May 2009 – Channel Crossing: DRTV

How to be a DRTV Fortune Teller

By Dick Wechsler

• Do your DRTV campaigns die before their time has come?
• Do your CPOs rocket out of control, reaching unforeseen heights?
  
• Does your MER suddenly fall off a cliff, dramatically slashing your revenue stream?
  
• As if out of nowhere, do you find yourself with tens of thousands of units in inventory and little prospect of selling them profitably?

Learn to anticipate, rather than react, and your DRTV campaigns can run longer, more predictably, and as a result, more profitably. The first step to being a DRTV fortune teller is knowing everything possible about the media you are buying–not just the media that has already run. Foresight, not hindsight, is the real key to sustained DRTV success.

Know the cost per thousand (CPM) of every network, station and rotation that you buy. But beware: the CPM of every media will be different depending upon your target. For example, a two-minute spot airing on Lifetime Monday through Friday from 9 a.m. to 12 p.m. might have a $10 CPM against women 25 to 54. In that same rotation, the CPM against men 25 to 54 could exceed $35. To make matters a bit more complicated, that CPM is likely to vary widely by target, by day and by hour of the day.

Understanding how many people are likely to watch a commercial and how much you should pay to reach them is critical to ongoing success. A cost per order (CPO) provides a wonderful, empirical measure of what has already occurred. But, it doesn’t foretell what is likely to happen.

USING THE INFO WISELY
Response rate, however, does provide you with a media planning and buying crystal ball. If you know how many viewers out of a thousand respond to your campaign, and you know how many people are likely to view your commercial, you can calculate a rate for every spot that should result in a favorable CPO. It’s simple math and it holds up.

These empirical measures are particularly important when you’re planning a campaign to take advantage of inventory opportunities going into a new broadcast quarter, ramping up a new campaign, evaluating high-ticket network or syndication buys, or when you’re simply trying to crack a medium that you can’t seem to make work.

There are clear advantages to basing your media planning and buying on response rates and CPMs. First, you’re not likely to purchas e media that costs too much. Your rate structure will be based on each campaign’s response rate and CPM thresholds. Second, more of the campaign is now likely to perform well because it’s priced well against audience delivery. Third, the campaign is now less likely to fall off a cliff, because you’ll constantly be adjusting your rates in lockstep with current response rates. In short, you’re now anticipating rather than reacting to campaign performance, your CPOs and your MERs will remain healthier, and you’ll be better able to forecast revenue and inventory demand.

Dick Wechsler is president and CEO of Lockard & Wechsler Direct in Irvington, N.Y. Wechsler also serves on Electronic Retailer’s Magazine Advisory Board. He can be reached at (914) 250-0250.