September 2009 – Feature: Creating a DR Hit

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

By Peter B. Aronow

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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