September 2010 – Channel Crossing: Teleservices

10 Rules for Selecting the Right Telemarketing Company

In order to be a successful marketer in the DRTV industry, a retailer has to have a strong and effective relationship with its telemarketing service provider (or providers). However, individuals who have worked on the “client side” know how competitive that telemarketing service companies can be.

When I began in the DRTV industry back in the 1980s, I often went to the Mecca city for the “in-bound industry”–Omaha, Neb. While in Omaha, it was normal to shuttle between the major companies in the industry that offered services. I met with the owner of one such company, and asked him why we should use more of his services. He stated, “You know, we are better at dealing with problems that arise than anyone in the industry.” I then went across town to meet with one of his competitors to ask the same question, telling the company sales manager what his competitor had said. “Well, we are better because we don’t have problems,” he replied, “and the other guy is probably good at solving problems because he is so used to having them.”

The telemarketing service industry that has developed to support DRTV is very much like the wireless service industry that I worked in during the early 1990s. Like wireless, there were a limited number of larger companies that dominated market share in the early years of DRTV. Over time, many other service organizations have entered the picture, creating fierce competition and making choices for the service consumer more difficult.

I am often asked what retailers should look for in choosing a telemarketing vendor. There are so many options out there today–”brick and mortar” type mega call centers, home-based operations, offshore operations, IVR-based technology companies and smaller “boutique” high-sales-conversion-oriented facilities. In addition, each of these categories is at least five to 10 companies deep, so you not only need to choose your type of “partner,” but determine which one gives you the best chance to succeed.

All of these types of service companies provide useful options. However, what works best for each DRTV retailer is really based on what they are looking for in an operating relationship. But how do you cut through the myriad of choices, and how do you best manage the relationship with the companies you choose?

For one thing, you have to do your homework before choosing the right one. Many people gravitate to a big name or the new technology of the moment, but that’s not always the best choice. You need to establish a list of criteria that fit your needs, and then evaluate your choices accordingly.

Here, then, are 10 rules that I believe that DRTV retailers should use when selecting a telemarketing partner, along with ways to maximize their relationship:

Marry your offer and price point with the proper company. Some companies are better at different types of offer categories (such as hard offers, soft offers, continuity, installments, lead generation) and price points (the $19.95 “sweet spot,” mid-range prices points similar to $49.95, or $100 and up). Reputable companies should tell you what their strengths and weaknesses are.

Match your media budget to the capabilities of the telemarketer. Smaller facilities may not be able to handle the call volumes generated by your larger, national media placements, so if your budgets grow, they may not be able to grow with you.

Check their references with people you trust. Companies will always give you their preferred reference list, but it is important to find people you know and trust who have used them before for the real story, and these references may not be on that list.

Make sure that their reporting information can meet your needs. The level of information you receive on order capture and non-order capture is essential, as is the timing of that information. If you can’t get usable data on a timely basis, you can’t manage your business properly.

Make sure that you have the ability to listen in on live and recorded calls. Listening to calls is essential, especially during the early testing of shows and spots. That is why industry experts have recommended that campaigns that utilize IVR technology should first test with live operators to get feedback on their shows, spots and related offers.

Make sure that the telemarketer understands the importance of their contact with your customer. It is important that the service company understands that they are the first contact with your customer, so they should always be aware of what you are trying to achieve in customer relationships. That is also why it’s so important to periodically monitor calls as a campaign continues.

Tell them how you want to measure their conversion rates, not how they measure them. Order conversion rates can be computed in different ways by companies, but if you are dealing with multiple telemarketing centers, you need everyone on the same page–so set standards that are important to you and have all of your service providers use the same metrics.

Set specific performance standards and conversion rates that you want them to meet on a weekly basis. As a retailer, I find this is essential in maximizing call center performance. It is important to set realistic metric goals for your service provider so they know what’s expected of them. This is also very useful when using multiple telemarketers on a campaign–they will always work harder to achieve their optimum level if their market share for the account is at stake.

Micro-manage the scripting process. The most successful companies in the industry have always been very involved in telemarketing script development, constantly tweaking and adjusting wording, sequencing offers and reacting to changes in order conversion metrics. The good telemarketing companies don’t mind this. This is like working with a doctor–you are always your best advocate when you take charge of the process.

Don’t assume that your sales manager is as good as his or her agents. This is a controversial comment to make, but it’s always the “elephant in the room” when considering telemarketing resources. Many firms have knowledgeable sales account managers who know the business; but their agents in the field don’t always have the same capabilities. Accountability must start at the top of these organizations, but it needs to be managed downwards to achieve your objectives.

As our DRTV business continues to evolve and media formats and ways to place orders increase with new technology, it is important to remember that many of our key targeted demographic groups will continue to use their phones as their primary order option. Making the right decisions on whom we choose to partner with and how we maximize our telemarketing relationships will remain one of our keys to success.

Richard Scheiner is COO at International Commercial Television Inc. in Wayne, Pa. Contact Scheiner at (484) 598-2310 or at scheiner@ictvonline.com.

September 2010 – Feature: Engaging the U.S. Hispanic Consumer

The U.S. Hispanic Marketplace Breaks Records in Growth, Buying Power and Success in DRTV.

BY JACQUELINE RENFROW

U.S. Hispanic consumers are rapidly becoming one of the most important segments in direct marketing. In fact, with Hispanics constituting 15.4 percent of the total population in the United States–more than 46 million people–the industry can hardly afford to ignore them. This second largest ethnic group not only continues to grow, but so does its spending power. Despite myths, credit card use in this population is high–90 percent of U.S. Hispanics who purchase through DRTV have access to credit cards, and 46 percent use credit and 26 percent use debit when making a purchase. The collective buying power of the segment is expected to reach $1.2 trillion in 2010, up from $862 million in 2007.

“Our client case studies have shown that we experience an average of three times the call conversions when comparing the Spanish to the English version of a show,” says Eitan Cohen, president of Media Stream Direct, a Sherman Oaks, Calif.-based media buying company with more than a decade of experience in the U.S. Hispanic marketplace.

Beyond growth and spending power, marketers are finding renewed success in categories such as beauty, ingestibles, hardware, financial services and kitchenware thanks to U.S. Hispanics. And with Spanish-language advertisements drawing strength from DRTV, marketers are expanding campaigns across growing channels such as mobile and online social communities.

Growing Market, Growing Power
The most important reasons to be in the U.S. Hispanic market space are twofold: the size and the spending power.

“It is the demographic growth of the market that is driving the growth of DRTV,” says Marcelino Miyares, director of Mercury en Espanol, a division of Mercury Media in Santa Monica, Calif. “In fact, it is the population growth of the Hispanic market that is driving the population growth of much of the country. It is not necessarily that Hispanics are spending more, but rather that more Hispanics are spending.”

Along with population increase, there is a new comfort with using credit cards. In turn, marketers have seen an increase in direct-response sales via long-form television commercials. Not to mention, the demographic is more likely to purchase via direct response. An estimated 11 percent of U.S. consumers will make a purchase through DR, but that number is as high as 15 percent among the Hispanic population.

Purchasing Trends
According to Cohen, products that tend to sell the best in DRTV correlate with the interests of the Hispanic demographic such as beauty, fitness, health and housewares.

“We have been able to take English infomercials in these categories that are either successful or, in some cases, only marginally successful, and create tremendous hits with a Spanish creative,” says Cohen. Media Stream Direct recently brought the Ab Rocket infomercial to the U.S. Hispanic market. Although the product was successful over the past three years in the English version, the introduction of the Spanish version created a resurgence in response.

Miyares agrees that ingestibles, housewares and beauty products are the workhorses of U.S. Hispanic DRTV, along with music and video, diet and exercise, hardware, and financial services. In addition, language learning services and telecommunications continue to be stronger in the U.S. Hispanic marketplace versus the general market.

Miyares also believes that U.S. Hispanic DRTV has followed the general DRTV trend to push to retail. “What makes this convergent with Hispanic marketing is that Hispanic shoppers over-index at these types of retailers–Walmart, Kmart, Bed Bath and Beyond, Anna’s Linens, etc.,” says Miyares.

“I forecast that over the next 18 months, we will see a proliferation of products in the two extremes–$19.95 and $200-$400 range. The lower-priced products have been difficult to make work given the costs of limited media inventory. This problem is solving itself with the addition of more cable channels. And the higher priced products have simply been inaccessible to cash-oriented customers, but credit card penetration has reached a critical mass,” Miyares adds.

Today’s Challenges in a Unique Space

Though very lucrative, experts agree that marketers, media buyers and call centers all need to be aware of the nuances of the U.S. Hispanic market and brace for a learning curve when starting a campaign. One of the biggest challenges when marketing a product to Hispanics in the U.S. is translation into Spanish. The key, says Cohen, is not to translate but to “transcreate.” “When speaking to the Hispanic market, it is essential to understand that there are different expressions and nuances in the phrasing that simple voice dub-over cannot communicate,” says Cohen. “Taking the time to properly re-phrase the intention of each statement into appropriate Spanish dialect immediately ingratiates the viewer to the brand and the show. We’ve had several marketers come to us after working with other agencies, who simply had the show hastily dubbed over and could not explain why the campaign did not work.”

Another challenge to the U.S. Hispanic market is client patience. “The problem is that few clients truly commit,” says Miyares. “While in the general market they may test offers, media mixes and telemarketing scripts until a campaign works, the Hispanic market is more like one or two strikes and you are out.” He advises clients–who can eventually imagine their product on the shelves of a Walmart–to stick with a campaign.

Yet another challenge marketers face is properly budgeting Hispanic campaigns versus general market campaigns. In markets that are predominantly Hispanic, Spanish-language media can substantially lift retail sales and increase overall campaign performance. Interestingly, Denira Borrero, vice president of operations for Omni Direct Inc. in Miami Beach, Fla., says that English-language sales lift when running a Spanish-language campaign simultaneously. This is mostly due to the fact that U.S. Hispanics consume media and use the Internet in both languages. So the message is reinforced in their native language, but in many cases, orders are processed through English-language channels. Omni Direct was established in 1999 as a company focused on the potential of Hispanics as a U.S., not foreign, market.

Kathi Moore, CEO and president of Engagem3nt in Newport Beach, Calif., believes the biggest challenge in this market is breaking down the myths that surround it. One myth is a belief that the demographic doesn’t have credit cards, when 84 percent of Hispanic DR purchases are made via credit. Also, that the market is too small to be worthwhile. And finally, the myth that marketers don’t need to advertise in Spanish because Hispanics will catch the English campaign. However, 30 percent of the market watches only Spanish-language television and even those who watch both respect advertisements in their native language.

Callzilla, a Miami-based call center specializing in the U.S. Hispanic space, deals with the same issues as a call center for the general market–converting calls to sales and now, more than ever, third-party upsells. What’s different about a Hispanic-focused call center is how the sales agents are trained. It’s about “training, educating, retraining and monitoring ">the agents and making sure they adhere to best practices that the industry mandates,” says Neal Topf, president of Callzilla. He says there are three main challenges for call centers. First, reaching the expanding demographic. Second, call centers must be ready for an increase in credit and debit transactions. And finally, the economy has put pressure on marketers to capitalize on a new segment.

Channel Changing
DRTV continues to be the strongest media channel for both general and U.S. Hispanic DR. Cable and satellite televisions have increased in popularity over the past two years, both in channel options and distribution, even though broadcast television has taken a hit. And interactive and digital TV activity among the U.S. Hispanic market will increase over the next 18 to 24 months, according to Miyares.

One of Omni Direct’s recent successes was with the campaign for “Sobre de Oro,” marketed in non-Hispanic markets as “My Gold Envelope,” by Money 4 Gold. The campaign ran on TV, radio, online and print channels and has expanded internationally. Money 4 Gold believed its product was under-tapped in the U.S. Hispanic market and so it worked with Omni Direct to develop creative production and identify Hispanic celebrity endorsements. The campaign built a trusted name through a customized Hispanic message. Even when the category suffered bad press due to other industry players, “Sobre de Oro” withstood the hit because of its brand recognition among Hispanics.

While the buying principles for time in the U.S. Hispanic market are the same as with the general market, the universe is limited. There are far fewer cable networks, particularly in the long-form space, and even fewer in broadcast networks. This creates a high-demand, low-supply situation, according to Miyares. As more marketers begin focusing on the Hispanic market, demand for long-form media time will rise and subsequently, so will rates.

Online is increasing faster than any other channel. Since 2008, the U.S. Hispanic online population has grown faster than the non-Hispanic population in terms of visitors and time spent and pages consumed. Just two years ago, most Hispanic campaigns did not have an e-commerce website. Now, about 25 percent of U.S. Hispanic campaign orders come through the Internet. “Based on our own research and national statistics, we expect Internet usage to continue to grow in this direction,” says Borrero. “Also, because Hispanics are significantly over-indexed when it comes to the use of mobile technology, we expect to see growth in marketing through the mobile channel, even within the very short term.”

Moore says that mobile is definitely a growing segment of the demographic. Everyone is trying to monetize the channel’s value and it’s already an effective means to get outbound messages, special offers, reminders, etc., to customers. And U.S. Hispanics are conducting more business transactions via mobile than the general market.

Moore also says that grassroots event marketing is a strong channel in the U.S. Hispanic demographic. The group tends to have more family oriented outdoor events and attend large festivals in population-dense cities such as New York, Miami, San Diego and Los Angeles. It benefits a marketer to spend money and have a booth at these events.

According to Topf, there is an emerging trend in using online social media in the direct-to-customer acquisition space. Although at the moment it’s not being used much in this way, users of social media and other web applications (either on the computer or by phone) will start to see a correlation between purchases and this channel.

No matter what the channel, more and more marketers are going to arrive in the U.S. Hispanic space in the coming year. The question, according to Topf, is not “Do I have to be there [the U.S. Hispanic market], but how do I get there?”

Jacqueline Renfrow is a freelance writer, who has been writing about the direct marketing industry for the past few years.

August 2010 – Channel Crossing: Customer Care

An Alternative to ‘Clubbing’ Consumer Confidence

The current controversy over third-party upsells–in particular, club memberships–contains a certain irony and some valuable lessons for direct marketers. On the one hand, the industry has evolved from a single transaction-based model to one that depends on a relationship and longevity between marketer and consumer. After all, successful continuity programs rely upon innovative products that deliver on their promises and foster continuing goodwill with the buying public.

Yet somewhere along the line, some DR practitioners and their supply chain partners allowed greed and the allure of the quick buck to warp the industry. They started pushing monthly programs with little to no value to the consumer, where the rate of practical usage was, in some cases, less than 1 percent. These programs rely on what is known as a breakage model, where a lack of consumer redemption–call it benefit–is what creates the profits. In the process, consumer confidence has turned to ire–ire that has now summoned the threat of increased government regulation. It’s time for the industry to course-correct by embracing new business models that dovetail with consumer desires and interests; a premise that is essential to not only survive, but to thrive.

Moving in a New Direction
There’s nothing wrong with upselling complementary products or services to the public; they may, in fact, be welcome in many cases. For example, many fitness programs sell vitamins, meal replacements and ancillary workout equipment. The buyer is in a mindset to affect healthy change and often welcomes the opportunity these auxiliary products represent. Problems arise, however, when buyers view the product being pitched as having little to no relevancy.

So what is the industry to do? The answer lies in seeking alternative sources of incremental revenue that do not rely on a breakage model that cracks consumer confidence. One solution involves the concept of cross-pitching. The key to this process is relevancy: consumers are offered only complementary products or services after the original reason they have called is satisfied.

Take the fitness category referenced earlier. While many seasoned marketers have already sourced all of their upsells, not every company has. A strength-training device aimed at aging boomers could be ideally paired with a joint supplement manufacturer. After the inbound caller’s initial needs are met, the operator would simply employ a soft-sell approach by asking the consumer if he or she is interested in a complementary product.

While a typical cross-sell could require reading a script of 90 to 120 seconds, cross-pitching can be executed in seconds. If the caller says yes, he or she would then be transferred to the call center of the supplement company. The second marketer pays a bounty to the originator of the lead for the warm transfer, a fee that is far less than they would pay for any other media-generated lead.

When ideally applied, this solution creates value for all of the parties involved: the consumer who gains the benefit of a relevant product, the lead generator who can now realize incremental revenue for generating the lead, and the lead buyer who is able to dovetail off the lead generator’s advertising and obtain a qualified prospect.

Ray Golden is vice president of sales and business development at Sales Portal. Contact Golden at rgolden@salesportal.com.

August 2010 – Channel Crossing: Legal

Senate Takes Aim at ‘Post-Transaction’ Marketers

On May 19, Senator Jay Rockefeller (D-W. Va.), chairman of the Senate Committee on Commerce, Science and Transportation, introduced legislation intended to end aggressive sales practices by companies involved in post-transaction offers. In fact, the reach of the bill goes far beyond the practices of post-transaction marketers and their partners. The bill, if passed into law in its current form, will completely change the face of continuity marketing in the United States.

Known as the “Restore Online Shoppers’ Confidence Act,” the bill grew out of a year-long investigation by the Senate Commerce Committee staff in response to thousands of complaints about the tactics used by a handful of companies that affiliated themselves with prominent travel, entertainment and shopping websites in order to offer subscriptions to membership programs via “interstitial” or “post-transaction” offers. These offers would be presented to consumers before the order confirmation page when a consumer completed an e-commerce transaction. After clicking on a button to accept an offer such as “$10 off this purchase,” consumers were enrolled in the membership program and their payment information was passed by the e-commerce site, where the initial purchase was made to one of the three companies managing the membership programs. If the consumer did not act to cancel his or her membership before a 30-day trial period expired, that individual’s payment information was used to charge the membership program’s recurring monthly fee until the consumer called to cancel the membership.

This business model, according to the Senate committee’s investigative staff, led to consumer confusion, a high number of credit card charge backs and general erosion in consumers’ confidence in Internet commerce, an increasingly important part of the American economy.

Taking the Transaction Out of Post-Transaction
In an effort to right the perceived wrongs of post-transaction offers, Rockefeller and the co-sponsors of the bill (Senators Mark Pryor (D-Ark.), Bill Nelson (D-Fla.), Amy Klobuchar (D-Minn.), Claire McCaskill (D-Mo.) and George LeMieux (R-Fla.) seek to make it illegal for e-commerce sites to transfer, via “data pass,” a consumer’s payment information to a third-party post-transaction marketer for the purpose of facilitating an Internet-based sale.

In addition, the bill would make it illegal for any post-transaction marketer to use a consumer’s payment information to close a sale without essentially beginning a completely new transaction. The bill outlines steps that post-transaction marketers must take before closing a sale, including 1) clearly disclosing the terms of the special offer; 2) disclosing that the post-transaction marketer is not affiliated with the website from which the consumer intended to make a purchase; and 3) clearly outlining the full costs of the offer.

In addition, post-transaction marketers may not charge a consumer without first receiving their express consent, signified by the consumer providing 1) the full account number for the account to be charged; 2) the customer’s name, address and a means of contact; and 3) an additional affirmative step such as clicking a box giving consent to be charged the disclosed amount.

It should be obvious to any marketer that the proposed requirements put in place a number of high barriers that might well destroy the commercial viability of post-transaction marketing.

Photograph by Jupiterimages/Comstock/Thinkstock

The Bill’s Impact on Continuity Marketers
The scope of the bill is not limited to post-transaction marketers and their e-commerce affiliates. It also takes aim at common continuity, or negative option, marketing practices, and proposes a new set of disclosure rules that would apply to all continuity products sold via the Internet.

The bill would ban all use of the negative option in e-commerce transactions unless marketers disclose the name of the company making the offer, a description of the goods or services and the cost of the product or service. Marketers would also be required to disclose the length of the trial offer, when billing will start, the billing interval and the steps the consumer must make to avoid the charge.

In addition, the marketer must provide the consumer with Internet and e-mail-based methods to cancel the recurring charges.

The original version of the bill included a measure that would require marketers to notify consumers, via e-mail, of a coming charge no less than 10 days before the charge would be made. It also required that the e-mail notify consumers that a charge would be made to their card, and that the e-mail includes a description of the good or service, the amount the customer would be charged and instructions for stopping the recurring charges.

When it was released in May, the 10-day notification language in the bill sent shockwaves through the direct marketing industry. However, thanks in large part to the efforts of a coalition of direct marketers and associations representing the direct marketing industry, the language mandating the 10-day notification e-mail had been removed from a working version of the bill that was released on June 6.

Although the bill has gone through the markup process and been passed out of committee, the Senate’s crowded agenda over the next few months makes it unlikely that the bill will reach the Senate floor before the midterm elections.

However, recent changes to credit card companies’ payment processor agreements have essentially enacted many of the bill’s measures designed to increase affirmative actions by consumers when they accept post-transaction marketing offers.

Going forward, marketers may want to examine their practices, as well as those of their partners to ensure compliance with the new terms of their payment processor agreements and the bill’s other measures when and if the Rockefeller bill is passed into law.

Jeffrey D. Knowles is a partner at Venable LLP and chair of the advertising, marketing and new media group. Contact Knowles at (202) 344-4860 or at jdknowles@venable.com. Stuart P. Ingis is also a partner at the Washington, D.C.-based firm. Contact Ingis at (202) 344-4613 or at singis@venable.com.

August 2010 – Column: Rick Petry

Shakedown in Cyberspace

When the Federal Trade Commission (FTC) published its final Guide on Testimonials and Endorsements late last year, it contained a new wrinkle reflective of the web weaved by–what else?–the worldwide web: bloggers or other word-of-mouth marketers who receive any sort of financial benefit, including free product, are now required to disclose such “material connections.” The guideline’s goals are admirable: to create as much transparency as possible by laying such agreements bare, thus enabling consumers conducting product research to have as many facts as possible with which to fashion their own opinion.

Some of the larger sites that actively encourage consumer reviews such as Amazon.com and CNET.com have created user-friendly mechanisms for aggregating opinion data such as star-based ratings. Part of what lends these sites credibility is that they approach the task of disseminating recommendations with neutrality and organize the information so that it is of genuine benefit to their buying communities.

In contrast, some so-called consumer advocacy sites aimed at infomercials and other methods of direct marketing use loaded words such as “scam,” “spy,” “rip-off” and “hell” in their very URLs. While there is no denying that DRTV has had bad actors, such tacit indictment of an entire genre of advertising is simply unfair and about as cynical as suggesting that all consumer opinions are deceptive.

Just how cynical was evidenced last year when Video Professor won its lawsuit against InfomercialScams.com. According to the Consumer Law & Policy Blog (clpblog.org), InfomercialScams.com and at least one similar site allow companies that are criticized on their pages to purchase “special privileges.” These allow companies that are getting flamed to have favorable notices posted front and center, while condemning blurbs get buried. Thus, instead of collective opinion resulting in the proverbial thumbs up or down shake out, some profiteers have been relying on a classic shakedown. What’s good for the goose apparently isn’t good for the gander when the latter can freely honk inflammatory opinions for the world to gander at.

Yet, it’s unlikely that unscrupulous opportunists masquerading as consumer advocates are going to be given any government guidelines on how they should conduct themselves in this new arena of public opinion anytime soon. Therefore, marketers must be vigilant about addressing consumer complaints and adopt policies that are fair and easy to understand.

However, there’s a certain irony in all of this. The DR industry personifies the entrepreneurial spirit that stokes free enterprise. But an unfortunate byproduct of that success is that it attracts parasites that feed off of the demonization of business, undermining the industry’s ability to create jobs and economic opportunity. While some self-appointed consumer watchdogs might characterize the demise of InfomercialScams.com as an example of big business vanquishing the little guy, perhaps a more apt description would be that it represents the triumph of reason over hypocritical small-mindedness.

Rick Petry is a freelance writer who specializes in direct marketing and is a past chairman of ERA. Contact Petry at (503) 740-9065 or online at rickpetry.com. On Twitter at http://twitter.com/thepetrydish.

August 2010 – Column: Shop Talk

Convert Sales into Relationships with Great Customer Service

As the direct marketing landscape has become more fragmented, the industry has moved from one-off sales to more programs that rely on enduring relationships between marketers and their consumers. Beauty, skincare and health-and-fitness supplements are just some of the categories that depend upon variables such as overarching brand strategies to cross-sell products, continuity programs and a need for satisfied customers to replenish their supply of product. One key factor to help ensure long-term prosperity that is often overlooked is exemplary customer service. It is a vital element that is nothing short of a golden opportunity.

Building Customer Loyalty
Here’s a case in point. Recently, a customer who had purchased one of our body shaping products in late 2009, called to inquire about our exchange policy. Though she was well past the 30 days required for a refund or exchange, the customer explained that she was unable to use the product because she lacked the hand strength to pull it on. Once the customer service representative was clear about the issue, she suggested an alternative jean product that is easier to get into. The rep obtained management approval to make the exchange outside the bounds of the policy. The customer was so delighted she took time to call and thank the rep for introducing her to the new product that she loves.

The lessons of this story exemplify why customer service is so critical:

The customer was treated as an individual. Rather than ascribe to rote policy, a good customer service center will have latitude to address customer concerns. Obviously, the team needs to be conversant in the product so they can respond with knowledge and competency. But they also need to be able to address concerns on one-by-one basis.

The representative listened. As Dr. Stephen R. Covey suggests in his landmark book, “The 7 Habits of Highly Effective People,” the representative followed the principle “seek first to understand, then be understood.” She treated the customer with empathy and addressed her specific concerns with a custom solution.

You can convert a disgruntled customer into a brand ambassador. The reality is an angry consumer is more likely to rip your brand or product rather than praise it, but this dichotomy can be turned on its head with extraordinary customer service. Why? Because customer service that feels as if the marketer is bending over backwards makes buyers feel special!

It is vital that you walk your talk. If direct marketers tell consumers that exchanges or refunds are easy to attain, then they had better be. In today’s world of rampant social networking, how you treat every individual can have an enormous ripple effect on your business, for either good or bad.

The foundation of any enduring relationship is trust and nothing engenders trust like going the extra mile to satisfy a customer. By exceeding consumer expectations and turning a potentially bad situation into a positive one through extraordinary customer service, marketers can spend a little extra up front to preserve something that is priceless: their reputation.

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

August 2010 – Column: Direct Response Insights

Stop Overpaying Affiliates

How much are you paying for your affiliate orders? Why? Who said you had to pay that much? Have you asked these questions lately? Well, you should. Let me share some things I found to be true about affiliate marketing today.

Most of the affiliate orders I’ve seen produced can be associated with a successful offline ad campaign. Other than a very select few, I’ve yet to see affiliates take a non-TV offer and run with it. And from my experience, affiliate marketing only works when there’s TV or offline media behind the campaign. I’m not talking about lead gen. I’m referring to an electronic retailer taking a hard good item, creating a DR campaign and running it straight out of the gate with affiliate marketing. More often than not, it doesn’t work.

Keep the above thought in mind and consider this macro-event that has occurred recently in the affiliate marketing world. The activities of the credit card issuing companies, the FTC and Senate have killed the soft offer in the continuity business–you know, the free trials with large backend monthly charges to consumers. Primarily run by nutraceutical companies, electronic retailers would take items like male enhancement pills and electronic cigarettes and convert consumers into monthly continuity programs.

Taking Back Control
The industry collapsed when many of these marketers would avoid answering calls and allowing people to cancel. It was horrible, and the changes that were implemented really needed to be put in place for many players. Well, those players had very low costs of goods, and high revenues due to people being stuck in continuity. In turn, they were paying affiliates $30, $40, $50-plus for every affiliate order driven. So, when a typical $19.95 DRTV hard good offer with a $10 payout would be presented to the affiliates, they would balk at the offer and run with the nutraceutical offer. They had a greater chance of making money.

Photograph by Burke/Triolo Productions/Brand X Pictures/Thinkstock

Now, take the fact that affiliate marketing campaigns for DRTV items really only work when there is media behind them and the fact that the easy money has disappeared for the affiliates and what do you have left? You have marketer control. And that’s the way it should be. If you have a good DRTV offer, are spending hundreds of thousands of dollars on TV each week, there’s a good chance that an affiliate can earn some decent money by dropping an e-mail, blogging, putting up banner ads or running performance-based ads in turn for a bounty on each order they drive you.

The playing field is now more level and you, the marketer, are now in control. Rather than paying out $15, $20, $30 or more per order, consider offering affiliates a more reasonable payout. Offer them $8, $9 or $10. Wait ’til you see what happens. They may complain at first. But, when you tell them it’s an exclusive offer and that the campaign is a success on TV, they’ll most likely listen and give it a shot.

Affiliate marketing is a solicitation game. Your affiliate team has to be proactive. They have to understand what you’re doing, know how to sell and relay to the affiliates why the offer is unique. Control your affiliate marketing and you will save money–a ton of money.

I’ll leave you with this thought: If you save $10 per order from affiliate marketing and save that on 3,000 orders per week, that’s $30,000 going right into your pocket…each week!

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

August 2010 – Columns: Your Association, Your Bottom Line

Education Drives Success

It’s an eye-catching resume to say the least, one which any retail executive would be justifiably proud of:

• He’s the only CEO to have built three Internet start-ups into billion-dollar companies;
• While in his 20s, he transformed Macy’s and Fingerhut into two of the top-three multichannel retailers in the world;
• As CEO of GVG Capital Group, he has acquired 25 multichannel retail organizations while creating more than $30 billion in shareholder value; and
• He has advised some of the world’s greatest, most iconic companies, including Walmart, Google, Apple, Nike, Amazon, Starbucks and Walgreens, among many others.

The résumé belongs to Love Goel, the keynote speaker at the 2010 ERA D2C Convention, held September 21-23 at the Wynn Las Vegas. Mr. Goel will deliver a speech titled, “Innovation 3.0: Winning Customers in a Multichannel World.” In his presentation, he’ll outline the new rules for success in a retail environment where customers have more information about products, prices and promotions than ever before, and more channels to buy from–and where retailers have more data concerning their customers than ever before, and more channels through which to market and sell their products. We’re living in a retail world that’s transforming dramatically before our very eyes, and Mr. Goel can help us adapt and innovate–which, he says, marks the difference between extinction and success.

Mr. Goel will speak at 9:00 a.m. on Wednesday, September 22, following Tuesday’s Education Day, which will feature the most robust education program in the 20-year history of the convention.

Sessions and panel discussion will be presented along four tracks: Direct Response Success, Digital Marketing Intelligence, Operations and Profitability and ERA Government Affairs: Protecting Your Bottom Line. And, of course, we will again feature one of the association’s most popular education franchises, DRTV 101, moderated by the dynamic Stacy Durand, president of Revenue Frontier. Whether you are looking for emerging trends in direct response, curious about how to successfully integrate campaigns across channels, considering leveraging a new channel, want your back-end processes to contribute to your bottom line or are interested in the most crucial legislative and regulatory issues impacting our industry, there will be something for you on Tuesday.

The education program does not end once the tradeshow floor opens, however. On the show floor on Wednesday and Thursday, be sure to attend bonus sessions including a panel of some of the most influential women executives in our space, an analysis of performance-based marketing, a look at trends and best practices in production from a marketer’s perspective, all in addition to a “live case study”–Wednesday at 1:00 p.m.–featuring some of the most successful marketers in direct response–it’s a rare and valuable opportunity to learn directly from the innovators behind some of the industry’s current hits.

I am confident that this year’s education line-up will provide each and every attendee with an opportunity to gain valuable, actionable knowledge to drive their current and future success. And remember, it all starts on Tuesday, September 21. For more information about this year’s educational offerings and the rest of the exciting events planned for the 2010 ERA D2C Convention, please visit www.D2Cshow.org.

July 2010 – Channel Crossing: Payment Processing

Getting E-tailers Approved for a Merchant Account

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

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

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

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

General Guidelines

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

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

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

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

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

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

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

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

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

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

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

July 2010 – Channel Crossing: DRTV

Every Campaign Should Do a 4-to-1 Ratio

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

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

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

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

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

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