September 2010 – Channel Crossing: Legal

Do You Need a Legal Physical?

When was the last time you had a physical? What about a legal physical? If you’ve got a product you’re selling on TV, online or at retail, it may be a good idea to get one from a qualified attorney.

The Examination
Not to worry you, but here are just a few of the subject matters to be considered in the course of such an examination:

• Product/Patent rights. If you obtained your product or invention from someone else, do you have a written contract? Does it include all the rights you need to market the product for as long as you will need to market it and in all the channels of distribution you desire? Is there a patent application or patent? Should a patent application be filed, and if so, by whom and at whose expense? What about international IP protection? Can the product be marketed without infringing someone else’s patent, i.e., has a search of other patents been conducted? Are the royalty and other financial obligations clear?
• Name/Trademark rights. If you obtained the name or trademark of your product from someone else, do you have a written contract? Is it a license or assignment? Does it give you the rights you need to use that name or trademark in commerce as and when you desire? In the contract, is it clear who is indemnifying whom and holding them harmless against future third-party claims, alleging trademark infringement if any arising out of the use of the mark? Is the mark even available for commercial use in the United States or does it infringe registered or unregistered “common law” trademark rights of a third party? Is it confusingly similar with a third party’s mark? Has a full search been done on this, i.e., beyond just a Google search and a www.upsto.gov search? If it is available, should a U.S. trademark application be filed, and if so, what kind, by whom and at whose expense? Is the mark too descriptive to be registered with ease or too easy for someone else to come close to with a similar but lawful “knockoff” name? What about international registrations? And, is the name perhaps too good, meaning the FTC might view it as being deceptive if it impliedly conveys to the ordinary consumer that your product has some benefit, if that claim isn’t substantiated?
• Ad Copy/Copyrights. Who owns the spot or infomercial for your product? Who owns the content of the website? Is there a written, signed “work-made-for-hire” agreement or copyright assignment contract with every person who provided any creative input, so the “chain of title” is clear and is in your name for copyright purposes? Has the material been registered with the U.S. Copyright Office? What about registering the material with U.S. Customs? In your contracts, is it clear who is indemnifying whom against third-party claims, alleging copyright infringement arising out of the material?
• Production. Is there a production contract? Is it clear? Does it include the necessary “work-made-for-hire” language? Does anyone (e.g., talent) have a right of script review or approval? Have you consulted with legal counsel about the script and advertising claims? Are there any edits that should be made or supers or disclaimers added for legal reasons? Were the product demonstrations “rigged” in any way? Is there a release form signed by all on-camera talent? Is there a testimonial affidavit signed by all of your testimonialists? How were they recruited? Were any of them paid or given anything and if so how much, when, by whom and for what?

If you have an expert (e.g., a doctor) who is going to endorse your product in your ad, what exactly did he or she do to evaluate the product and to support whatever he or she is saying or implying about it in the ad; and is there a signed expert endorsement affidavit to back it up? Under your contract, is it clear who will indemnify whom for any third-party claim of copyright infringement or false advertising arising from the ad?

• FTC claims review. No advertising should be done without there having been some FTC claims review or consultation ahead of time. What express claims are being made? What would the FTC believe the implied claims are? Liability exists for both express and implied claims. For each, do you have adequate substantiation according to FTC precedent? Given your product and your claims about it, what degree of substantiation would the FTC likely require? Do you need a clinical? Do you need two? Does it need to have a placebo group or other design features? Is there any preexisting substantiation you can borrow from, that may apply to your product and your claims? What edits could be made and what supers or disclaimers added, for a reduced legal risk level? What substantiation could be developed? Does your product or your claim about it fall into a category that the FTC historically has been interested in (e.g., weight loss)? Are you subject to other regulatory bodies such as the FDA? Do you use testimonials? If so, have you ascertained and are you disclosing the results that one can “generally expect” from use of your product in the depicted circumstances? Are you using the word “free” and if so how and why? Are you “guaranteeing” any results? In terms of the online space, is your privacy policy adequate? Are your terms of use adequate? Are you running a sweepstakes or contest? Are you using disclaimers and disclosures properly and in the right locations? Are you using online affiliates or affiliate networks? If so, is their conduct in compliance with the FTC Act and the FTC’s guidelines? The same question goes for any bloggers or other social media participants you pay or to whom you may send free product or gifts. Are they, for example, disclosing the material connection that they have with you (e.g., that you gave them free product)? Finally, in your contracts, who is indemnifying whom for FTC or other third party (e.g., attorneys general) claims of false or deceptive advertising?
• Contracts. Does everyone who has an obligation to you, and does everyone who has a right to be paid by you, have a signed contract? Is anything vague, ambiguous, unclear or otherwise a “loose end,” and if so which party does that favor?

Consult with an Expert
On some of the above matters, it may be reasonable to defer getting legal advice until you’ve tested your campaign and you know it will make money; but on others, it is a major risk to do that. Figuring out which is which is the first step. As they say on TV, “always consult your physician before beginning this or any other exercise program…”

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

September 2010 – Feature: Special Section-An Industry Remembers

Direct response veterans reflect on 25 years of the infomercial and the lessons that they’ve learned along the way.

BY RICHARD SCHEINER

Welcome to the fourth installment of Electronic Retailer’s celebration of the 25th anniversary of the infomercial.

As we all now know, Al Gore did not invent the Internet by himself, and Lebron James can’t win a championship without some help. It takes many individuals to create a success, and the direct response industry is no exception.

As inventors, marketers, producers, media agencies, telemarketers, fulfillment service suppliers, webmasters and product manufacturers–many of us have played our part. Some individuals have endured the test of time, and others have stepped in to bring the genre to the next level.

In preparation for the D2C Convention in Las Vegas in September, the ERA Public Relations Committee and ERA staff have been busy at work, assembling exhibits of some of the industry’s most iconic and memorable infomercial products to be featured at the convention’s 25th Anniversary Pavilion. Included will be product samples, clips of memorable shows, and information on some of the people and companies that have contributed to the growth and success of the infomercial. We urge all attendees of the convention to stop by the pavilion to visit and reminisce.

This month, we hear from Mercury Media’s John Cabrinha and Dan Danielson, Tim Hawthorne of Hawthorne Direct, Jeffrey Knowles of Venable LLP and Richard Stacey of Northern Response (Int’l) Ltd.

Richard Scheiner is chief operating officer at International Commercial Television Inc. in Wayne, Pa.

Dan Danielson
and John Cabrinha
Co-Founders and Co-Chairmen
Mercury Media

Electronic Retailer: How did you both get into the DRTV industry?

Dan Danielson: John Cabrinha got his start in the DRTV business in 1982, answering telephones for one of the first home shopping shows called “Telephone Auction.” He worked his way up from an operator to a media buyer and was actually an “on-screen demonstrator” a couple of times.

John Cabrinha: I met Dan Danielson at a company called SyberVision in 1987. We were two of the first people to ever call a television station and convince them to sell us a half-hour. We developed relationships with cable systems and broadcast stations all over the country. Back then, stations didn’t know what the value of the time period was and neither did we, so we did some calculations on what they should sell it to us for, and we waited for the response to see if we were correct. We quickly developed a database of stations, markets and time periods and what price they worked for and what types of products were successful.

Danielson: This was so early in the history of DRTV that half-hours weren’t even called infomercials back then. There were only a handful of shows on the air during that time, and we were all learning things as we went along.

ER: Is there any one product that you believe changed the face of DRTV for the consumer?

Danielson: If we look back over the past 25 years of infomercials, we could almost create a time line of the business over those years based on the “mega-hits” that were out there–the products that became household names. Some people in the industry are too young to remember some of the older titles that were there at the start of the business.

SyberVision: The Neuropsychology of Weight Loss was one of the first “home look- and-feel shows.” So many shows followed the style that this show set in 1987. Tony Robbins Personal Power was one of the first shows to use true celebrity hosts and to appeal to a mass audience. Ron Popeil’s Food Dehydrator and Pasta Maker were two of the first massive kitchen product hits. There were other kitchen shows that worked, but Ron took it to another level.

Cabrinha: Tae Bo is one that we consider “the” mega hit because it was the first show that hit the airwaves and ran so much media in a relatively short period of time, and people still talk about it to this day. It is a show to compare your success to, and that success was met or exceeded over a long period of time by The Total Gym.

We consider Bare Escentuals to be the quintessential makeup product that created a brand and had a long TV life and shelf life. Magic Bullet would be considered the modern day big hit. It’s had a long TV life, went to retail and continues to be successful in both channels. They set a trend and broke the mold. I’m sure there are so many shows that we are leaving out that were monumental: Proactiv Solution (long life, brand establishment), Power 90 (exercise, weight loss, customer satisfaction, web, etc.), Kevin Trudeau (various shows developing the talk-show format). Also, Time-Life (with the music and video). We could go on and on.

ER: What is your most memorable (insightful, funny or endearing) story of the DRTV industry or a colleague in the industry to date?

Danielson: We have been doing this for such a long time now that we have so many stories and experiences that have been funny, exciting, humorous and sentimental. As the industry is getting older, the individuals in the business are getting older. We have lost some of our fellow industry pioneers in the past few years. We have always loved this industry because of the people. We have worked with so many great people, whether as clients, vendors, consultants or just friends growing up in the business.

There are lots of stories that we can’t publish, and there are many that are way beyond the word limit we have in this article. The one reason we keep going to work every day and attending every industry event is because we love the relationships and the people we have met over the years, and look forward to seeing those relationships continue to blossom, and hopefully continue to develop relationships with new people as they come into this industry.

Timothy Hawthorne
Founder, Chairman and Executive Creative Director
Hawthorne Direct

Electornic Retailer: What were you working on 25 years ago, in relation to DRTV?

Timothy Hawthorne: In November 1984, I sat in the basement of a local electrician’s home (one of the few C-band satellite owners in Fairfield, Iowa), struggling to tune in tiny cable network, Satellite Program Network (SPN), awaiting the telecast of my first infomercial to air in what, unbeknownst to me, was soon to be a new era of DRTV.

Moments after the hour-long infomercial, I anxiously called our small telemarketing partner in Omaha for results. I was disappointed to learn only 100 orders had been posted. One hundred seemed like a fraction of the potential, considering SPN was in 5 million homes. I pulled out some scratch paper and did my first MER calculation: cost of media: $3,000. Sales: $30,000. Ohhh…a 10 to 1. Thus began my transition from DGA director and documentary filmmaker to DRTV advertising. Over the next 18 months, I helped build the Beckley Group, 525 staff strong, with over $100 million in sales–one of the first major long-form direct marketers.

ER: How has the DRTV industry changed over the past 25 years?

Hawthorne: In 1986, I launched Hawthorne Direct, an ad agency dedicated to bringing long-form DRTV to brand advertisers. For 15 years, I had been telling compelling human interest or investigative stories via documentaries; now I was telling product stories. I still considered myself a filmmaker, not an adman–but these “product stories” presented an even greater challenge: results not measured in TV ratings, but sales and immediate feedback on how successful I executed my visual communication skills. It was thrilling and frightening at the same time.

My vision was that all major brands should capitalize on long form’s inherent power: “The more you tell, the more you sell.” It took a while, but over the past 25 years, hundreds of brands have incorporated DRTV into their marketing mix. Along the way, average production budgets tripled, media prices quintupled and hit ratios “inverse septupled” (from 1/3 to 1/20). Simultaneously, our business has gained complexity, credibility and customers, and expanded product categories, professionalism and stability.

ER: What, if any, technologies and trends will influence future growth and help to shape the DRTV industry?

Hawthorne: PVR, VOD, Internet, mobile, interactive TV, gaming, local, TV Everywhere, Digital Out of Home, social, apps, fragmentation, consumer choice: these are the hallmarks of the New Media age–nothing less than a revolution in communication and advertising as significant as moveable type.

The 65-year-old linear TV viewing experience will remain for a few more decades but diminish in use, replaced by viewers interacting with advertising messages on four screens: TV, computer, mobile (hand set or tablet) and out-of-home digital displays. The primary threat to all advertising remains: in a world of infinite choice, how do we engage viewers in our products’ stories? Any ad delivery mechanism that provides consumer control, immediacy and relevancy will win out in the end. But ads incorporating the trademarks of DRTV–great products and motivating offers–should always find success.

Jeffrey Knowles
Partner
Venable LLP

Electronic Retailer: How did you get into the DRTV industry?

Jeffrey Knowles: In the late ’80s, my brother, an entertainment attorney in New York, introduced me to Tom Fenton and Dick Kaylor at Synchronal. I did some legal and FTC-compliance work for the company, which was then the largest infomercial company in the nation.

In 1990, Congressmen Ron Wyden and Norm Sisisky invited members of the infomercial industry to testify at a hearing about the industry’s practices. I was tasked with preparing Greg Renker, co-founder of Guthy-Renker, to testify as the industry’s representative.

During Greg’s testimony, Sisisky asked whether there were industry standards or an industry group representing the interests of companies producing infomercials. When Greg said there were none, a light bulb went off. I decided the industry needed an association, and I set out to organize it.

Over the next few months, I worked with Greg and other industry leaders to form the National Infomercial Marketing Association (NIMA), which eventually became ERA. Twenty-one years later, the rest is history.

ER: What product or products have changed the face of DRTV within the past 25 years?

Knowles: In my opinion, Proactiv Solution is the single most transformative DRTV product over the past 25 years. It has generated more sales than any other DRTV product, and Guthy-Renker’s success integrating A-list celebrities into direct marketing marks a turning point in the industry’s history.

The Thighmaster was another transformative product. As the first wildly successful exercise product marketed through DRTV, it paved the way for other exercise programs such as Tae Bo and P90X that have continued the tradition of reshaping the industry and customers’ lives.

Thighmaster was also one of the first DRTV products to experience widespread counterfeiting and marketing of knockoffs. Many of the legal strategies we employ today to defend clients’ intellectual property were developed while protecting the Thighmaster.

ER: What is your most memorable (insightful, funny or endearing) story of the DRTV industry or a colleague in the industry to date?

Knowles: Greg Renker’s testimony before Congress in 1990, was a turning point for the industry in more ways than one. I will never forget how Greg carried himself during the hearing. At the time, he was only 33 and was president of one of the fastest growing direct marketing companies in the nation. Only a few years earlier, he had been working at the Indian Wells Racquet Club. I had prepared a number of executives to testify before Congress during my career, and it’s safe to say none of them were like Greg.

Watching him in front of the committee and the steady gaze of television cameras from all three major networks, you could tell he was something special. The way he carried himself, the way he responded to questions with the perfect combination of conviction and respect, I could see this was a guy with the intelligence and passion to reshape an industry.

Richard Stacey
President and CEO
Northern Response (Int’l) Ltd.

Electornic Retailer: How did you get your start in the DRTV industry?

Richard Stacey: In 1984, I had a company in Canada selling home-study courses that I wrote on how to get rich in your own business and real estate. They were sold through seminars and mail order. I began seeing infomercials in the United States, selling similar courses by people like Tom Vu, Tony Hoffmann, Hal Morris, Paul Simon and Ed Beckley. I decided to write a script for a 60-minute show called “Blue Print for Success.” That show was a condensed summary of my eight-hour live seminar.

The first time we aired it, the station ran it for free, as they thought it was a public-service educational show. That’s how “early” those days were back then! The phone lines were jammed for over a week from that first single Sunday afternoon airing. From that day forward, I was in the infomercial business.

ER: What product or products have changed the face of the DRTV industry within the past 25 years?

Stacey: In the beginning, the infomercial industry was mostly home study and self-help courses. As the ’80s progressed, companies began experimenting with hard goods like the Hard-Hammered Chinese Cooking Wok or the Annushka Cellulite Reduction Kit. Then the industry literally exploded and everybody got into it. At the same time, the cable industry was expanding so they had plenty of airtime to sell and the industry had plenty of shows to fill it. It was a perfect partnership. We locked up huge blocks of airtime often from midnight to 6 a.m. on most stations. We stopped producing shows and started distributing them. We’ve now distributed over 3,000 shows over the past 25 years. The products have not changed too much–need, greed and vanity still sell. There are certain types of products that fit the DRTV genre in short form and long form. Lately, it’s more about retail and products that can be introduced by DRTV and later sold into Walmart.

There are many memorable and breakthrough products and productions that took the industry to new levels each step of the way. I always thought Media Arts with its Amazing Discoveries series had a big impact in the early days by showing what was possible. Guthy-Renker took it up a notch with its first Personal Power show, which again demonstrated a new standard of quality in DRTV products and production. These types of shows pointed the way.

ER: What is your most memorable (insightful, funny or endearing) story of the DRTV industry to date?

Stacey: What I have always loved about this industry is that there is always something new and exciting going on. Probably the most important insight is that there is no telling what people might buy–it almost always pays to test. Our biggest hits are often ones that you would not have predicted in advance. Sometimes, a show is not so well produced or the product is sort of gimmicky, but that is often what sells.

I remember years ago, a show on how to get better grades in school that reportedly cost a million dollars to produce (a lot of money at that time), that was shot on film and starred many sports stars like Wayne Gretzky. We had to call the station to see if it aired–there wasn’t one call! A few days later, we aired a very simple show called Smart Mop and it took off like a rocket. So you just never know. It also means you have to always keep an open mind because no matter how crazy or off-beat a product is, it might just be the next winner.

September 2010 – Columns: Shop Talk

Here, There and Everywhere

For decades, conventional TV advertising wisdom suggested it took three net impressions to break through to a consumer. Infomercials were a counter-point to this argument because they did not require frequency—a viewer could be sold in one complete, half-hour pitch. While that may still hold true, things may have come full circle. With so many messages competing for a consumer’s attention combined with escalating media fragmentation, a direct marketer needs to be here, there and everywhere.

Piquing Consumer Interest
Here are some innovative ways to create consumer impressions that help develop awareness and prime viewers so that when they see your direct pitch, they are ready to buy:

• Mobile -With nearly half the world’s population now owning a cell phone and 3.3 billion global subscribers, the so-called third screen (after the TV and computer) has come of age. The iPhone alone has 200,000 apps and endless opportunities for advertisers. With the generational shift away from the TV, this can be an excellent way to broaden your consumer base.
• Product Placement - The ongoing boom in reality television gives marketers many opportunities for product placement. For example, Kymaro’s Rhythm Rocker will be featured in a new NBC series, “Ultimate Women Challenge.” The product will be showcased prominently as contestants use it to get fit in this mixed martial arts competition.
• User-Generated Content – Do-it-yourself satirists are posting their own versions of commercials and getting millions of views. Marketers should embrace such lampoons—it comes with the territory. But amateur archivists are also doing their own time lapse of body transformations by using fitness programs marketed through direct means. The unadulterated authenticity of such programs is simply terrific, organic promotion, but it doesn’t mean that marketers can’t do it for themselves, as long as they disclose material relationships with endorsers.
• Video sharing sites - Everyone thinks YouTube, but there are nearly 70 different video sharing sites that allow marketers to post content. Advertising, product reviews and personal appearances on talk shows are just some examples of what can be posted. Even an infomercial can be dissected and then organized so that consumers can get ready access to the content they seek.
• Blogging - It isn’t just about your blog—it’s about their blog. Many bloggers will post opinions about your products. And yes, such posters have to disclose any free product that you provide, but who cares? Find trendsetters in your category, send them free product and bask in their evangelistic glow.

While every marketer would like to achieve the brand ubiquity of a Nike swoosh—or even a Snuggie—sometimes, you have to seed the marketplace. While such tactics may not be as easily quantifiable as pure direct marketing, today it’s not just about being seen on TV, but everywhere the consumer is paying attention, and that could be anywhere.

BJ Fazeli is president of BJ Global Direct and Concept2Consumer. Contact Fazeli at (949) 825-5822.

August 2010 – Department: Product Talk

Nothing in the universe ever stays the same; it is either expanding or shrinking. That is especially true of your product’s reputation. Without professional networking, advertising and social media to build and expand your product’s reputation a terrible thing happens…nothing! It is becoming more and more apparent to me that the new thread common to all important product talk has come down to product reputation management. You may still call that function publicity, or advertising, or search engine optimization (SEO), or professional tradeshow networking or social media, but it all really comes down to reputation management. We’ve all heard of new media or modern media so let’s talk about “new networking” or “modern networking” and the importance of building a product’s positive reputation as part of your networking efforts. You will enhance your prospects for successful tradeshow networking if you launch even a low-cost product reputation campaign, which is specifically designed to enhance your networking prospects. Savvy media executives actively Google search direct response product categories—from weight-loss products to household items—to find hot new products online and to learn what comments people are making about them. So seasoned product promoters have learned they have two jobs to promote their products: 1) launch an online SEO campaign to create some product awareness by building the product’s online reputation; and 2) introduce their product’s good online reputation through professional networking with buyers and media marketing executives. If your product does not have a reputation, no one will search for it or find it. If you don’t know how to build a reputation for your product, you need professional help. If your product has a bad reputation (deserved or undeserved) you need to cure it by fixing the product or fixing your product’s reputation. And if you’ve launched your product and it has a successful reputation, then it is still easily vulnerable to reputation assaults by cunning competitors (a different management problem). So I believe direct response networking and marketing all begin and end with product reputation management (yes, a lot goes on in the middle, too). This month’s panel has many years combined experience in direct mail, online marketing, social media and print advertising. Joy Gendusa, PostcardMania CEO, founder and direct-mail marketing maven, recently learned that she is amongst the “Top 50 Entrepreneurs” when Business Leader Media announced its first annual awards. Gendusa focuses on her passion to educate business owners in effective ways to grow and expand their companies through various marketing techniques. Marianna Morello is president and CEO of Manhattan Media Services, a media buying company based in New York City that specializes in direct response print advertising. Morello has 30 years’ experience creating successful print strategies for clients such as Bosley, Hair U Wear, Telebrands, IdeaVillage, Jamster, JBrand and many others. The company works with clients from print media creative all the way through placement, buying, test runs and full rollout campaigns. Mike Hughes is an independent reputation management expert. www.ReputationManagementPartners.com To offer product analysis in a future column or to join our virtual trade-show network, visit www.YouTube.com/ ProductTalkShowcase, e-mail us at producttalk@gmail.com or call (925) 210-9005.

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Gendusa: This is a low-cost item that you need to sell in volume so you’d start with TV, radio and billboards rather than postcard marketing. Hughes: Let’s talk about your experience with marketing products and use the Yoshi Blade knife as an example. Gendusa: Well, what I can tell you is that the Yoshi Blade has done a very good job because I know what the Yoshi Blade is. I actually just saw one in Walgreens. I thought, “I would like to have a Yoshi Blade.” I haven’t made the purchase yet, but I understood it and I knew what the Yoshi Blade was because they’ve done such a good job of getting their name and explaining how their product is different out there. To get more market share, I’d just continue what they are doing because it’s working. Hughes: So you’d use that direct-response exposure to broaden their market in retail sales? Gendusa: Yeah, I haven’t seen it in Home Goods or TJ Maxx so those would be good places for the Yoshi Blade, as well. Hughes: Let’s go back to product reputation marketing. What does it mean to you? Gendusa: You are trying to change the opinion of another human being and bring them over to a certain kind of understanding to do what you want them to do. So it’s really just a matter of communicating with people and getting people to react. That’s really basic and that works in traditional marketing, direct-mail marketing, e-mail marketing, web development and design, and user functionality. It all has to do with raising the rapport that you have with the individual prospects and getting them to make that decision to purchase. Those basic points of marketing are used in all forms of media. Morello: The Yoshi Blade is doing very well in print, on two-minute TV spots, online and at retail. The push has been to use direct response as the push to Walmart and “As Seen On TV” retail products. Hughes: How important is professional networking for someone interested in launching a new product? Morello: It’s very important—networking and knowing all the different players and whose the best at doing what. Whether it’s a call center or a fulfillment center of someone whose going to produce a commercial of the creative on your ad, networking is vitally important. Hughes: What about online marketing? Morello: Consumers are going to go online before they decide to buy rather than from TV, radio or print. The online testimonials that you have for a product will push consumers to a sale and any negative comments will cause people to think twice about a purchase. Hughes: What advice would you give someone starting out with a $19.95 product to begin a step-by-step launch? Morello: For an in-home product like this, we look at the free standing inserts (FSIs) on Sunday. We test at a low CPM to find out if we have a winner. We also look at things like Parade magazine and Weekend, which are in the Sunday papers as well. This gives us a quick reading. Once we know we have a very good response, it means the ad is working. If we are getting that type of reading, then we are definitely going to want to roll it out.

PRODUCT VIDEO #2: HotelsEtc. Lifetime Discount Card – RETAIL $89.95 Become a member of HotelsEtc. and use the company’s pre-negotiated discounts to save every time you travel, go out to eat or even buy a movie ticket—for the rest of your life! All of HotelsEtc.’s travel and entertainment discounts have been negotiated and tested to provide 100-percent accuracy. So, imagine going on an all-inclusive vacation to Hawaii, the Bahamas, or even Italy, and staying in a five-star resort for the price of a two-star resort. Or, imagine taking your family out to dinner and saving 70 percent or more off your restaurant bill at over 15,000 restaurants.

Gendusa: I think the HotelsEtc. Lifetime Discount Card sounds really interesting. If I received a well-designed post card that explained how I could get 70 percent off my travel by just spending $89.95, I would be sold. It’s a great offer for somebody who travels a lot. If you are targeting travelers, it’s perfect. I travel so much and I always stay at good hotels and it adds up. It really sparked my interest and with direct mail, you get a high enough response rate to warrant an $89.95 purchase. Morello: HotelsEtc. sounds like a very good program, especially with the economy being what it is. If you are a member, you get substantial discounts and it’s worth the $89.95 price point. To have all these things available to you for hotels, cruises, car rentals and more, it seems like a very worthwhile price for a membership like this. Hughes: How important is it to promote a product that is already on people’s minds, which is making and saving money today? Morello: In this case, you need to repeat the benefits. With the economy being what it is, people are looking to save money. The current unemployment rate has caused people to stop going out to dinner at restaurants as frequently. So on a local level to be able to go out and have a restaurant meal at discount pricing, I think they will be very interested in the HotelsEtc. Lifetime Discount Card. Hughes: For a few hundred dollars you can also buy the cards at deeply discounted wholesale rates to resell as a money-making opportunity. Morello: If there’s a way for consumers to market the cards locally for discounts on restaurants, theaters, museums, etc., then they seem to have everything covered. I think for a person who wants to start a home-based business—as a lot of people are trying to do—it sounds like a good opportunity. Hughes: Using your experience to speak as a marketing visionary, what advice can you offer new product promoters? Morello: First, you need to know whom you are marketing to and be very specific. If you are marketing to seniors, the market is huge and print alone may be just right. However, if you are marketing to the younger generation, you cannot look only at marketing online as being the future. Print is something that’s going to be around for a long time—even with younger people who love the gossip magazine. They read In Touch, OK!, Us and Star. The younger people are reading magazines and responding to ads. The web is drawing a lot more traffic than it used to. I think it’s a fantastic combination with print.

August 2010 – Special Section: DR Milestones

Applauding the impact of the infomercial and the visionaries who recognized the opportunity

BY KEITH CONNERS

Welcome to the third installment of Electronic Retailer’s celebration of the 25th anniversary of the infomercial.

It seems like yesterday the Chia Pet hit the airwaves and allured audiences of all ages to the point where they rushed to buy one. As a boy in the early 1980s, I had the opportunity to witness this product come to life in front of my eyes.

Or what about the Clapper? This was truly an awe-inspiring invention and I had to have it! The new vehicle promoting these innovative products like the Chia Pet and Clapper was a sneaky phenomenon that penetrated our households and set the stage for the powerful marketing tool known as the infomercial.

Behind the scenes in the early days, were a few influential pioneers who recognized the opportunity inherent in the infomercial. I can hardly imagine the exciting experience it must have been to develop those early long-form commercials, buy media time and wait to see what happened!

Of course, we all know what happened…sales soared and many inventors got in line to place their product on television. A natural progression occurred and the legend of the infomercial was born. Companies were created to orient those brave inventors to the process of purchasing media time and capturing the desired response with one thing in mind, keeping the customer happy so he or she will buy again and again.

In this issue, we recognize three visionaries who laid the groundwork for the Electronic Retailing Association that we know today. The first of which is Frank Cannella. In 1982, Cannella created the infomercial by recognizing a product, New Generation, which benefited men everywhere. Our second pioneer, Michelle Cardinal, put products like NordicTrac and Hoover on our televisions and in our homes. The final forerunner we acknowledge this month is Fern Lee. Her years of experience and knowledge of the industry brought us FocusFactor, a product that has influenced the success of millions of professionals on a daily basis.

Visionaries like Frank Cannella, Michelle Cardinal and Fern Lee set the stage for the rest of us. It is truly an honor to introduce them to you as this month’s infomercial pioneers!

Keith Conners is marketing director at MicahTek and a member of ERA’s PR Committee.

Electronic Retailer: How did you get into the DRTV industry?

Frank Cannella: Believe it or not, my introduction to the business came when I was a kid cutting grass and weeding. When I was 12 years old, I took care of the lawn of a guy who became my mentor. I sought job advice from him prior to graduating from college. He must have liked the work I did on his lawn because he got me an interview at A. Eicoff & Company. I started in the accounting department and was promoted to media buyer upon graduating college. It’s funny how networking can open doors, even at such an early age.

ER: Is there any one product that you believe changed the face of DRTV for the consumer?

Cannella: There were numerous products: just about any Guthy-Renker product, The Banjo Minnow of the mid-’90s, Tae-Bo, P90X and Total Gym, to name but a few.

ER: What is your most memorable (insightful, funny or endearing) story of the DRTV industry or a colleague in the industry to date?

Cannella: An advertising VP walks into an AE’s office and gives him a lead to call on. The AE reacts and says, “It’s for a half-hour long commercial that says it will cure male-pattern baldness. We’ll never get it on the air. The FCC only permits two minutes max.” The AE follows up on the lead anyway, obtains the account and gets numerous broadcast stations to run the media. The lead becomes the first program-length commercial on the air since the 1950s. This is 1982 and the joke is that this is how the industry all began. Eventually, the AE and his media staff expand the genre by capitalizing on the FCC’s deregulation and take it to the mainstream broadcasters. After a couple of years of obscurity and thousands of airings, a new industry called “infomercial advertising” explodes! And I was the lowly AE who asked to follow up on the lead we never thought would go anywhere. Moral of the story…always follow up on your leads!

ER: What is the most significant obstacle facing the industry today?

Cannella: Consumers have so many media and other options to choose from now. There is so much technology that keeps them from traditional TV viewership. Add to that the proliferation of TV viewing options from broadcasting to cable networks to Netflix, and you have a viewership that keeps getting further fragmented. Fortunately, we are in a supply and demand business, and we can keep clients profitable by negotiating lower rates and creating new media buying opportunities. We’re all working harder to keep up, that includes broadcasters and cable networks, too.

Electronic Retailer: How did you get your start in the DRTV industry?

Michelle Cardinal: I began as a sales assistant at KADY-TV in Santa Barbara, Calif., selling airtime to early DRTV stalwarts such as Time Life, Sports Illustrated, Twin Star, Guthy-Renker, Synchronal, Quantum, Ron Popeil, etc. Not knowing a thing about DRTV when I started, I got a crash course in not only the industry, but also its colorful and controversial characters! In 1991, I went to Williams Worldwide Television as an assistant media buyer. As one of the leading buyers of infomercial media in the country, Williams was a demanding environment. During my first week on the job, three buyers were fired for poor performance. Clients were depending on us to deliver upwards of 4:1 ROIs. If you couldn’t deliver, you were toast. I loved it!

CEO Katie Williams was an inspiring mentor to me, and I credit much of my success to her tutelage. Over nine years, I worked in every aspect of her business: media buying international and domestic, client services, and marketing and research. By 1994, our clients consisted of many successful direct marketers (Kent & Spiegel, Ron Popeil, Quantum, NordicTrack), as well as major corporations (Philips, Braun, Hoover). We were the first to effectively work with major corporations, teaching them how to effectively use DRTV to drive direct and retail sales.

In 1998, I started Cmedia. My vision was to create a direct response media buying company that could aggressively negotiate in multiple formats: short form, long form (eventually print, radio and digital).

I knew we had to perform not only for highly demanding direct marketers, but also provide strategic DRTV for major brands, intuitively knowing both these genres were on the verge of intersecting. I began by training and hiring some of the most aggressive media buyers in the country. We focused on highly analytical media strategy and client service, while also designing and programming our own proprietary media system; the Cmedia Tracker. Over the past 12 years, we have had enormous growth and now rank as one of the largest buyers of DRTV media in the country.

In 2004, my husband and business partner, Tim O’Leary (former CEO of Tyee), and I merged our two companies (Respond2 and Cmedia) to form a holding company. Now the R2C Group, we are a full-service agency, with five direct response agency services companies (Cmedia, Respond2, MMSI, Production West and R2 Entertainment) that has over 200 employees and offices nationwide.

Our practice now includes paid and PI DR media services (all formats), creative production, duplication, talent management, operations consulting and an in-depth digital practice including building transactional websites and digital media.

R2C Group is the largest independent DRTV agency in the country with annual agency billings over $400 million.

ER: What are the most significant challenges facing our industry today?

Cardinal: Fragmentation of media viewership and increasing media rates continue to be significant challenges facing our industry. At the end of every day, our clients still rely heavily on their ability to generate sales to pay for media and make a profit. ROI is not just a fancy advertising word hijacked by Madison Avenue. It’s a matter of our survival.

Smart marketers need to run faster and jump higher year after year. This means focusing on the most efficient and strategic media buying and analytics. We put enormous effort into ensuring we are on the cutting edge of developing alternative DRTV formats as well as doing creative media deals to leverage rates through our enormous clout. Media tracking can no longer be done with outdated Excel spreadsheets. Now, sophisticated tracking software and data algorithms are essential to track trends quickly and efficiently. If you’re not getting daily multiple-format reporting that rolls up and deciphers all your results in one report, you are leaving valuable dollars on the table. Your focus now needs to be, “where do I spend my next incremental dollar efficiently?”

We also stress perfecting marketing messages through multiple formats, including short form, long form, offline media and digital media, as well as thinking realistically about retail distribution. Success on this level requires multiple-format marketing (800 numbers and websites that sell), as well as media plans that drive both direct and retail sales. And let’s not forget online reviews and tight web transactions.

According to Jupiter Research, 77 percent of purchasers do online research before they purchase and over 50 percent of sales volume comes through the web, according to our Cmedia Tracker™. Thus, improving your review rankings and making your web transaction seamless will directly affect your results.

DRTV drives search–it’s a fact. Therefore, focus on where you will spend your next media dollar most efficiently, and be careful not to overspend on search. In a world where low CPOs mean spend, spend, spend, search can be misleading (especially with high weekly DRTV media budgets). Unlike most media that is scalable by rate, search has a finite spend ceiling, and much of your dollars can be wasted if you scale too high. Instead, find your sweet spot through extensive media tracking, and reinvest extra dollars in media that drives search.

ER: What is your most memorable (insightful or funny) story of the DRTV industry or of a colleague in the industry to date?

Cardinal: In my 20+ years in this business, I’ve been fortunate to work with some of the industry’s most colorful characters. One of them was Atida Karr. Standing no taller than 4′2″ and brimming with wavy gray hair (think Dr. Ruth), Atida was a doctor of dermatology, who had developed a highly successful infomercial product called Acne Statin. She was really the forerunner in the acne category to use infomercials to expose heart wrenching testimonials and amazing “before and afters” of people suffering from acne. She was the epitome of an eccentric entrepreneur.

She would often come to meet with our media buyers, to discuss her campaign and extol her theories on where, when and how her media dollars should be spent.

On one such occasion, she arrived, excited to share her most recent observations and decided her messaging needed some pizzazz! She rewrote the words to an old song, “Never on a Sunday” (by Bing Crosby). With much fanfare and theatrics, she proceeded to sing to the group (with her son, by her side, humming in harmony), her desired media strategy. Enthusiastically prompting everyone to join in…”You can buy me on a Friday, a Saturday, a Sunday which I’ll never refuse, but never, never buy me on a Monday, Tuesday or Wednesday as those days shall not work. …”

Hey, I thought, “Atida has a lovely voice and are all clients this passionate about their media strategy?”

I’ve had the pleasure of working with many industry leaders and legends who have taught me much, entertained me and became lifelong friends. It’s been a wonderful ride!

Electronic Retailer: How did you get your start in the DRTV industry?

Fern Lee: When I first started in the business, there wasn’t the word, “infomercial.” My first foray into DR was in the print and direct-mail vertical for our client, Vikki LaMotta Cosmetics. Print led to media, which led to the infomercial. We did one of the first skincare infomercials with Vikki in the 1980s with great success. The industry rules were being formed on the go and the journey was creatively challenging.

ER: What product or products changed the face of DRTV within the past 25 years?

Lee: I was fortunate to work on many of the products/campaigns that changed the face of DRTV in the past 25 years, e.g., Richard Simmons, Billy Blanks, The Firm. The past 25 years brought other great inventions from legendary pitchman, Ron Popeil, who gave us the Chop-o-Matic, The Pocket Fisherman and the “Set it and Forget it” Showtime Rotisserie. And, of course, we can’t forget to acknowledge successful products including Jane Fonda, The Thigh Master, Ginzu knives, Psychic Hotline and The Ab Roller. Guthy-Renker set the bar with Proactiv Solution; while P90X from BeachBody/Product Partners is the current trendsetter in DRTV today.

ER: What is your most memorable (insightful, funny or endearing) story of the DRTV industry or a colleague in the industry to date?

Lee: My fondest memory is Earl Greenberg’s first annual Christmas party at the Rick Weiss Apartment complex. It was amazing how Earl gave others not only Christmas gifts, but also the gift of sustainability and “home.” I’ve had so many laughs with Earl and the men and women who created the world of direct response. We, the veterans of the DRTV world, were and still are marketing mavens. We create continuity models and communities, and yet we are the tireless champions of bringing all together for direct-to-consumer sales.

August 2010 – Feature: Say ‘Oui’ to the Quebec Market

Photograph by Hemera/Thinkstock

Don’t let language or cultural differences deter you from expanding your North American business into Quebec. Simply partnering with an expert in the marketplace can translate to added profits.

BY ED CRAIN

Canada has proven itself to be fertile ground for DRTV marketers. It offers a population the same size as California, with consumers who didn’t suffer nearly as much in the recent recession as their neighbors to the south. But many firms continue to ignore Quebec, a lucrative segment that represents a quarter of the Canadian population. This makes as much sense as moving into the California market but overlooking Los Angeles, San Diego and San Jose.

Yes, the dominant language in Quebec is French and the culture is decidedly different than English-speaking North America. These issues are easily overcome by partnering with a DR media buying firm experienced in the Quebec market. Following are some helpful examples and tips for navigating your way through the Quebec market.

Despite many examples of success, a psychological barrier continues to intimidate some American DR marketers. As a result, the Quebec market is notably less competitive than any other region in Canada. An anti-wrinkle cream campaign, for example, won’t be going head-to-head with every single competitor. And the media rates can be far more efficient and flexible if managed properly. Putting it all together, this translates into the potential for considerably higher ROI for your efforts in Quebec.

When Parisian French Just Won’t Do
The actual mechanics of marketing in Quebec require French-language labeling and translated product instructions. Websites fully functional in French must also be created.

As well, short- and long-form spots need to be dubbed in French. It is crucial that the dialects are correct since an infomercial dubbed with a Parisian accent will alienate viewers. And just like faces, voices matter so it’s important to have access to top talent.

All of these language issues are not a big deal. A worthy Canadian DRTV media buying agency with experience in Quebec will handle all these matters.

With the right local partner, U.S. direct response marketers can literally run their entire Canadian program–including Quebec–from a laptop.

Photograph by Hemera/Thinkstock

Quebecers and Power Tools
Let’s take the Rockwell SoniCrafter, a handheld multipurpose power tool, which rolled out a direct response campaign across Canada. Quebec quickly became the star of the show. The province is home to 24 percent of the 34 million people living in Canada, yet it accounts for half of total SoniCrafter sales.

SoniCrafter’s impressive success in Quebec helped it secure distribution in both regional and national bricks-and-mortar retail chains. In total, 675 stores in Canada now sell the product, one-third of them in Quebec.

Another well-known brand, Lithium WorxGT, a cordless garden trimmer and edger, also leveraged its DRTV success in Quebec to build retail distribution. Of the 1,070 stores that carry the Lithium WorxGT, 39 percent are in Quebec. The lesson is clear–Quebecers love their power tools!

Cosmetics, Too
Perhaps the most lucrative market for DRTV in Quebec is cosmetics and skincare products. The people in Quebec have always been very fashion conscious, as any stroll down a Montreal street will show.

This desire for beauty helps explain why campaigns for anti-wrinkle products are even more successful in Quebec than in the rest of the country. A perfect example is Balley Direct. For its campaign for Resurgence by Murad, an age fighting skin cream, its media buy for French-language television spots accounted for 43 percent of total spend in Canada, despite the fact Quebec represents only 24 percent of the country’s population.

Fitness Products Can be a Stretch
While Quebec offers very compelling opportunities, the fitness market requires specialized knowledge. In the 10 years my company has been buying DRTV media time in Quebec, we have gained valuable lessons in terms of what works and what does not. Yet, the differences are not always obvious.

You would think that demand for products that enhance someone’s appearance, such as cosmetics, means exercise and toning products would be big sellers. Indeed, fitness equipment has had phenomenal success, including a leg toning apparatus that glided to big sales across Canada, including Quebec.

The tricky fitness products are workout DVDs, big sellers in English Canada. Quebecers buy exercise DVDs, but only if they are fully dubbed in French. The clear exception is very successful exercise DVD sets that combine dance and music. No words are needed to get into the groove. But for DVDs that include plenty of instruction, the sheer cost of dubbing the disk sets is too high to make economic sense. One company tried using subtitles, but it isn’t easy reading a TV screen when you are prone on the floor, with arms and legs stretched out.

I also advise clients to skip the Quebec market if they are selling pet products. Quebecers do love their cats and dogs, but they don’t seem to want to pamper them. Or, more accurately, Quebecers do not buy products for their pets through direct response campaigns.

But perhaps the biggest irony in DRTV marketing in Quebec is the fact that English-language music CD sets sell phenomenally well. In fact, one of our most successful long-form campaigns sold CD sets featuring romantic music hits. It seems love conquers all barriers, including language. Other top long-form successes in English-language music box sets include classic rock and songs from the ’50s.

The Upsell
The upsell can mean the difference between a profitable campaign and a smashing success. When DRTV campaigns run in both Quebec and English Canada, we have consistently found that call center operators supporting Quebec campaigns are more successful in selling additional product, driving up average sales. Of course, higher revenues per call drive up ROI.

For instance, a popular wallet sold on TV gets half of its sales from Quebec even though the province accounts for only a third of the media buy. We have no science explaining why this is the case, but the numbers tell the story. And that story ends with more money in your wallet.

Translating DRTV Into In-Store Sales
The ultimate prize for DRTV campaigns is securing sales in bricks-and-mortar retailers. In Quebec, our experience shows that for DRTV campaigns selling products already in stores, every $1 in sales through direct response spots generate 12 times the volume in in-store sales. The comparable multiplier in English Canada ranges between four and eight. Effectively, DRTV sales eventually subsidize the media buy to drive sales at retail, or “cost deferred advertising.”

This brings up another key lesson. Direct response marketers cannot fully reap the profits of parlaying DRTV success into retail unless they control their own media. Reluctance to work in French plays a big role in this decision. It should not. Again, language and labeling issues are easily overcome by working with an experienced partner.

For example, a hugely popular kitchen blender initially licensed its Canadian distribution to another firm. But after seeing the success of its blender, it didn’t renew the agreement and took Canadian distribution back in-house. This move proved to be, well, magic.

Less Competition
Despite ample success stories, psychological barriers about working in French still prevent direct marketers from targeting the Quebec market. As a result, firms that have moved into the market face relatively few DRTV competitors. The lack of competing infomercials sets the stage for significantly higher response rates.

Regulatory Benefits
Quebec broadcasters are far more flexible when it comes to schedules. We can thank government regulations.

In the name of protecting Canadian culture, the federal government restricts the number of foreign shows broadcasters can air. To do this, the government sets a minimum percentage of a broadcaster’s content that must be made in Canada. Typically, TV broadcasters in English-speaking Canada air their foreign content–mostly American entertainment shows–during primetime.

Since most shows on French-language TV in Quebec are indeed made in Canada, broadcasters there can offer long-form opportunities during primetime. Those primetime broadcasts can be very lucrative.

The Long and Short of It
There isn’t a big difference in the success of long- versus short-form campaigns in Quebec compared with the rest of Canada, but there are some nuances.

Short-form DR campaigns are cheaper to translate and dub in French, but such costs are not large enough to influence a decision on format. On the other hand, running long-form campaigns in Quebec has an advantage on the media buy since the availability of 30-minute opportunities is more flexible. As mentioned, government regulations actually result in our ability to purchase primetime slots with Quebec broadcasters.

The bottom line on short versus long ultimately comes down to the product. If it needs to be demonstrated, you’ll likely need more than two minutes.

Canada is a land of opportunity for DRTV marketers. The business case for heading northward only gets better when you include French-language Quebec. Team up with the right local partner and enjoy the rewards.

Ed Crain is president and CEO of Kingstar Media in Toronto, Canada. Contact Crain at (416) 869-0631.

August 2010 – Cover Story: Leading the Charge

Photograph by Roger Hagadone

As the Electronic Retailing Self-Regulation Program marks its sixth anniversary, ERSP Director Peter Marinello talks about the program’s success and why other industries are taking notice.

BY VITISIA PAYNICH

In 2000, the direct response industry was experiencing a bit of deja vu: a slew of bad actors tarnishing its reputation by making egregious product claims in their DRTV campaigns and threatening the very principles for which the Electronic Retailing Association (ERA) was founded back in 1991.

The association sought support from its membership and those within the direct response community by launching an ambitious plan to preserve the industry’s image, to maintain control and to fend off government intervention. The answer, of course, came in the form of self-regulation. Yet in order to get a full-fledged self-regulation program off the ground, ERA realized it needed to partner with a third party, the National Advertising Review Council (NARC). And on July 1, 2004, ERA and the NARC launched the Electronic Retailing Self-Regulation Program (ERSP).

Peter Marinello, director of ERSP, says the program’s success has piqued the interest of other industries that look at ERSP as a model for their own self-regulation guidelines.

Electronic Retailer caught up with Marinello for an update on ERSP’s caseload, to discuss the process for filing a case and to learn why he believes the program has set a precedent for other industries.

Electronic Retailer: Can you provide a brief history about ERSP?

Peter Marinello: We opened our doors back in July 2004 and the program really began at the behest of the Electronic Retailing Association (ERA), which–because of some nudging from the Federal Trade Commission–became very concerned about egregious advertising claims that were permeating the airwaves in early 2000. These were really weight-loss claims. The FTC essentially went to ERA and said, “Listen, if you guys don’t get your house in order, we’re going to do it for you.” So, ERA did the very responsible thing and went to an outside third party, the National Advertising Review Council, and asked them to set up a self-regulatory program designed specifically for the direct response industry. So, that’s how it really began. This is a very unique collaboration between ERA and the National Advertising Review Council, particularly the Council of Better Business Bureaus, which administers the program.

Three of the primary objectives of ERSP are to improve consumer confidence in electronic retailing; provide an expeditious forum for getting blatantly egregious advertising claims off the airwaves and out of publication; and lastly, to demonstrate to the regulatory agencies, the direct response industry’s commitment to meaningful self-regulation.

ER: How many cases have been submitted to the program, to date?

Marinello: To date, we have closed 255 cases, which did not include several compliance follow-up cases that we’ve handled. It also doesn’t include the yearly live shopping analysis that we do for the industry.

ER: What percentage of cases do consumers file versus marketers?

Marinello: I would say that the breakdown of cases is about 40 percent by the marketers, 40 percent is monitoring by ERSP itself and then I would say the other 20 percent is consumer-generated.

ER: Can you provide some other statistics on the program?

Marinello: As I mentioned, we closed 255 cases. The average length of a case is just about 65 days. The published decisions are 243 cases, so there’s actually a little lag time between when we close a case, when we get the press release going, and when we actually post the case on the website. So, that’s why there’s about a 12-case lag there. We’ve probably monitored over 5,000 pieces of direct response advertising, 300 hours of live shopping, 5,000 pieces of e-mailed spam and we’ve pursued about 170 consumer complaints. And, that does not include seven non-English-speaking infomercials that we’ve handled. As you can see, we really try to run the full gamut of the direct response industry.

ER: What is a “competitor challenge” and how does it protect people’s anonymity?

Marinello: We have this great niche in the ERSP policy and procedure that allows companies to challenge competitive advertising anonymously. There are two important advantages for having this nice procedural niche. It allows companies to bring advertising to our attention without worrying about retaliatory challenges and without being publicly perceived as a whistle blower. Those are two key competitive pieces for a challenge. Now if you bring a challenge anonymously, it does not allow you to see a marketer’s responsive submission. All it really does is it allows you to bring an advertising campaign to our attention anonymously and then at the very end of the case, you’ll be informed as to the outcome of the case. So on one side, it offers a discreet mechanism for bringing a case without disclosing your identity, while it also enables the marketer to participate in the process without worrying about a non-disclosed competitor seeing some proprietary information that may be necessary in substantiating their claims.

ER: Once a case is filed with ERSP, what’s the process?

Marinello: Once a case is filed, a marketer will have 15 calendar days to submit their substantiating information. After we receive that marketer’s initial response, ERSP or a challenger will then have 10 days to offer rebuttal information. After we receive the rebuttal information, we’ll pass that on to the marketer for almost the second bite of the apple, where they will have another opportunity to reply to the challenger’s information. And then from there, ERSP has 15 days to write its decision and come to its conclusion. After that, the marketer has 10 days to provide what we call a “Marketer’s Statement,” which is a statement indicating whether or not the marketer will abide by the recommendations of ERSP. They’re also able to give their comments on the usefulness of the process. That whole sequence of events generally falls within 60 to 65 days. And I also should note, within that period, there is an opportunity for both the marketer and the challenger to come and meet with us–either personally or via a telephone conference.

ER: Are most of the cases brought before ERSP legitimate cases?

Marinello: Yes. As a matter of fact, we do have a weeding out process before we officially commit to the case, where if we feel that a challenge is bringing a frivolous complaint, we won’t proceed with the complaints.

ER: What’s the most difficult case that you’ve come across?

Marinello: Maybe some of the most difficult cases collectively are homeopathic cases. The reason being that homeopathic has its own historical reference point that has to be followed and it gets very tricky because it’s based on the traditional use of certain ingredients and the mixture of these ingredients. And, I would say that the regulatory landscape for homeopathic products isn’t as clearly defined as it is with traditional-use products. When I say “traditional-use” products, I’m referring to the types of products we see on an everyday basis–such as exercise equipment, dietary supplements, etc.–that have a clearly defined regulatory road to follow.

ER: How can people find out more information about cases that have been filed with the program?

Marinello: There are two main vehicles of information for ERSP. One is the National Advertising Review Council website at www.narc.org, which includes a specific section on the Electronic Retailing Self-Regulation Program. The other vehicle is the ERA site at www.retailing.org, which also has a very neat section for ERSP. All of the cases that we complete are posted on both of those websites along with the press releases that accompany the cases. There’s also information on how a company or consumer can go about filing a challenge. The posting of case reports on the NARC and ERA websites is a significant element in reinforcing the transparency of our self-regulatory work and the integrity of the process.

ER: The FTC has been very supportive of ERA and ERSP. Do you consult with the Commission on every case?

Marinello: Absolutely not. The cases that are brought to us are treated very confidentially. The only time any outside third party will see the cases is at the conclusion of the case. With that being said, one of the reasons for the success of the program has been the FTC’s support of the program. A lot of times, we’ll refer cases. For example, if a company declines to participate, we’ll refer a case to the Federal Trade Commission. The FTC always makes it a point to put that referral case on the top of its priority list.

ER: Does the industry share the FTC’s sentiment about ERSP?

Marinello: I think it does. We’ve had an uptick in terms of competitive filings in the six years that we’ve been around now. When we started out, it was a monitor-heavy type of caseload; and subsequently, we’ve seen a great increase in competitor challenges–particularly, with the anonymous challenges that we talked about. There are five appending anonymous challenges that are going on right now. So I think a lot of companies and marketers out there see this as a very useful mechanism for bringing egregious advertising to our attention.

ER: What type of precedent has this program created for this industry and for other industries?

Marinello: It’s been an enormous precedent in not just the advertising industry but in other categories of advertising as well. It’s a terrific example of how self-regulation can work. Let’s take green marketing, for example. If there is a concern in one particular discipline of advertising, such as green marketing, those in that industry feel that they can come to the National Advertising Review Council and set up their own self-regulatory process based on that concern. We saw that happen in the Children’s Food and Beverage initiative a few years ago, where there was this vast industry concern about childhood obesity. There was a great self-regulatory opportunity there, and the NARC and the Council of Better Business Bureaus administered a terrific program about three years ago. We’re seeing the same thing occurring in the behavioral advertising world right now, and I believe the industry is looking to the NARC for self-regulatory response to the issues it’s currently facing. I think a lot of that is due to the success of the direct response industry’s self-regulatory program.

ER: What trends are you seeing occurring in the marketplace right now?

Marinello: I think there are a couple of things going on right now. One thing that we’re looking very closely at is the affiliate advertising space and seeing how, with a self-regulatory program, we can offer help to the direct response community in terms of providing some guidance. It’s also interesting that one of the new trends is actually an old trend–we’re seeing an uptick now in weight-loss advertising. So, we have to keep a close eye on some of the claims now being made in weight-loss advertising again. It’s funny how this is cyclical, sometimes. Ten years ago, there was this big issue with the egregious claims being made in the weight-loss industry and now all of a sudden, we’re seeing some companies becoming a little bit more aggressive with the claims they’re making and I think the same holds true for some of the exercise equipment manufacturers out there.

ER: What changes or developments can we expect from ERSP in the near future?

Marinello: I think it’s really important that ERSP makes a concerted effort to evolve with the direct response landscape. That means monitoring the advertising in all these new and different areas of social networking–Facebook and Twitter–and in the affiliate advertising area. I believe we also need to keep an eye on what’s going on in the behavioral advertising world. In addition, I would like to see ERSP going beyond just looking at claim substantiation and truthfulness and accuracy; maybe getting into some of these very topical issues like negative options and things like that. It’s very important for this program to grow with the industry, because it’s evolving at warp speed and ERSP needs to keep pace with it.

ER: Any final thoughts?

Marinello: Any success that this self-regulation program has earned is really predicated on the voluntary cooperation of the marketers and direct response community. ERSP doesn’t work at all without it. The marketers and those in DR have been so supportive over the past six years of what we’ve done, and that’s really helped this program create a nice self-regulatory niche out there.

July 2010 – Channel Crossing: Legal

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.

July 2010 – Column: Shop Talk

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.

July 2010 – Cover Story: A Closer Look at ERA’s Asia Committee

Committee Chairman Scott Reid Discusses the Group’s Objectives, Encouraging Member Participation and Tackling the Most Important Issues.

BY VITISIA PAYNICH

What can Electronic Retailing Association (ERA) members do to get the most from their membership? Scott Reid, the current chairman of the Asia Committee, says, “It sounds cliché but the simple answer is: get involved.” Reid, operating officer at Oak Lawn Marketing Group in Japan along with other OLM executives have participated in various ERA councils and committees over the years to help affect change within the organization, as well as in the industry.

The experience has not only given him a better understanding of how an association functions, but has also enlightened him to some of the other services that can ultimately benefit his business.

In 2005, the Asia Council evolved into the Asia Committee, acting as a bridge that connects its members from the Asia-Pacific region with ERA in the U.S. Five years later, the committee has greater ambitions–goals that would not only attract more members, but would also give ERA an even stronger presence as the leading association in that region.

Electronic Retailer sat down with the committee chairman to talk about the goals set for the Asia Committee, the key issues that are most important to the group and why others need to step up to the plate and participate.

Electronic Retailer (ER): What is the purpose of the Asia Committee?

Scott Reid: The No. 1 goal of the Asia Committee is to be an extension of ERA. By that, I mean helping the association understand how to service and meet the needs of its growing regional members in Asia. Through the committee, we hope to recruit new members, establish an understanding of the benefits that the members in Asia value and identify the specific needs of these members. What benefits will satisfy and keep them as members?

ER: What are some of the objectives that the Asia Committee has this year?

Reid: One of the objectives, which I’ve been passionate about in my own business dealings, is for the Asia Committee to take the lead in coming up with a solution for solving this counterfeiting problem. Now this isn’t a problem plaguing just our industry; it’s affecting other industries as well. And I don’t think it’s a problem we’re going to be completely able to solve. But we can begin sharing information, working together, educating people and aligning ourselves with other groups and associations that have the same goal of taking steps to find a solution.

By getting involved in advocacy, we can also try to set rules and guidelines for some of these Internet companies that enable people to sell counterfeit products on their homepages. Right now, all the responsibility to monitor these activities falls squarely on us, not on the actual websites that profit from allowing counterfeit products to be sold. At least by doing these things and making it a risk to sell counterfeit ">versions of DRTV or home shopping products, we’ll be able to decrease the amount of counterfeit products on the market. The Anti-Counterfeiting Task Force, led by ERA’s vice president of government affairs, Bill McClellan, proves that the association is doing something about it.

Another objective for the committee is to continue to raise awareness of ERA in Asia, increase membership and add value to the members in Asia. So, one of the things that we’re looking at doing is establishing a self-regulatory [policy] in the major countries.

Another goal is to bring back the Asia conference. We used to have one but we stopped a few years ago. This year, we had a networking reception that ran in conjunction with the Housewares Show in Hong Kong. We had 80 people show up and it was a good three-hour event. It was very well received, and there were many interested people getting involved in the Asia Committee and ERA.

ER: How can ERA members benefit from the work that the Asia Committee is doing?

Reid: As I mentioned earlier, get involved. The more you put into it, the more you’ll get out of it. That’s been my personal experience with any organization that I’ve been involved in. If you care about your industry or if you’re passionate about the business that you’re in, then you’re going to want to get involved in the leading organization in that industry and be a leader yourself, because the fruits of that effort will naturally take place.

ER: Are there vast differences between the markets in Asia? If so, as a committee, how do you make sure that you’re supporting the needs of each market?

Reid: First of all, I don’t think that people who live in this region of the world ever refer to it as Asia. And when you’re talking to Americans, you’ll hear words like “Asians” and “Asia” and they’re often grouped together. I’m sure this happens to Europeans in Europe, as well. People who live in this region–like China, Japan and Korea–would never refer to themselves as “Asians.” They are Chinese, Japanese, Korean, etc.

The cultures are all very different. The business practices are very different. The markets are very different. For example, Korea doesn’t have infomercials; it only has home shopping. So, people need to understand that if you do business in Asia, the way you do business in Japan is not the way you do business in China. I think when it comes to communicating that to others, the Asia Committee is weak in that area. But it’s something that we can improve on.

The blanket assumption is that everybody in Asia is interested in having a connection with the U.S., such as new products or best practices. And I think that’s the biggest value that a lot of the members in this region have is: ERA = America. By becoming a part of the organization, you will be kept up to date on what’s happening in the U.S. marketplace, and you can forge relationships with American product suppliers and vendors through networking opportunities.

But when you look at what ERA also stands for: getting involved in policy, government lobbying and making sure the industry doesn’t become over-regulated, that’s not happening in Asia. And this is a point where I think we need to get to one day so that the members are receiving a benefit in their own backyard–not just simply having a connection to the United States. So, I think that’s one of the challenges.

ER: What other key issues are important to the committee?

Reid: Anti-counterfeiting is the biggest, but self-regulation is another important issue. If we can get involved in regional specifics with regard to self-regulation and start to influence how each country regulates this industry, a) That’s good for our industry; and b) it’s a very good story for increasing the member benefits in ERA. However, it’s difficult because it must be country-specific.

ER: What initiatives are in place for growing and serving the membership in the Asia-Pacific region?

Reid: I think having these networking receptions is another action that will bring back members. Also, setting goals for having a larger vision for the committee and developing self-regulatory programs will make a difference to existing and potential members.

ER: What about providing education?

Reid: Yes. I’ve realized that this region is far more advanced than the rest of the world in terms of some technologies, such as mobile and digital signage. I’ve always felt that we’ve looked to America for best practices, especially since the infomercial came from America. But I think it’s interesting that for the first time, the U.S. can look to Asia for best practices. And we can start to give back to Europe and America and show what people are doing in Asia that can give those in the U.S. ideas of what they can do with these technologies.

That insight is also useful regionally for other members who are in Asia. For instance, Japan is ahead of some of its neighboring countries with regard to some technologies. So I do believe education should play a big part of it. And I think the education sessions that Asia can put on will not only be interesting to other members of Asia, but will also be valuable to other members of Europe and the United States.

ER: What’s the most important thing that people should understand about the Asia Committee?

Reid: I think the most important thing that people need to understand about the Asia Committee is that it’s a group that is 100 percent made up of volunteers who have busy jobs, who are taking the time to get involved in the organization and who work together to make the industry better by developing benefits for other companies in our industry. And that goes back to my earlier message.

If you want to get benefits out of your ERA membership and you’re in Asia, then get involved in the committee and start doing something. You’ll definitely reap the rewards from your efforts.

If you would like to get involved in the ERA Asia Committee, please contact Robin Greenspan at rgreenspan@retailing.org.