to the north of the United States

By Vitisia Paynich

Five years ago, Mike Moreau was a virtual stranger to the direct response world. He had just begun working for a Canadian-based inbound call center, IMI, and he knew no one in the industry–let alone anyone at the Electronic Retailing Association (ERA). IMI had garnered great success in Canada but when it came to the States, like Moreau, no one had ever heard of the company, which is why he was brought on board.

In a previous industry, Moreau had conducted business in the U.S. and was familiar with some of the obstacles that went along with a Canadian company trying to penetrate the U.S. marketplace. Much of it had to do with the fear of the unknown about their North American neighbors–an issue that Moreau had also experienced in the DR business. “When I started to sell IMI to a DR marketer in Texas and he asked, ‘Legally and logistically, how do my calls flow into Canada and how will my fulfillment company in Chicago get the orders?’ I realized there was still that barrier. And of course, you could take that order in Timbuktu and send it anywhere, because it was all done electronically.”

This prompted Moreau to become actively involved with ERA, which began with his participation on the Membership Committee. At that point, Moreau had left IMI to form his own company, Dream Team Direct, a campaign management company and supplier agency based in Winnipeg. “The thought of creating a Canadian Council came from my work on the Membership Committee and then when I became [its] chairman and was voted onto the board of directors, I thought now this would be a good opportunity,” he explains.

Thus, in 2009, ERA officially launched the Canadian Council with Moreau as chairman and fellow board member, Steve Edelstein, CEO of The Logical Step in New Haven, Conn., serving as co-chairman.

“The mission of the Canadian Council is to educate and inform our American and international friends, as well as our ERA members, about the robust direct response market in Canada,” notes Moreau. “When you’ve got a successful program operating in the United States, the next best thing is to come up to Canada. And when you think that almost $2 billion a day in trade and services are going back and forth between Canada and the United States, it’s just amazing.”

Edelstein, who brings a U.S. perspective to the council, says, “a few things need to take place.” The first is to gain an understanding and appreciation for what this market and the Canadian consumer can generate for marketers in terms of revenue. “Also, I think it’s very important to really educate the general ERA membership and direct response constituency on cultural issues,” he says, “because one of the things that I certainly have found while marketing products in Canada is there are, albeit slight, cultural differences in terms of how the product is presented, the call to action and the overall message.”

While Moreau and Edelstein are leading the charge, other Canadian members are elated that the association is taking notice of its members to the north.

“I think it’s great,” says Ed Crain, CEO of Kingstar, a Toronto-based DR agency.

“I’ve been working in Canadian DRTV for approximately 15 years and we’ve tried to work through the CMA (Canadian Marketing Association). They tried at different times to have a DRTV panel, but I just felt that the mindset wasn’t as established as it is with ERA.”

Leaders in the Canadian DR Market

		Council Co-chair: Steve Edelstein, CEO, The Logical Step	Amir Tukulj, CEO of Thane Direct Inc.	Mark Goodale, VP and General Manager, Torstar Media Group TV	Rob Woodrooffe, chairman, Interwood Direct
Canadian Council Chairman: Mike Moreau, CEO, Dream Team Direct
		Ed Crain, CEO, Kingstar	John Dickson, owner and president, Automated Fulfillment Systems	Jean-François Quevillon, DRTV and sales manager, TVA Sales & Marketing	Richard Stacey, CEO, Northern Response (Int’l) Ltd.

EXPLORING THE MARKET
According to 2006 Census figures, Canada has a population of nearly 32 million people–comparable in size to California. The country is comprised of 10 provinces and three territories.

“Canada has a relatively strong GDP and a high consumer-spending index,” says Mark Goodale, vice president and general manager of Torstar Media Group TV, one of Canada’s largest media companies based in Toronto.

Amir Tukulj, CEO of Thane Direct in Toronto, adds that Canada is a natural extension of a U.S. marketer’s business. “You gain access to a marketplace of about 32 million affluent customers whose behavior is very similar to those in the U.S. and whose purchasing power is the same.”

While the two North American countries share certain traits, Richard Stacey, CEO of Northern Response (Int’l) Ltd–a distribution company based in Toronto–cautions that marketers must still recognize Canada as a foreign country. “Although Canada is on the same continent as the U.S. and not overseas, it still has its own issues such as currency, shipping, customer service and regulations, as well as cross-border operational issues.”

Rob Woodrooffe, chairman of Interwood Direct, a distributor in Toronto, says, “It just drives me nuts to see American companies selling products in Canada in U.S. dollars, because the currencies aren’t the same. I mean, would an American ever buy a product from a marketer in the U.S. using Canadian dollars?”

Another major difference between the U.S. and Canada is language. There are two official languages in Canada: English and French. The Quebec market, which is French-Canadian, represents more than 35 percent of total DR sales in Canada, according to Jean-François Quevillon, DRTV and sales manager at Montreal-based TVA Sales & Marketing.

DISPELLING THE MYTHS
Why are some U.S. marketers wary about this market? John Dickson, owner of Automated Fulfillment Systems located near Toronto, says they often think it’s too much trouble to bother with, and therefore, stay away. “I’ve talked to many U.S. marketers who have said, ‘Yeah, we’ve looked at Canada for a number of years and as a matter of fact, we get cross-border responses from Canadians to our U.S. advertisements, but we don’t bother to fulfill them because it’s a hassle; there are border clearances and hold-ups and when we try to fulfill from our facilities in the U.S., we get customer complaints,’” he says.

Dickson says that some U.S. marketers also believe they must pay Canadian income tax, set up a bank account and a business presence in Canada, which is untrue. “We’ve explained many times that all they have to do is register in Canada for GST (Goods and Services Tax), which we help perspective clients do and it’s quite easy to set up,” he says. “Marketers also just need to form a relationship with a good Canadian customs broker. We just happen to know one that we work with often and after that happens, all a DRTV marketer has to do is just make sure the goods come over to us in quantities that will last for a while.”

If you are considering entering the Canadian market, Stacey strongly advises conducting your due diligence before making that big leap, which means consulting with a number of key players in Canada such as distribution companies, DR firms and media agencies. This will help you decide if you’re going to approach the market on your own and establish a long-term presence in the country, team with a Canadian partner to handle a few channels of distribution, or in some cases, not enter the market at all.

Woodrooffe says, “By doing it yourself, you have all the risks and you make all the profits. By having a distributor, you share the risks and the profits.”

U.S. PRODUCTS FIND SUCCESS UP NORTH
Still not convinced that Canada is a viable market? “Everything in Canada is about one-tenth of what it is in the States,” says Goodale. “Toronto is the fourth largest market in North America–Chicago, New York and L.A. are the only three that are bigger.”

Thus, he points out if you are spending most of your energy in the fifth, sixth and seventh largest markets and bypassing Toronto, then you’re leaving a big market on the table.

And if you’re wondering what DR products do well in this marketplace, look no further than IMS or Jordan Whitney–as many of the top-ranking products in the U.S. have also found success in the Canadian marketplace. Popular household products like the Swivel Sweeper, ShamWOW and Snuggie are cleaning up in this market, while fitness items like Hip Hop Abs, TurboJam and P90X are bulking up sales. One U.S. product set to roll out in Canada in July is the Dual Saw.

TAKING TO THE CANADIAN AIRWAVES
When it comes to navigating the media landscape in Canada, one must remain cognizant of regulations.

The Quebec television market comprises three conventional channels that make up 52 percent of the market share, 24 specialty channels capturing 41 percent of market share, and a few American channels that own 1.7-percent market share.

TVA, according to Quevillon, is the largest French broadcaster in North America with 59 percent market share. The other two channels, SRC and TQS, own 29 percent and 12 percent, respectively.

Quevillon adds that most of the media time on TVA is sold on a long-term basis, therefore, the majority of DR media agencies and distributors will book 52-week contracts. Yet, Quevillon points out that while inventory may seem limited, there’s room for different clients–especially with its 24-hour, seven-day-a-week infomercial station.

ShopTV Canada also has a 24/7-infomercial station. “We have 25.5-percent of all media inventory available in Canada through [that station],” notes Goodale.

“I think the significant thing that we’ve been able to do on the media side,” says Crain, “is really secure two-minute time for our marketers and run them successfully on a consistent basis. If we’re booking two-minute time, we’re clearing 75-85 percent of our schedule. Whereas, there are periods of time in the U.S. where two-minute marketers are only clearing 25-30 percent of their schedule.”

Although stations like TVA and ShopTV Canada embrace DRTV, infomercials are not welcome on every station. For instance, the Canadian Broadcasting Corporation (CBC), the country’s national public radio and television broadcaster, is not allowed to air infomercials.

Other types of restrictions that marketers should keep in mind are with regard to product claims and testimonials that appear in a marketer’s show. “You are required to obtain a Telecaster approval number from the Television Bureau of Canada (TBC),” notes Quevillon.

“The biggest restrictions I think are around ingestibles,” says Goodale. “We and a few others are working with Health Canada to try to make that process easier and more transparent for people.” Although the process may seem daunting, Goodale says TV standards and regulations tend to be commonsense things that promote good business practices and truth in advertising.

SPEAKING THE LANGUAGE
When it comes to the English-speaking market in Canada, U.S. marketers can take comfort in knowing that they can keep their shows nearly intact with the exception of some minor tweaking perhaps to the offer or even the 800 number. However, if they want to air their programs in the Quebec market, French translation is a must.

Marketers who want to penetrate the Quebec market must not only consider translating the show on the front-end; they must also consider the logistics on the backend as well. For instance, if you have a show that is translated in French, having a French-speaking call center is just as critical.

“The average U.S. marketer doesn’t realize that if you want to get a DR product into Canada, and hopefully end up on retail shelves, you must have French on the packaging,” notes Dream Team’s Moreau. “You just can’t wing it.” In addition, product instructions also must be translated into French.

THINK MULTICHANNEL
These days, marketers know that it’s not enough to simply rely on a single distribution channel when conducting business in the U.S., and the Canadian market is no different. “I think in any market today, especially in markets that are most competitive, you have to have a multichannel strategy,” Thane’s Tukulj affirms. “Your television, Internet, credit-card syndication, catalog and retail strategies all have to work together.”

If you are running a DRTV campaign, it’s imperative to also have a supporting website.

“Over the last couple of years, we’ve seen 60 percent of television orders coming from the web and we’re running a couple of products in two-minute spots where it’s as high as 500 percent,” says Crain.

Retail is another critical channel. In fact, many experts believe taking a product to retail in Canada is a bit easier than in the U.S. Thus, it makes for a good testing ground. Stacey says the P90X is not only doing well on television in Canada, but it’s also highly successful in retail even though it isn’t available in retail in the U.S.

SEEING BEYOND A BORDER
As U.S. and other global marketers consider new ways to expand their overall business, the Canadian Council hopes they will look north.

As Moreau puts it: “We want marketers to realize that Canada is the next logical step, and that there’s enough opportunity for everybody to share in this growing market.”

May 2009 – Feature: Tough Times for China

A closer look at how the global recession is affecting this country’s
manufacturing–and what all DRTV companies need to know

By Bill Quarless

Despite a worsening economy, or perhaps because of it, the DRTV business is booming in the United States. This might cause DRTV companies to overlook an important area where they are not immune to the effects of the global recession: their manufacturing operations abroad.

Here in Hong Kong, these effects are clear. Indeed, it could be argued that the industry most affected by America’s economic woes isn’t the banking industry, the auto industry or any other American industry–it’s the Chinese manufacturing industry. As U.S. consumer spending has contracted stateside, the flow of purchase orders that keeps this industry afloat has slowed dramatically. The result: An astounding 70,000 factories have closed in the last few months, putting some 20 million migrant workers from rural China out of work.

HITTING CLOSE TO HOME
Some experts are estimating that nearly 10 percent of China’s total factories may ultimately fail, leading to another 20 million without jobs. The situation is so dire that, mirroring the actions of the U.S. government, China’s communist government recently approved a $586 billion stimulus plan.

According to government statistics, the hardest hit have been the factories that supply toys and shoes. But close behind them are the factories that supply inexpensive, low-margin housewares and fitness items. In other words, exactly the type of factories that supply the DRTV industry.

• Before the global economic crisis hit, these manufacturers of low-cost products were already contending with a host of new pressures. Among them:
• A steady increase in raw material prices over the past two years;
• A new China labor law mandating labor contracts, contributions to pension funds and insurance programs for all workers;
• Stricter environmental regulations in preparation for the Olympic Games; and
• The rise of the RMB against the U.S. dollar.

BEING PROACTIVE
With already thin margins and significant fixed costs, it’s easy to see how these factors combined with a drastic reduction in purchase orders could cause so many factories to fold.

So what does all this mean for DRTV companies? There are five ways the industry will be affected by this crisis:

1 Production delays. To reduce unemployment in February, China’s State Council issued an order requiring factories to secure approval from local authorities before any layoffs involving at least 20 people or 10 percent of the staff. Since migrant workers are essentially “let go” every year and then re-hired after Chinese New Year, many factories reacted by being more conservative about how many they re-hired.

The same phenomenon is also affecting skilled labor, such as engineers and factory managers. Some 25 percent of last year’s 6 million college graduates remain unemployed, according to university data. Factories are understandably cautious about hiring these workers without steady orders coming in. Adding to their concern are new labor laws requiring factories to sign contracts with their workers. Such contracts make it difficult for employers to reduce their staff when orders dry up.

Even existing staff is being managed to reduce costs. We experienced this during the recent Chinese New Year holiday. Many factories asked their workers to leave early for the annual two- to three-week holiday, and return later, in an attempt to lower costs. These “extended vacations” affected the entire supply chain, since most DRTV products require several factories to complete the final product. Whether it’s the plastic injection parts supplier, the stamped metal supplier, the paint supplier or the box printer, if one component is not in the chain, the production is delayed.

The bottom line is that even suppliers who are enjoying booming business because of the increase in DRTV sales are scrambling to find new raw material and component suppliers. An immediate effect on the DRTV business will be longer ramp-up times.

2 Higher defective rates. Last year’s news out of China was dominated by stories of defective products. From lead paint in toys to melamine in candy and deadly baby formula, all of these tragedies were the direct result of cutting corners in an attempt to increase profits. These actions were motivated by greed. This year, similar actions are predicted–this time motivated by survival.

Life in China without an income is no life at all. Many factories will do almost anything to stay in business. DRTV companies would be well served to tighten their quality control measures in the coming year.

3 More knockoffs. Desperate factories on the brink of failure will also gravitate to where the demand is. As mentioned earlier, the DRTV industry is booming while many other industries are struggling. That can only mean one thing: An increase in DRTV knockoffs. The evidence will be everywhere at the next China tradeshow. Even factories that don’t normally counterfeit items will be showing off their copies of the latest DRTV hits.

Worse yet, there will be no one to stop them. The Chinese officials at the central, provincial and local levels all have more to worry about than copycats. In fact, they may just be glad that exports are going out at all.

4 Increased social unrest. If the financial crisis in China worsens, as many experts predict, it could have disastrous social consequences that also have implications for the DRTV business. Some experts are suggesting that a “rural revolution” is imminent amid the financial crisis. The reason: In a rural village, as many as three or four people depend on the income of a single migrant worker. So, while current estimates put the unemployment rate at 20 million workers, as many as 80 million people are directly affected. Double that if the most dire predictions for this year come to pass.

In an attempt to prevent this, the Chinese government is creating training programs throughout the country to re-train factory workers in farming and agricultural skills. For example, in the southern central city of Chongqing, some 30,000 factory workers have already taken these classes. However, China’s own leaders admit the national economy must grow by a minimum of 8 percent this year to keep everyone employed and to maintain order.

In recent months, there has been a troubling increase in strikes, worker protests and labor disputes with factories. This news doesn’t make it onto CNN, but it happens often and is a real concern for the central government. With 90 percent of DRTV hard goods made in China, supply lines could be seriously affected if this crisis deepens and is prolonged.

5 New risks. In the current economic climate, there are new risks DRTV companies never had to think about before. An obvious one: What if your factory fails in mid-project?

When demand was high, a factory could make up for lost business with new business. But these days, a few lost orders can be the final straw. And so, after selecting a factory to make your hit DRTV item and wiring them $25,000 for molds, it’s possible you could learn they just became the 70,001st factory to close its doors this year.

All of these concerns are ominous and real, but there are ways for DRTV companies to minimize their exposure. The biggest one is to maintain a constant presence in China.

Doing so will allow you to react more quickly to production delays, to give increased attention to quality control measures that prevent defectives, to police tradeshows and nip counterfeits in the bud, to stay abreast of what regions are experiencing social unrest (and avoid them) and to vet suppliers personally before you risk money with someone on the verge of bankruptcy. If you don’t have the personnel or resources abroad to accomplish this, the need for a competent and trustworthy China partner has never been more critical.

Bill Quarless is president and CEO of Impact Products Ltd., a firm specializing in China manufacturing and production management. He lives in Hong Kong and can be reached at (852) 2139-3961, via e-mail at bill@impactproducts.com, or online at www.impactproducts.com.

August 2007 – Inventor Spotlight: AeroGrow

After several years of fits and starts, the dirtless and practically foolproof AeroGarden continues to gain momentum.

By David Lustig

AeroGrow International Inc. believes in keeping things simple and straightforward. Based in Boulder, Colo., its primary business is developing and marketing the AeroGarden, the world’s first kitchen appliance that uses an advanced indoor aeroponic gardening system.

Don’t have a backyard or even a window box to grow fruits and vegetables? Not a problem. The AeroGarden sits on the kitchen counter and is ideal for growing herbs, salad greens, tomatoes, chili peppers and strawberries, among many other fruits and vegetables–all without dirt, bugs or otherwise making a mess. No matter how brown you believe your thumb to be, the AeroGarden can turn it green.

The neat, self-contained AeroGarden doesn’t require watering or even exposure to natural light.

WHAT IS AEROPONICS?
Aeroponics, explains the company, is a dirt-free growing method whereby plant roots are suspended in air with 100-percent humidity inside a highly oxygenated growing chamber. Because the roots are bathed with pre-determined levels of nutrients, water and oxygen, AeroGrow contends that its product not only grows plants faster, they are healthier and boast a higher nutrient content than those grown traditionally in soil.

The AeroGarden is about the size of the proverbial breadbox, measuring 16 inches long by 10.5 inches wide. At the start of the growing cycle, it is 15.5 inches high, eventually raising to 21 inches at its highest level. Packed inside the device is a built-in plant lighting system and computerized garden technology that automatically adjusts nutrient delivery, light cycles, water flow and the aeroponic optimizing chamber.

The nucleus of what eventually evolved into the AeroGarden started as a concept that founder and Chief Executive Michael Bissonnette was toying with back in 2002. That marked the start of the development process. Three and one-half years, $10 million and a host of false starts later, with the concept progressing from early design via an almost continual refining process, Bissonnette and company believed they had a product ready for consumer testing.

But still there were a few technical problems to iron out.

EARLY TESTING
“Before us, ‘aero’ was always roots suspended in air that were misted,” explains AeroGrow CFO Mitch Rubin. “We started with a misting concept also, but it proved to be too noisy and complicated. Our product takes water up through a pump to a grow deck while trickling it down. It’s more effective and much cheaper to build.”

The first version tested didn’t contain lights, but the company soon discovered that the product wouldn’t be successful without some sort of lighting system that precluded customers having to put their new purchase in a south-facing window.

Another trip back to R&D was necessary when a wider test found that some plants were dying in certain areas of the country, but not in others. The answer, says Rubin, was to be found in the varying pH levels of municipal water systems from city to city. The company had to develop a methodology to neutralize it. Thirty jugs of water from 30 different cities were shipped to Boulder for testing.

After examining the water, it took the company’s researchers months to eradicate the problem. At the same time, company researchers were developing technologies to make it virtually impossible for consumers to kill their plants.

RAISING CAPITAL
Meanwhile, Bissonnette kept his shoulder to the wheel, continuing to raise capital to keep the funding process on track while the company was still in the R&D phase, coming up with about $6 million through 25- and 50-cent stock offerings before cementing a deal with an investment banker. That was in 2005.

Soon after, the company settled on a design. However, Bissonnette then met a designer who wanted a shot at redesigning the product. He claimed that the product had something of a ’70s look; he said he could do a better job. He was right.

Starting all over again, the first production prototypes were shipped in December 2005 and put on the market for testing, with a first production run in March 2006 of 5,000 pieces priced at $149 (including an initial seed kit, with additional seed kits available separately).

According to Rubin, the company was trying to avoid moving too fast until the market was aware of the indoor gardening category.

EDUCATING THE PUBLIC
Once consumers understand the product, it’s not a tough sale, Rubin explains. But getting them to that point was at times difficult. People sometimes didn’t comprehend that you could grow something without dirt in a completely self-contained unit sitting on the kitchen counter. It doesn’t even require watering; it just takes care of itself.

But once people finally understood the concept, there was an appetite to buy right away, including additional seed kids and replacement light bulbs and sometimes even a second AeroGarden.

Who is the company marketing to?

“We divide our world into three key markets,” says Rubin. “Gardeners, cooks and wannabes for both. And everybody loves it. The return rate is next to nothing and customer satisfaction is incredibly high.” To make sure that buyers are properly supported, AeroGrow even set up its own call center. “We pay a lot of attention to customer service,” he adds.

The AeroGarden’s primary target market consists of gardeners and cooks, both current and aspiring. And the product is ideal for an urban environment.

SIMPLICITY IN SETUP IS KEY
According to Rubin, another key reason for the product’s success is that it’s extremely simple to put together. “You open the box and you’re 10 minutes away from getting your garden up and running,” he says. “It’s that easy.” Besides the initial seed kit that comes with the AeroGarden, 16 additional kits have been created, as well as an additional model of the AeroGarden itself.

Then there was the question of how to market it.

Depending on the month, it’s a 50/50 split between direct marketing and retail sales. Sometimes, the ratio is closer to 60/40. The product has been on QVC many times, but the first appearance, at 10 a.m. on July 2, 2006, was the clincher.

“The July 4th weekend has to be the worst time possible to air an indoor gardening product, and we had a 12-minute slot at 10 a.m. on July 2,” laughs Rubin. But the AeroGarden never made the entire 12 minutes because it sold out in just seven minutes, with more than 300 people still on the telephone trying to order. If the AeroGrow people believed they might have had a winning product before the airing, they were absolutely certain afterward.

GETTING THE WORD OUT
“We’ve been very controlled with our retail rollout so we don’t dilute the effect of our DR advertising,” continues Rubin. “We don’t want to impair our ability to get the word out with respect to the product and the category.

“Our retail presence is concentrating on high-end outlets, such as department stores and high-end lawn and garden stores, not ‘big-box’ stores.” Rubin adds that the company is now chainwide in Linens ‘n Things. “We’re very focused on distribution. We’ve also placed the product in 800 independent culinary stores, and lawn and garden stores nationwide,” Rubins says, explaining that these types of stores are usually eager to accept the AeroGarden displays, set them up and grow plants.

“If we’re going to be a box on the shelf, we’re not interested. Everything we do is focused on merchandising, branding and awareness. Everybody who sees it in use wants one.” Rubin adds that he has one of the original prototypes in his kitchen and proudly proclaims he’s now on his fifth seed kit.

WHERE TO ADVERTISE
The company has focused on every high-end catalog in the country, combined with an intensive public relations effort. It has been seen on the “Ellen DeGeneres Christmas Show,” “Good Morning America” and “The View,” among many others.

The company’s first infomercial, on national cable, aired September 2006. Right now, AeroGrow’s media budget is 70 percent cable and 30 percent broadcast, with little if any print advertising in any form.

AeroGrow also executed what Rubin calls the “New York Blitz” program. “We put a lot of money into PR and merchandising in the New York City area, with the goal being to demonstrate retail velocity in a single market.” The company went after and captured floor space at Macy’s, Bed, Bath & Beyond and Fortunoff–a chain of stores in the Northeast.

Meanwhile, the infomercial had to be pulled off the air in December, just three months after launch. Why? After selling tens of thousands of units, AeroGrow was out of product.

PLANS FOR THE FUTURE
In February 2007, AeroGrow announced that it had shipped its 100,000th unit. And while the company claims to have no competition as of yet, AeroGrow is not resting on its laurels. Next steps include the launch of overseas campaigns. According to Rubin, the company is preparing to enter the Japanese market, as well as Europe.

And if there are any competitors preparing for launch, they’ll have a fight on their hands. “We are prepared to pull units at any price point anyone would want to come up with or show,” Rubin says. “Our mission is a price point and product by next year for Christmas for every distribution channel.”

David Lustig is a contributing writer to Electronic Retailer magazine.

 

November 2007 – Channel Crossing:Legal

November 2007 – Product Inventions

New Product Hot Spot Debuts

By Pat Cauley

Glenda Sidman demonstrates The Germinator.

The Improved Pooper Scooper took home the award for Best Potential Web Product.

Abby Novel showcases her product, Jewel Tree.

James Acevedo shows off the Wireless Smoke Alarm System.

Anie Piliquian demonstrates her JoolTool Sharpening and Polishing System.

The Freeform Hideaway Home Gym in action

Product Strategies’ Michael Planit (right) gives James Deola the Best Potential Long Form Product award. Deola also won the Inventor of the Year award.

Nestled right in the heart of the tradeshow floor, ERA’s New Product Hot Spot garnered tremendous amounts of attention at ERA’s 17th Annual Convention in Las Vegas. The NPHS, previously known as the Invention Showcase, has become something of a novelty for the annual ERA show, where aspiring inventors get a once-in-a-lifetime opportunity to pitch their products and ideas to industry professionals.

“It contributed a lot to the show floor and the overall buzz and excitement of the conference,” says Sheridan Malphurs, the ERA staff liaison for the NPHS. With 37 exhibitors and more than 40 products, attendees were treated to displays ranging from a tornado warning alarm system to a hands-free umbrella bag. Inventors were not simply thrown into the fire without direction, but were actively engaged in education sessions to help them sell their products. On October 1, a breakfast was held where invention experts Wendi Cooper of C Spot Run Productions, Product Strategies’ Michael Planit and D. John Hendrickson, Esq. of Manhattan Advertising & Media Law, helped the inventors with everything from product pitches to marketing basics. “The NPHS breakfast meeting was very informative. The information Wendi, Michael and John gave to us was excellent,” says James Acevedo of First Escape Inc. Inventors also were invited to participate in an interactive DRTV 101 session, where they had the opportunity to present their product ideas to a panel of industry professionals representing companies such as Vertical Branding Inc. and Guthy-Renker.

This year’s NPHS had a number of changes from previous years. Traditionally, the Invention Showcase was reserved for ERA members only and closed off to additional attendees. This year, in conjunction with its position on the floor, the influx of attendees vying to enter the NPHS was incredible. In order to appease the masses, an executive decision was reached to open up the inventors’ exhibits for all eyes to see. Abby Novel, winner of the NPHS award for Best Potential Short Form for her Jewel Tree, thought ERA staff made the right decision. “The more exposure, the better,” she says.

Another new element was the leadership of Product Strategies’ Michael Planit, who chaired the Invention Task Force. Cooper passed the leadership torch to Planit and was very proud of the level she helped bring the Hot Spot to after many years of hard work. Planit, for his own part, brought a new energy to the NPHS, which was evident earlier this summer when he recruited inventors at the INPEX show in Pittsburgh. “Michael was amazing. I hope he chairs it again next year,” says Malphurs. Planit was also instrumental in the opening up of the NPHS. “I think tearing down the walls to the Hot Spot made it more exciting for everyone. It opened up more opportunity for everyone and became an ERA Convention benefit.

Along with the educational opportunities and exposure, there is also a value when the inventors get to spend time with fellow creative-types. “I thoroughly enjoyed meeting other inventors and seeing how diverse the human mind can be,” says Novel. “Networking with other NPHS attendees was great for sharing pitfalls and accomplishments,” agrees Acevedo.

The NPHS reached its climax in the afternoon on October 2, as ERA President and CEO Barbara Tulipane invited attendees to gather by the entrance of the Hot Spot for the awards and reception. Awards were then presented by Planit and Malphurs to the inventors they had worked with closely over the previous few months. Glenda Sidman won the award for Best Potential Print Product for her invention The Germinator. Paul Holbrook’s Improved Pooper Scooper took the award for Best Potential Web Product. First Escape Inc.’s Wireless Smoke Alarm System, developed by James Acevedo, won the award for Best Potential Radio Product. Anie Piliquian’s JoolTool Sharpening and Polishing System won the award for Best Potential Live Shopping Product. The Best Potential Short Form Product went to Abby Novel’s Jewel Tree. “I was totally astonished when I won the award; this was my first show,” says Novel. Best Potential Long Form Product was given to James Deola for his Freeform Hideaway Gym. Deola went on later in the night to win the award for Inventor of the Year at ERA’s Annual Awards Gala.

“The show was very well done and certainly a great opportunity to network with all of the key players in the industry. It was an excellent opportunity to get feedback from the professionals on the marketability of our products,” says Deola. This year’s NPHS sponsors included Koeppel Direct and Ingenio Inc. ERA wishes all the inventors the best in their pursuit of their dreams and direct response.