February 2005 - Selling South of the Border

Latin America might be a hot new market for your DR products. And if you aren’t even testing the U.S. Hispanic market, what are you waiting for?

By Jack Gordon

At first blush, the Jack LaLanne Power Juicer looked to Judith Gorinstein like a poor candidate for a successful direct response television (DRTV) campaign in Latin America.

The Power Juicer sold for $120 to $150 in the United States, and Gorinstein knew that the price would rise to around $200 in Latin America due to import tariffs and markups by distributors in individual countries. As the Mexico City-based Latin America account manager for supplier Interglobal Intl. Ltd., Gorinstein also knew that the Power Juicer product would have to compete against many cheaper juicers available in retail outlets in Mexico and elsewhere.

On the other hand, she says, “we thought maybe a very high-quality product would work. “Two years ago, Interglobal tested a Spanish-language version of the Power Juicer infomercial in Mexico. A rollout to Central and South America followed, with the program running both on local broadcast stations and on the panregional TV cable network that serves 19 countries south of the U.S. border. The juicer has been selling briskly in the region ever since, Gorinstein says, with 2004 sales ranging from 3,000 to 6,000 units a month.

“Many suppliers think that because Latin America is poor, you can only bring in cheap products,” she says. “Not so. This one worked in Latin America because of its quality.”

Do you envision the Latin American DRTV market as a dumping ground for cheap, shabby products pitched in infomercials that were poorly made in English to begin with and then dubbed badly into Spanish? If so, suppliers enjoying success in Latin America wish direct marketers would keep believing that stereotype. It’s now far enough off the mark that you represent no threat to them as a competitor.

Daniela Todorovic is vice president of Toronto-based master distributor Thane Direct, whose Orbitrek Platinum exercise machine has been selling briskly for five years in Spanish-speaking countries and Portuguese-speaking Brazil. “Will our competitors be reading this?” she asks. In that case, she laughs, “Here is the formula for success in Latin America: overprice, low quality, and be late with delivery.”

When they’re speaking seriously, experts say that DRTV advertisers with successful U.S. campaigns are leaving a lot of money on the table if they ignore the potential for sales in Latin America. Even advertisers who have already wised up to the burgeoning U.S. Hispanic market may be missing a good bet if they fail to test an infomercial farther south.

9 Keys to Conducting Business in Latin America
By Stan Bruckheim

1

Determine whether the product is appropriate for the Latin American market.

2

Determine which selling model you will employ for Latin America.

3

Select your sales and operational team.

4

Determine your selling parameters. FOB point and price/unit, import specifications, required documentation, policy on dry testing, minimum orders, upsell product and strategies.

5

Translate the show or spot into Spanish.

6

Select your product launch strategy.

7

Select your local distributors for each country.

8

Prepare your chosen local distributor partners.
9
Launch.

From fitness equipment to health and beauty products to kitchen gadgets, experts say, just about anything that succeeds on DRTV in the United States can succeed in Latin America. The main caveat is that, as a rule, the product should be able to sell in the region for less than about $300 after import taxes, distributor markups and other expenses are factored in.

The list of U.S. DRTV products that have traveled well to Latin America includes Ab King Pro, Ab Lounge, Butterfly Abs, Winsor Pilates, Natural Bra, Magic Bullet chopper/blenders, Miracle Blade knives, Reduce Fat-Fast diet pills and more.

For a North American supplier, however, there are complications. These apply especially to ingestibles, topicals and electrical equipment. Import taxes and shipping charges also raise the issue of whether the product can be sold wholesale to local distributors at a price that allows both the supplier and the distributors to make a buck without driving the final cost to consumers out of reach.

U.S. suppliers wanting to tap the Spanish-speaking market will find the process more straightforward if they begin closer to home.

START IN YOUR OWN BACKYARD?
Spanish speakers in the United States represent an enormous and often overlooked market, says Dr. Nadia Ashrafian, CEO of Capital Media of Mission Viejo, Calif., which specializes in bringing Latin American DRTV products to the U.S. There are 40 million U.S. Hispanics, 80 percent of whom have credit cards, Ashrafian says. They spend about $780 billion a year on goods and services. They want the same kinds of products that English-speaking Americans do. And they respond to DR advertising.

As prospective customers, U.S. Hispanics differ from other Americans mainly in that they watch and listen to their own TV and radio networks, such as Univision, Telemundo and TV Azteca America, Ashrafian says. “Ninety-nine percent of DRTV products that do well in the U.S. market would do well in the U.S. Hispanic market.” The main exception she can think of is golf equipment.

Media time on Spanish-language stations in the U.S. is about 30 percent less expensive “per eyeball” than in the general market for either long-form or short-form DRTV advertising, she says. For instance, KMEX, the Univision station in Los Angeles, attracts the country’s largest adult viewing audience for local newscasts. Yet, commercial time on KNBC in Los Angeles is “30 percent more expensive, with fewer viewers,” she says.

For years, Ashrafian contends, “marketers thought, ‘I’ll reach these people when they learn to speak English.’ Now they’re realizing that the U.S. Hispanic market is a huge power in its own right. When President Bush gives a speech, it’s dubbed in Spanish on Univision.”

Though much of the programming on Hispanic networks originates in Spanish, viewers in both the U.S. and Latin America are quite used to dubbed versions of English movies and other programs. This means that the creative side of producing a Spanish-language infomercial need not be a major obstacle. While there is a big difference between a quality dubbing job and a “cheesy” one, Ashrafian says, an English-language infomercial or short-form spot can perform perfectly well if dubbed with care in “neutral” Spanish accents.

What’s more, she says, U.S. Hispanic viewers are conditioned to higher production values than those that generally apply in Latin America. Therefore, a tape whose quality and dubbing are acceptable to U.S. Hispanics usually will be acceptable to viewers farther south.

If the product is closely tied to a non-Spanish-speaking celebrity or sponsor, dubbing may be the only way to go. In the past year, Body by Jake exercise equipment has achieved “amazing ROI” in the U.S. Hispanic market, Ashrafian says. The infomercials are dubbed rather than produced from scratch in Spanish because, of course, Body by Jake requires Jake.

For a North American advertiser looking to tap Spanish-speaking customers, the U.S. Hispanic market seems an obvious place to begin. The consumers are relatively affluent. Most major fulfillment centers can supply Spanish speakers to handle customer service. Tariffs and international shipping costs are not a concern. Electrical service in the United States is standardized at 110 volts, and a plug that fits a socket in California will fit one in Delaware-which is not the case for electrical devices sold in Mexico (110 volts) vs. Peru (220 volts). The only government regulations applying to truth-in-advertising claims or to health concerns about topicals and ingestibles are the ones your products and advertisements have already met in their English manifestations. And you can sell directly to consumers, at retail prices, instead of wholesaling your products to partners and distributors in other countries.

SOUTH OF THE BORDER
The bad news is that doing business in Latin America can be a complex endeavor, fraught with headaches arising in a number of countries. The good news is that very few of those headaches must necessarily be yours. If a master distributor with international experience takes an interest in your product, and you can sell in quantity to that distributor at a price point that works for everyone concerned, then the market mechanisms and the socioeconomic gyrations of countries like Mexico, Venezuela and Brazil become someone else’s problem.

More good news: It is easy and inexpensive to test or dry test an infomercial on the panregional cable network in a manner that provides an excellent indicator of how the program will perform in each of almost 20 countries.

According to Stan Bruckheim, president of PanLatinoTV of Laguna Hills, Calif., the first thing to understand about marketing in Latin America is that unless you have plenty of experience, staffing, resources and contacts in the region, you neither want nor need to have much hands-on involvement with your international sales operation. It usually makes more sense to take your product to an international master distributor such as Thane Direct, Interglobal, Telebrands of Fairfield, N.J., In Clover Marketing of Los Angeles, or Williams Worldwide Television of Santa Monica, Calif. That partner essentially will act as the supplier of your product, with a great deal of latitude about how to sell it.

The master distributor deals with the local distributors in individual countries. They are the ones who handle the business-to-consumer end of the process, including telemarketing, fulfillment, warehousing, media buying, selling to retail outlets, and maybe some re-dubbing or localizing of your infomercial or your spots. It likely will be a Brazilian distributor that has the program dubbed in Portuguese, for instance. Distributors in other countries might add testimonials from local people to versions of the program that run on local broadcast stations.

In other words, you will cede considerable marketing control to local distributors. You also will rely on them for help in gaining approvals from each country’s version of the Federal Communications Commission (for advertising claims) and the Food and Drug Administration (for topicals and ingestibles). This applies even if you set up manufacturing operations in one or more Latin American countries. “The mode of business in Latin America is to rely on existing distributors in Mexico, Argentina, Columbia, etc.,” Bruckheim says. “You can’t compete with those guys, and you wouldn’t want to.”

Local distributors buy broadcast TV time in individual countries. And they combine with suppliers and one another to buy media time on the panregional cable system that serves all of Latin America. For people affluent enough to afford cable TV, the panregional system carries Spanish and Portuguese versions of familiar networks, including the History Channel, Animal Planet, A&E and HBO. Approximately 25 of these cable networks sell time for DRTV programming.

All of the available DRTV time on the cable system is bought or brokered by agents, the major ones being PanLatinoTV and Williams Worldwide. These two then sell media time to other suppliers and distributors.

Both PanLatino and Williams offer one- or two-week tests of DRTV programs on the panregional cable system. PanLatino’s standard one-week test includes an average of 21 30-minute airings or 150 two-minute spots in each of up to 18 countries. Williams, under a supplier program called Media Uno, offers two-week tests that operate similarly. The charge for one of these extensive tests by either company is usually about $10,000-”similar to one national cable airing in the United States,” Bruckheim says.

Both Bruckheim and Carlos De La Fuente, executive vice president for Williams Worldwide, stress the value of dry testing as a way to sample the Latin American market’s potential with little expense and no risk. This applies especially to makers of topicals and ingestibles, which face regulatory hurdles that can take six months or even years to clear in some countries. A dry test, before the product actually is made available, gives the supplier and local distributors a reading on the likely return for their efforts.

GOING FOR IT
If a test shows that a product has high potential, De La Fuente suggests that suppliers consider establishing some manufacturing operations in Latin America. If a supplier is open to producing products in Mexico or Argentina, for example, a master distributor can help find a local manufacturing operation, he says.

“A lot of [Latin American] successes with ingestibles are with products manufactured locally,” De La Fuente says. The same applies to electrical equipment, since standards vary among countries. “Can your factory produce samples with different plugs?” he asks. In Argentina, Peru, Bolivia and parts of Brazil, the standard household current is 220 volts, not 110 volts as in the United States.

Regional trade agreements allow products made in Latin America to escape high tariffs that apply to products made in the U.S., China or elsewhere. In Mexico, for instance, tariffs can run to 35 percent or higher, De La Fuente says. “So manufacturing in Mexico to serve that market can make a lot of sense.”

Local manufacturing can change the economics of the picture to such a degree that products otherwise not viable for the Latin American market can succeed, agrees Robin Behar, managing partner for master distributor In Clover Marketing.

“The local distributors have a certain business model,” Behar says. “If they air a product at $100, they want to land it in the country for about a third of that.” When freight charges and tariffs are factored in, a supplier’s cost of $10 might rise to $20 for a local distributor to get the product to his warehouse. Therefore, if the item can’t sell to consumers for $60, the numbers don’t work.

That’s where local manufacturing comes into play. “We’re dealing right now with a supplier whose product is made in China,” Behar says. “It’s heavy, so the freight charges are considerable.” And then there are the tariffs. “We told [the supplier] the product won’t work in Latin America. But it turned out they were already considering manufacturing in Brazil. That changes everything.”

Sometimes DR marketing in the region brings frustrating surprises. In 2003, Behar’s client Butterfly Abs had “one of the strongest shows in Latin America,” but the infomercial couldn’t run in Brazil because authorities there classified Butterfly Abs as a medical device. This meant the product required background documentation and test results that the maker couldn’t supply.

Strangeness comes with the territory in international marketing, however, regardless of which area of the world is targeted. And with strangeness comes opportunity. PanLatino’s Bruckheim says that Latin America represents about 5 percent of the global market for DR advertisers, or 15 percent of the total market outside the United States. As a rule of thumb, he says, international sales as a whole can add up to about 50 percent of a supplier’s U.S. total.

“That means that if a good product sells 2 million units in the U.S., I should be able to sell about 1 million outside the U.S., of which 150,000 will be in Latin America,” Bruckheim says.

That may not be a big slice of the global pie, but who wants to leave 150,000 units worth of business on the table?

ERA Latin Hispanic Council
Following is a list of Latin Hispanic Council officers and members.

Chairman
Luis A. Salaverria
Grupo TV Offer
www.grupotvoffer.com

ERA Board Member &
Liaison to the Council

Jorge Hane

Premier Solutions
www.premiersolutions.com

Latin American Council Members
Andres Sunnah

A3D
www.a3d.cl

Juan Elias
BJ Televenta
[email protected]

Ann Singh
Beauty & Home Systems, Inc.
www.bhsnv.com

Mario Kohn
Brazil Connection
www.brazilconn.com.br

Lillianne Salaverria
Grupo TV Offer
www.grupotvoffer.com

Carlos Mercenari
Innova
www.inova.com.mx

Carlos Neto
Polishop
www.polishop.com.br

Daniel Gorinstein
Premiere Exclusives
www.PremiereDirect.tv

Patricia San Pedro Cava
Producciones Infovision
www.infovisiontv.com

Paul Zaidman
Quality Products – Peru
www.qproductsperu.com.pe

Roberto Cherashny
Sprayette
www.sprayette.com.ar

Veronic Leyton
Sprayette
www.sprayette.com.ar

Oswaldo Acevedo
Televentas S.A.
www.televentas.com.co

Gerhard Wolf
Top Therm
www.toptherm.com.br

Saadin Solah
TVentas
www.tventas.com

Alejandra Markiewicz
TV Ofertas, S.A. de C.V.
www.tvofertasonline.com

U.S. Hispanic Council Members
BJ Fazeli
BJ Global Direct
www.bjglobaldirect.com

Dr. Nadia Ashrafian
Capital Media
www.capitalmedia.com

Kristin Pitman
Cataval Inc.
www.cataval.com

Ross McCarthy
Creative Nations International (CNi)
www.creativenations.com

Rebekah Alfond
Guthy-Renker International
www.guthy-renker.com

Stan Bruckheim
PanLatino TV
www.ventasportv.com

Eric Arias
TV Shopping International
www.ventasportv.com

U.S. Hispanic Task Force Chairperson:
Robin Behar

In Clover Marketing, LLC
www.inclovermarketing.com

Members:
Maria Almendariz

In Clover Marketing, LLC/In Clover Mexico
www.inclovermarketing.com

Samuel Bejar
In Clover Marketing, LLC
www.inclovermarketing.com

Steve Jaffe
Latin Media & Marketing Solutions
www.latmedia.com

Dr. Karissa Price
Lexicon Marketing, creator of Ingles sin Barreras
www.lexiconmarketing.com

Sergio Mankita
Lexicon Marketing, creator of Ingles sin Barreras
www.lexiconmarketing.com

Nicole Ali
Northern Response (Intl.) Ltd.
www.shopnorthern.com

Stan Bruckheim
PanLatino TV
www.ventasportv.com

Jorge Hane
Premier Solutions
www.premiersolutions.com

Poonam Khubani
Telebrands
www.telebrands.com

Michael Garcia
Telemedia
www.telemedianet.com

Blanca Campos
Thane Direct
www.thanedirect.com

Priya Ghai
The Shop
www.the-shop.com

Enrique R. Melendez
Universal Promotional Services
[email protected]
yahoo.com

Jim Weiler
Vyvx
www.vyvx.com

Jim Weller
Vyvx
www.vyvx.com

Carlos De La Fuente
Williams Worldwide Television
www.williamsworldwidetv.com

Sylvia Morales
Williams Worldwide
www.williamsworldwidetv.com

Nelinda Willoughby
WorldLink
www.worldlinkmedia.com

Jack Gordon is editor at large for Electronic Retailer magazine. We would appreciate your feedback. To submit comments, point your browser to coverstoryfeb.marketing-era.com.

 

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