July 2009 – Cover Story: Breaking Barriers in Canada

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

By Vitisia Paynich

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

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

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

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

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

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

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

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

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

Leaders in the Canadian DR Market

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Canadian Fast Facts

According to Canada’s 2006 Census figures, the country has a population of 31,612,895.

Canada’s population is equivalent to California.

The country’s 10 provinces include Newfoundland and Labrador, Prince Edward Island, Nova Scotia, New Brunswick, Quebec, Ontario, Manitoba, Saskatchewan, Alberta, and British Columbia.

Canada has two official languages: English and French The Canadian Broadcasting Corporation (CBC) is the country’s national public radio and television broadcaster.

French Quebec TV market accounts for 33.2 viewing hours per week, while the rest of Canada accounts for 28.4 hours, according to stats from BBM.

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

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

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

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

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

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