February 2005 - One-Stop Shop

As more Latin American companies transform their front-end and backend operations into full-service entities, they are beginning to branch out into other markets. Not only are they serving their own client base within DRTV but finding new sources of revenue.

By Vitisia Paynich

U.S. direct marketers unfamiliar with the Latin American DRTV market may be surprised to learn that many of these companies are actually full-service organizations that can handle many of their needs-from the front end to the backend. Why do these companies handle so many different aspects of direct marketing?

Roberto Cherashny, president and CEO of Sprayette of Argentina explains that it’s simply “because there are very few or, in some cases, no service providers [available in certain areas of Latin America]. Therefore, he says, DRTV media companies in Latin America, out of sheer necessity, have had to develop their own telemarketing, fulfillment, payment processing and data processing departments in-house.

Yet, although some of these companies have found it necessary to bear most of these responsibilities themselves-due to a lack of resources-others believe having these services in-house gives them more control over operations, enables them to offer better quality customer service, as well as provides more opportunities to venture into other markets.

The Latin American market is still relatively small in comparison to North America; and therefore, many of these companies have broadened their operating capabilities. Today, U.S. and other multinational marketers who wish to enter the DRTV market in this region can rely on these companies for long-form and short-form media buys and creative production, as well as some help on the backend.

Sprayette of Buenos Aires, Argentina, began in the direct marketing business in 1977, says Cherashny, president and CEO of the company. “We started providing services [to other Latin American firms] in 1990, as we saw an opportunity to succeed in the DRTV market in Argentina,” he explains. Part of the reason the company chose to extend its services was because there were few companies in the country that actually specialized in DRTV.

Another DRTV company soon emerged in Argentina. Tevecompras began operations in 1989 before the company even heard of the term infomercial. “We have everything from television advertising, catalog, inbound/outbound services, telemarketing, warehousing, fulfillment, editing, post-production and retail,” notes Ricardo Saragovi, CEO and founder. “And, we also have an in-house media buying office.”

He adds that the company also sells media to other Latin American companies because, he explains, “Argentina has so many networks that are based in [this country].”

In Central America, Grupo TV Offer was launching its own operations in 1993 out of San Salvador. “We started very small with three people, two telephone lines in El Salvador, and we were mostly concentrating on the telemarketing part of the business,” recalls Luis A. Salaverria, president and CEO. He adds that the company sold product, put the programming on the air, answered the phones and handled the delivery of product.

“In the 12 years we have been operating, there have been probably around 16 or 17 companies that have done DR on television, and they have come in and they have gone out,” says Salaverria. “Our mission from the beginning was to cover the region.”

Thus, Salaverria and Grupo TV Offer began forging partnerships with the leading TV stations in each country, which is how the company started its expansion. In May 2004, Grupo TV Offer acquired two small competing companies that were operating in Central America. They now operate as part its group of companies.

Saragovi explains that in some countries throughout Latin America, it’s difficult for marketers to purchase media time. One reason is due to strict regulations and the other reason is due to few local cable networks. “In Chile, for example, there are very limited terrestrial stations. However, in Argentina, it’s easier for us to acquire media because of the amount of homes and amount of cable networks.”

Why do Latin American DR companies opt to do everything themselves? Saragovi believes the control factor is critical. He says, “We have our own call center, and the reason is to give our customers the best quality services [first and foremost]. It’s not easy to get good quality when we hire service bureaus.” He adds that having fulfillment services located in-house enables the company to deliver a package the same day the order is placed. An outsourced delivery company doesn’t generally offer same-day delivery, but next-day service.

“That’s very hard to do when you hire a service bureau, because our customers are very limited and the size of the market is very limited,” says Saragovi. “We need to give the best possible service.”

In addition, according to Saragovi, Latin American companies don’t want to outsource their business due to security concerns. “Also, most of the small Latin American countries don’t have service companies that can give efficient service to our companies, causing us a lot of harm in the customer service area,” he says.

Five years ago, Salaverria and his company made the decision to offer their services to other local companies. Why did the company choose to do so? He says, “We reached a point where we had consolidated [our operations] and built an infrastructure, which permitted us to benefit from [creating] a horizontal business.” Some of those businesses included multinational companies that relied on Grupo TV Offer’s call center, customer service and market research, as well as insurance companies that looked to the DR company to sell insurance policies through its call center and via direct mail.

In addition, Grupo TV Offer provided its telemarketing services to Bank of Nova Scotia when it first ventured into Central America. “They were launching a credit card, and they used our service to grow their database [of] clients,” explains Salaverria. “So, [we] were doing outbound telemarketing and taking advantage of all the inbound calls that we were receiving and offering the credit card to our customers. At the time, it was considered a special service that Grupo TV Offer was bringing to clients who didn’t have a credit card.”

He explains that credit card purchases among Latin Americans are still relatively low. “Here around 20 to 30 percent of the sales are with credit cards,” according to Salaverria. So, it was a very exciting project for us, because there was a lot of interest for the credit card.”

Once the company had a good size call center, Tevecompras ventured into other vertical markets. Saragovi says the first opportunity that came their way was in the telecommunications sector. This occurred at a time when customers could select their own long-distance carrier. Thus, many of these major phone companies were looking to outsource their outbound marketing efforts. “It was an opportunity to make an extra profit,” says Saragovi.

Sprayette found new ways for expanding its business by capitalizing on the other direct marketing channels, such as catalog and e-mail marketing. The company also offers outbound telemarketing services to companies that are not affiliated with DRTV or direct response marketing. Cherashny believes more Latin American marketers will explore outbound telemarketing because “it is still non-regulated in most of the countries and it is extremely effective, while e-mail marketing is an excellent way to make money at a very low cost-considering that all DRTV companies are able to generate very good prospect names,” he says.

“Although we still rely on the traditional North American-based suppliers for the majority of products, we are starting to develop and test products,” notes Saragovi. Tevecompras is looking at developing products in the health and beauty category, which includes ingestibles and cosmetics.

Another area that some Latin American firms have found success is in the retail environment. Grupo TV Offer has been especially active in this area. Salaverria explains, “It wasn’t until 1997 that we started experimenting with retail outlets in mostly small kiosks in shopping centers and that started working. [However,] we got to the point where the kiosks were too small, because we started getting into more bigger items like exercise products, for example.”

Three years ago, the company opened its own retail stores. As of December 2004, Grupo TV Offer has opened 28 stores in shopping centers throughout Central America. The company also distributes some of its products in over 2,000 other retail chain stores.

While some companies have garnered success on retail store shelves, others have generated sales elsewhere. “The Internet is [becoming] a bigger and bigger part of our sales year by year,” notes Saragovi. Future plans also include venturing into direct response radio as well as database marketing.

Even though it seems that U.S. and multinational direct response marketers need only choose a single company to meet their direct marketing needs in Latin America, some warn that there are definite advantages and disadvantages to a one-stop shop.

Saragovi contends, “The advantages are bigger profits, because we have our own call center and fulfillment center. Quality control and speed [of product delivery] are the biggest advantages.”

According to Cherashny, U.S. direct marketers will find that the opportunity to enter the Latin American market is very high. “In every Latin American country, there is very few or non-existent competition. Many countries only have one DRTV company,” he explains.

Salaverria says that “you are able to keep costs down and have better control [of your operations] by doing everything in-house. And at the same time, you are able to get additional income by offering these services to third parties.”

So, what are the disadvantages? “I would say that because we pay attention to so many aspects of the DRTV business, we have less time to develop the future of the business like new products, for example,” says Saragovi.

“It is hard to identify your core business and specialize in it since you are involved in so many areas of the business,” Salaverria adds.

So, what does the future hold for direct marketing in Latin America? As Salaverria puts it, “I think that there are many areas in direct marketing [where] the majority of Latin American countries are still in the early stages, and there is a very good chance that in the near future, these will become important sources of income for many of our companies. It takes time to introduce a new concept and educate the Latin American consumer. It’s just a matter of time.”

Electronic Retailer would appreciate your feedback. To submit comments or questions, point your browser to latinamericafeb.marketing-era.com.


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