May 2007 - Channel Crossing: DRTV

Go Ahead, Blame the Media Rates!

By Rob Medved

Imagine waking up on a Saturday morning to review the test results of your new infomercial. You log on to the telemarketing website to get the order counts. You know the product is unique, has great testimonials, is a solid value and fits the problem/solution model. And then, the numbers flash onscreen-results just below break even! The post-test analysis determines the value was great, the creative addressed all the key selling benefits and the testimonials were solid. The phones rang, just not quite enough. You struggle to come up with some minor tweaks and then you test again, with similar results.

Hundreds of new infomercials test every year leaving the marketer, telemarketer, producer and agency staring at the same elephant in the room: A show with results not good enough to justify running more media, yet so close it pains you to walk away. It’s as if there’s a conspiracy to price media just out of reach.

In fact, it is not a conspiracy, but something called supply and demand. This simple market force is the Achilles heel of every on-the-fence infomercial ever produced.

When infomercials first began in the early 1980s, cable barely had started and broadcast stations were not nearly as numerous. Most of those stations went dark after midnight. When the infomercial came to be, these stations had to be convinced to run those half-hours in the middle of the night instead of staying dark. Obviously, with little demand for that time, the value was quite low. I have heard numerous stories of marketers running all night long on a single station-back-to-back. And with rates so low, the results were remarkable.

The next decade saw the development of a formal market for long-form avails. Agencies sprang up to become the middlemen, helping to negotiate the time between the marketer and the station. Seeing the potential value of infomercial time, stations also created positions dedicated to the sales and trafficking of infomercial time. And as more and more infomercials began to appear, demand for the time started to increase. With more demand, the rates started to go up. Shows posting 5-to-1 ratios began settling for 3-to-1 ratios.

The mid-’90s is when significant pressure started to drive the value of the infomercial time even higher. No longer did a marketer simply put up a show and count the orders. Many factors were contributing to honing the bottom line: Lower cost of goods could be had with overseas manufacturing; a retail goldmine was being realized at the end of many campaigns; inventory management systems were making fulfillment and processing more efficient; upsell scripts were being created; and continuity programs were being put in place to allow accounting for the long-term value of a customer. Sharp direct response entrepreneurs were finding new ways of being able to pay higher and higher rates for media. And, as a marketer, if you weren’t utilizing these marketing strategies to increase your top and bottom lines, you simply couldn’t be on the air.

The way in which media was being bought and sold also was changing. Technology allowed for avails to be faxed or e-mailed out to hundreds of potential buyers, instead of having to call on just a few. In addition, buyers were now equipped with real-time results and instant analysis, allowing them to make quick decisions. This process made infomercial time more liquid, helping to set true market value.

Today, the infomercial marketplace is a fast-paced struggle between supply and demand.

It is estimated that about $1 billion is spent annually on long-form media. This equates to about $19 million per week. The surprisingly painful reality is that the rate of that media is set by the marketer and agency, not by the network or station. All of the infomercials running at any given time are the market force that sets the rates for the entire long-form direct response field. If your show can’t pay the rate-and another show can-you won’t get the time.

While $19 million in weekly time seems like a lot, more than half of that inventory can be accounted for just by running down the weekly Infomercial Monitoring Service (IMS) Top 25 list. Throw in all of the seminars running on local broadcast and niche infomercials running on The Golf Channel, The Outdoor Channel and others, and the $19 million is gone.

For the marketer trying to be successful on television, it becomes a small and competitive field. That is why all of the elements that make for a hit infomercial are so important. Just having a unique mass-market product with a great mark-up and incredible before-and-after testimonials doesn’t always cut it. Furthermore, some shows simply need to be on the air to deplete inventory while driving retail. Other shows will lose money just to build some brand recognition. Still, others have such a compounding backend program that they are able to run at a loss on the front-end, only to make it up in a healthy return down the road.

Another compounding fact is that the majority of infomercials do not have a weekly budget. This means that the strong shows buy to their level of performance, regardless of how much weekly media spend that is. The XYZ avail that is priced fairly at $1,000 for your show might make sense for a stronger competitor’s show at $1,200. And they’ll pay it, and often get it. That is why it seems the infomercial market is always just out of reach. That 10 percent to 20 percent is the difference between hundreds of infomercials being able to take the time and only the top infomercials being able to take the time.

Some media outlets have hundreds of avails on a weekly basis, while others have very few. The outlets with very few will get the highest price for their given time, as they can sell to the top-tier, best-performing shows. On the other hand, the outlets with hundreds of weekly avails must reach out to more shows and weaker shows, causing the pricing of that media to be lower than if they had less time. Again, it’s simple supply and demand.

Fortunately, the fragmented and ever-growing television universe has provided us with enough avails to sustain numerous campaigns spending far less than $100,000 per week. These campaigns, and the agencies grinding them out to profitability, are the backbone of the infomercial marketplace.

While we would all like to stand in unison shouting, “Don’t pay the increase!” our chants will be muffled in backroom discussions about how selling product at a 2-to-1 ratio is still better than just sitting on the sideline being a martyr, or how breaking even is okay, as the retail will bring profits down the road.

The good news is that one Saturday morning you could wake up to review the test results of your next infomercial and discover that you do have the next home run. And when you do, buy like crazy!

Rob Medved is president of Cannella Response Television. Formed in 1985, Cannella specializes in direct response media placement on national cable and broadcast. He can be reached at (262) 763-4810, ext. 26, or via e-mail at [email protected].


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