1. Telesales

Telesales is just about as old as the telephone itself.  This form of lead generation requires a sales staff, either hired directly, or outsourced, to call individuals by phone and present offers and calls to action for products and services.  

BENEFITS: This lead generation technique provides marketers with excellent control over the details of their message, and which consumers are targeted with that message.  Marketers also benefit from having a highly trained person provide advice, resolve objections and close business with prospective customers.  Phone sales operations are also an excellent way for marketers to get real-time feedback from the marketplace about their product, the perceived value, and unforeseen challenges and opportunities for growing their market share.

CHALLENGES: On balance, a team of phone sales professionals can be very expensive, with the most skilled sales persons requiring anywhere from $50,000 – $100,000 in base salary, competitive benefits and commissions on sales.  Typically, only long established businesses with high margins are able to afford these employment costs, as well as the costs associated with buying sales lists, and providing other tools like CRM systems, phone lines and computers.

2. Direct Response TV Advertising

Direct Response television advertising involves the creation of a TV commercial or an Infomercial that presents an audience with a value proposition, an offer and a call to action to purchase a product or service.  Response methods include 1-800 numbers, websites, as well as social and mobile media.  Offers include Lead Generation tools, like opportunities to request more information, an opportunity to purchase a product or service at a price below the perceived value as well as free gifts and additional products or services in return for purchasing the offer.  Marketers can handle leads and sales via the web, receiving direct calls to their business, or hiring a call center to handle and fulfill orders.

BENEFITS:  Direct Response TV is one of the most scalable lead generation and sales channels in the marketplace today (For More See: LINK TO WHY LOCAL ADVERTISING IS LESS EXPENSIVE THAN YOU THINK).  Marketers can reach households multiple times often times for as little as $0.25 cents, and can reach millions of potential customers at rates that make returns on marketing investment very attractive.  Additional benefits include high quality metrics, that match air times, geographic and psychographic information to actual sales, allowing marketers to better understand their best clients, and rapidly redirect marketing funds more directly at their best clients.  Other benefits include a captive audience, and the opportunity to present your message multiple times to a prospective customer.

CHALLENGES:  Direct Response for TV requires a comprehensive marketing strategy that includes creative/commercial production, media buying and testing as well as ongoing media metric analysis, call center management and order fulfillment and logistics.  That said, agencies, such as GreyTV provide affordable, full service national & local advertising solutions for businesses of all sizes, that offer a wide range of products and services.  When it comes to Direct response for television (or DRTV for short), its best for businesses to not go into it alone.

3. Direct Response Radio Advertising

Lead Generation through Direct Response for Radio is experiencing a come-back, despite a general shift by marketers to other types of media.  The reason is simplethe reach that can be achieved by this approach is unrivaled.  Benefits are similar to DRTV, in that costs are scalable, and consumers can respond to a call to action and offer through the same methods of phone number and website.  A defining characteristic of radio advertising is infectious jingles, that increase repetition and memory for listeners in the car, or doing other things that will require a response at a later time.  Radio is considered a good supplementary awareness builder to Television campaigns.  

BENEFITS:  Radio equals reach.  Although broadcast presents a segmentation challenge, digital radio channels like Pandora and other online radio sources are presenting new opportunities to narrow focus.  

CHALLENGES:  Radio isn’t always right for niche products, or businesses with specific geographic restrictions.  

4. Direct Response Print/Outdoor Advertising

Direct response print advertising includes magazines, circulars, newspapers, and periodicals, where a display ad is placed.   Direct Response through print also includes magazine inserts and detachable response mail items.  These ads include a phone number, email, and sometimes forms that customers can return with payment information to buy a product or service, or to request more information.  

BENEFITS:  Perhaps the biggest advantage of print advertising is the recurring impressions that it provides.  For example, a magazine in a doctors office can be read by hundreds of visitors before it is discarded.  Other benefits include a wide range of sizes, and positions within the printed media, and increasing competition for ad sales, which has helped to push prices down over the past decade.

CHALLENGES:  Print advertising presents a potentially risky investment for several reasons.  There is no guarantee that readers will see your ad, depending on position, and often times when people are reading magazines and other forms of print media, they are not ready and able to respond.  One notable exception to this is newspapers, where readers often browse classifieds and look for sales.  Another challenge to conducting a direct response or lead generation campaign through print is that the responses are often difficult to track and match with your advertising spend.  Again, it is best to commission an agency to explore this media type for you.

5. Direct Response Mail

Direct response mail dates back to the 1800’s when companies like Sears and Montgomery Ward pioneered the art of selling department store products and commodities by mail in rural communities.  Today, direct response mail is a multi-billion dollar industry, and serves almost every kind of company, from local pizza shops to major financial institutions.  

BENEFITS:  Direct response mail historically has been an excellent lead generation source, whereby companies have offered direct purchasing offers, product information, and value added services.  Direct mail is extremely scalable, and relatively inexpensive, though metered mail rates have continued to climb in recent years.  Other benefits are the rich targeting data that can be used to conduct this form of lead generation campaign:  with ZIP code + 4 detail, you can target clusters of five to 10 households, with very specific demographic detail, increasing the efficiency of your marketing spend.  

CHALLENGES:  As more and more people elect to switch from letter mail to the Internet for important mail like bills and bank statements, consumers are likely to place less value on the other marketing mail that they receive.   It is estimated that over 90% of direct mail marketing is thrown out before viewing.  

6. Direct Response for the Internet

Direct response for the Internet is a new form of lead generation, which is still in its pioneering stages.   This form of Direct Response solicits requests for more information and sales, using traditional forms of online advertising like display and banner ads.  Additionally, video ads are increasingly being put into use, and offer marketers the opportunity to present an Internet user with a 15 or 50 second DRTV commercial, while they are browsing.  

BENEFITS:  Lead generation through the web is a dynamic and fast growing playing field of diverse marketing options.  Budgets are extremely flexible, and creative specifications are relatively relaxed.  The Internet offers a global marketplace, that can be sliced and diced with more flexibility than ever before.  Additionally, with VOIP (Voice Over IP), calls to action can include click to call, click to sign up, or click to learn more about this product or service.  

CHALLENGES:  Advertising platforms online (excluding Google) are relatively fragmented, and tracking and analytics can be a time consuming task for even small campaigns.  Agencies with digital experience are often required, and even then, testing to find the right target market and balance may require more time and investment compared to television and other media outlets.

Direct Response advertisers have the distinct advantage of running commercials that offer something for viewers to buy, and a strong call to action to call or visit a website to purchase.  The benefit of this ad format is that advertisers can tie results directly to each ad, and pair it with additional geographic and demographic customer data, which helps them refine their understanding of their best customers, and how to direct marketing budgets at them more accurately.  

The key to determining if a local advertising campaign is right for your product or service is calculating your chances of success using a time-tested formula for success.  Below is the information you’ll need to gather, and interpret to make the best decision.

1. Determine who is in your target market:

The first step in understanding how local TV advertising can work for your business, is to identify the people who have been your best customers in the past, and those who are likely to buy your product in the future.  This exercise will insure that you can ask your media agency and creative shop the right questions, to avoid waste and maximize return.  

Using past sales data, retail traffic information, and antidotal knowledge about your value proposition, and competition, define a set of parameters that define your best customer.  You should be able to clearly and specifically describe groups of your customers by age, gender, race, language, location, as well as social and economic status.  A description of why these groups of customers buy your product or service is also useful in the advertising process.  Why do they buy your product?  Why do they find it valuable?  What features and benefits differentiate you from your competition?  If you don’t have this information, your agency or creative firm should be able to provide you with this service.

Many times it isn’t possible to gather this information at once, and many grey areas and questions arise from this process.  In the end the goal of this exercise is to build a strong hypothesis based on the information available for testing, and ongoing refinement.  

2. Estimate the percentage of qualified buyers that buy your product, and set profit/revenue goals:

Once you develop general profiles for your customer or groups of customers that you are targeting, ask yourself:  If 1,000 qualified customers were introduced to your product, and were offered the chance to buy it, what percentage would buy it?  5%? 10%? 20%?  

Again using existing or estimated sales data, it is important to estimate this “conversion rate” so that you know how many qualified people you need to reach to meet your sales goals through advertising.

FOR EXAMPLE:  

If you think that 5% of qualified buyers would purchase your product, if they were aware of it, you could expect 50 out of 1,000 people to make a purchase.  If your goal was to sell 5,000 units, you would need to reach 100,000 people with your advertising message.   If your product sells for $49.99, you could expect to earn $249,950 from your advertising campaign, based on these sample estimates.  From there, the question is, “how much does it cost to make a commercial and show it to 100,000 people?  The answer might surprise you.  With local advertising, you can show your product to one person 3 to 4 times in many cases for as little as 15-50 cents.  This allows you to introduce the product to your qualified buyer, show them your product a second time so they can interpret its value and give them a third or fourth opportunity again to decide to call to purchase, visit your retail location, or order your product online.  

In this example the Local TV Advertising formula for success would be as follows:

REQUIREMENTS:

• Reach 100,000 people with my message
• Make sure they see my message on average three to four times
• Estimate that 50 out of 1,000 qualified people will buy my product or service for $49.99

COSTS:

• Reach each person 3-4 times for a maximum of 25 cents each with a local television media purchase
• Create an attractive television commercial that will provide a strong offer and call to action

EXAMPLE RESULT:  

$249,000 in new revenue for a $50,000 investment in local advertising.

Keep in mind that this is only a hypothetical example, and results are not guaranteed.  Also, this is a revenue, not profit analysis and each product and service has a different profit margin that must be taken into account.  None the less, this example shows the key steps that are required to understand the potential costs and returns of a campaign.  

1. Create a media plan that reaches qualified buyers:

Once you have created a hypothesis about who your target market(s) are, and set basic revenue/profit goals, it’s time to find the shows, times of day and networks that best match your market, and thus bring the best result.  Here are the key factors to consider:

• Demographic analysis:  Cable network zones are organized in specific geographic clusters.  What locations contain the highest concentration of your target market?  How do they match up with cable zones, satellite network service areas, and broadcast ranges?  What percentage of subscribers in that area fall into your market?  
• Psychographic analysis:  What stations and networks are preferred by your target market?  What times of day do they watch TV?  What kinds of programs do they watch?   What special events, and holidays are important to them?  
• Branding, Direct Response or Both:  How many times does your customer need to see your commercial to act on your offer?  Is your product complex or simple to understand?  How can your prospective customer purchase your product or service?  In a store, on the Internet, or by placing a telephone order? 

2. Design Effective Creative:

Showing your target market a high quality, trustworthy and well designed commercial is essential to the success of each local television advertising campaign.  Many sources will attempt to produce a commercial for $15,000 or even $10,000.  These commercials, while reducing initial cost, introduce a substantial amount of risk to a campaign.  If the commercial is of low quality, and the script does not present your offer in an appealing way, consumers will not view the product to have quality or value, and will often distrust low budget, poor quality commercial presentations.  It is best to work with an agency that has a defined creative methodology, and a track record of success.  This may add incremental cost to your campaign, but will reduce the risk of failure and substantially increase the chances of exponential upside to your results.  For more about creative methodologies see our DRTV Production and Ad Grading Methodology.

3. Test Your Hypothesis:

Testing is an essential part of any new campaign.  Once your creative is produced, and your media plan is matched to your target market, it is essential to do several trial runs to refine your target market hypothesis and your TV commercial.  As a rule of thumb, two to three tests may be necessary to optimize your longer term advertising budget, and reduce waste over the long run.  Media tests in each local market generally require budgets of $20,000 per month to get baseline data and make improvements.  For better or worse, tests are the only way to get real-time information about how your product will be received by your market through local television advertisements.  That said, many clients often get a sizable return, even from tests, and modifications are made to increase profitability, not just to mitigate losses.  

4. Launch a Full Campaign:

Once tests have successfully been undertaken, its time to commit to a longer term advertising campaign that will meet your long term goals for growth.  Patience and consistency is a key factor in achieving success.  Consistent milestones, and monitoring of media and commercial creative are required to ensure continued performance in an ever changing marketplace, therefore this process as a whole is iterative, and must be undertaken at regular intervals.  For more information on key advertising topics, including Direct Response and Infomercials see our Direct-Response Television and Local Advertising Resource Guide.  

What is the length of the Infomercial?

Infomercials are typically produced in the following lengths:  30 and 60 seconds, (short-form, or DRTV) and 30 and 60 minutes (long-form Infomercials).  Given that production of a short form Infomercial takes approximately 3 to 4 weeks, from concept to delivery, they can be produced on a smaller budget compared to long-form Infomercials.  Typically short-form infomercials work well with lead-generation offers, where the marketer offers to send more information, or provides an opportunity for the prospective customer to request a call in the future.  That said, product sales typically require more demonstration and a variety of value propositions, so that consumers can see that the new product is worth purchasing at the time of the Infomercial.

What is the shooting location of the Infomercial?

		Locations are an important contributor to the cost of Infomercials.  If the Infomercial is produced on a sound stage, primary costs will include the rental of the stage (or if owned by the production company, their cost of ownership), as well as additional lighting, props, and stage design that is required to make a stage production credible.
		On the other hand, if the Infomercial is produced in a public environment, key costs will include permits, insurance fees, private location rentals, and remote production facilities.

 Who is in the Infomercial? 

Historically, Infomercials have used a wide range of talent strategies to showcase their products and services.  Many have chosen to employ a celebrity or industry expert to bring notoriety to their Infomercials and the products they are selling.  This is a calculated risk, where celebrity talent can dramatically increase the cost of an Infomercial, however, it can also provide a dramatically higher return.  Other strategies include testimonials, where product users describe their experiences and success stories, as well as generic hosting, where a non-celebrity host or a spokesperson provides the audience with demonstrations, information, and supports the call to action.

What is the production quality of the Infomercial?

The production quality of an infomercial is an increasingly important success factor.  In today’s HDTV and digital media environment, it is increasingly important to produce commercials with the best possible cameras, highly skilled crew members, and talent.  Frankly Infomercials have generated a mixed reputation among consumers in the past 25 years.  Today’s consumers are increasingly savvy, and are prone to avoid infomercials that are poorly produced or have a “vintage 90’s” look.  Many companies, offer a stock formula for Infomercials, and have been using the same camera equipment that was being used before the TV remote was invented.  This will drive down costs, but adds substantial risk to the financial outcome of your Infomercial campaign.  The challenge for the Infomercial marketer in the 2010’s is that many strategies from the 1980’s and 90’s just don’t have the same impact in today’s marketplace, so calculated risks must be taken to innovate and improve on the look and feel of future Infomercials to meet the tastes of today’s marketplace.

What are the editing and broadcast requirements of the Infomercial?

 Another important factor in the modern Infomercial marketplace is the wide range of media channels that are now available for airing the Infomercial.  Unlike the past, where late night or public access Television was the only outlet, today Infomercials can also be aired on a diverse range of subscription networks, including local cable, and DirectTV, as well as Online through venues like GoogleTV, Hulu.com, and others.  Script treatments and editing requirements have changed dramatically from the past, so that the same Infomercial production can accommodate anywhere from a 15 second video ad on YouTube, to a full broadcast 60 minute show.

Final Thoughts

• Even with advances in film and editing technology, the budget for a quality 30 minute Infomercial show averages approximately $200,000.
• As a rule of thumb, 1 in 10 Infomercials are extremely successful ($50 Million+ Revenue Per Year), another 3 in 10 are moderately successful ($5 Million+ Revenue Per Year), and the remaining 60% do not make enough money to break even.
• Some of the most successful Infomercial products today were first considered either complete failures or lackluster.  Persistence pays off.
• Infomercial results in the past don’t guarantee future success.  The consumer market, as well as the delivery of Infomercial content has changed dramatically over the past 20 years.
• Take calculated risks.  Make sure the Advertising Agency you use has a foundational methodology for providing services to their clients.  Testing the media and creative of an Infomercial is essential to success in the long run.
• Consider the idea that your optimal campaign may be a combination of Television, Online and Mobile media.  Make sure that your script and final Infomercial production allows for editing a wide range of spot lengths and calls to action to accommodate these new media platforms.

Short Form – Known as TV commercials or DRTV commercials, short form Infomercials are either :30 or :60 seconds in length and are typically designed to air on Local and Regional Cable Television.

Long-Form – Traditionally coined as Infomercials, these are 30 to 60 minute shows, that convey the value of a product through a variety of formats (see below).

Micro-Form – A newer, more flexible Infomercial length, that incorporates the elements of Direct Response in a 30 second-or-less format.  Increasingly used in Online advertising.

Infomercial Formats

Hosted Talk Show – in this Infomercial format, the production is designed as a talk show, resembling those on major national channels.  This discussion format allows for professional hosts to present the features and benefits of the Infomercial product in a conversational manner, and offers the opportunity for a variety of personalized calls to action, that may reach different audience segments, based on the the personal characteristics of the host.  This is often considered the most entertaining Infomercial format by viewers.

Product Demonstration – A product demonstration Infomercial focuses on the variety of uses that a product has.  These work particularly well for multi-use appliances and home products.  Each additional use for the product adds perceived value, and thus calls to action typically build throughout the show.  A common format is one where a product representative shows a consumer how the product can work for them in many ways.  

Telethon & Live Caller – Telethon Infomercials emphasize the principals of group buying psychology, by demonstrating to the viewer that others are calling in and purchasing a product or service.  Often a time limit, or limitation on the number of available products is presented, and counted down to zero.  These shows are typically taped, but can also be aired live during key marketing periods, including the November and December holiday buying season.  

Testimonial-Centric – Infomercials that display numerous testimonials, usually paired with live product demonstrations are considered to be testimonial centric.  This provides the viewer with experiences from the point of view of other product buyers, and can be a very powerful vehicle for conveying product value, and motivational drivers for response.  

Documentary – this format of Infomercial is designed to resemble an hourly news show, presenting key headlines and facts that indicate a wide spread issue, or problem, and then use experts and professionals to describe a product or service that presents the solution.  Unfortunately, this format can be so well disguised as an actual TV show, the call to acton, as well as important decision making information can be “lost in the show.”

Brand Equity – This Infomercial format emphasizes adding equity to the product or parent company’s brand.  This is achieved by creating an attractive brand, and discussing the foundational strengths of the company and product that make it superior to others.  In an increasingly crowded “me too” Infomercial market, Brand Equity focused shows are becoming synonymous with high performing Infomercials.  Brand Equity is also an essential part of long term planning, for multiple distribution channels as well as continuity of purchases from existing customers.  

Infomercial Product Categories

What makes a good Infomercial Product?

Product economics play a major role in assessing the viability of marketing through an Infomercial.  The profit margin per unit must be high, but the product price must be low (between $20-50) so that it can be purchased by a wide range of people with different levels of disposable income.  The product must also be readily demonstrable, and have multiple value points that can be displayed throughout the Infomercial.  This drives the perception that the product has real value, and is worth much more than the price.  This is heightened by dramatic before and after transformations that show how much better the product makes the life of the buyer.  In general, products from the following categories best fit the requirements for a successful Infomercial: Diet & Nutrition, Exercise & Fitness, Financial Services, Beauty & Cosmetics, TV to Web.

For more information about how to make Infomercials work for your business, see:  How to make Infomercials work for your business or contact us at (808) 909-6670

Direct Response Product Economics

A key driver of DRTV success is the economics of the product.   In other words, how much does the product cost to make, and how valuable is it in the marketplace.  It is essential for direct response marketers to understand the costs and selling price of the product before beginning an infomercial campaign.  Key questions include:  Does the profit margin of each product sold support the cost of media and the cost of producing the commercial?  These two things together are known as the the Cost Per Lead (or CPL).  How much will it cost to store and ship the product (fulfillment cost)? And finally when a lead is received, how much will it cost to train call center professionals, and pay them for their time to respond to your customers (response cost)?  

Number of Respondents

The number of people that respond to a direct response campaign is tied directly to the media plan, and can be expressed as a ratio of the number of people who respond over total number of people that saw your commercial (Responses/Unique Impressions).  Factors that improve responsiveness include media targeting accuracy, as well as the quality of the commercial.  That said, it is essential to cast a wide net, so that enough of the target market will see the commercial.  The balance between the amount of money spent on media and the number of respondents is a key efficiency metric that can be tested on an incremental basis before fully launching your campaign. For more on this topic, see “Testing and Optimizing Your DRTV Campaign” below.  

Campaign Conversion Rate

The campaign conversion rate refers to the ratio of respondents who purchase your product over the total amount of respondents (Number of Purchases/Number of Responses).  This metric is essential to determining whether or not the combination of your commercial and the chosen media strategy is yielding qualified leads.  A low conversion rate can increase the cost per lead (CPL) dramatically, by increasing call center expenditures, without the supporting revenue from sales.  A high conversion rate indicates that the message in your DRTV commercial is effective, and that message has been presented through media to the appropriate audience for your offer.  Direct response marketers often test the impact of creative components, while holding media constant, and vice-versa to understand the impact that each component has on the conversion rate.

Cost of Marketing

The cost of marketing in a DRTV campaign refers to the sum of expenditures for creative and commercial production and media costs.  This category of expenses can also refer to the cost of completing a sale with a prospective customer, and finally, distributing the product to the customer.   In order to have a profitable infomercial campaign, the cost of marketing to each customer who purchases a product, or the Cost Per Acquisition (CPA) must be below the profit margin for the products sold to that customer over time (Lifetime Value of a Customer).  At the outset of each campaign, it is important to estimate the profit per unit sold, and the total number of units to be sold (Conversions) during the campaign.   Thus, the profit, multiplied by the total units sold, will yield the Gross Campaign Profit, from which the cost of marketing must be subtracted.   This final calculation will give you a critical starting point for understanding the potential profit or loss (or range of outcomes) that you can expect.  Once your initial calculations are complete, you can test individual components of your DRTV marketing plan (Impressions, Conversions, Marketing Costs) individually, thereby reducing the expected variation with real market data.  

Testing and Optimizing Your DRTV Campaign

The science of testing your DRTV campaign can appear daunting at first.  The key to testing your campaign is to change only one variable at a time, leaving the others constant.  For example, a direct response marketer will vary multiple  direct response commercials (each with different messaging, creative writing and calls to action), while ensuring that each commercial is run on an identical media plan.  This allows you as the client to see the results of changing only the commercial, and what messages yield the best response and conversion rates.  A series of tests will provide data on which commercials result in the best financial outcome, and in the case when multiple markets are targeted, different commercials may perform better in different audiences.  From there, you can now optimize your media strategy, using the same principals.  The good news is that testing is relatively inexpensive in relationship to running a full campaign.  GreyTV recommends that extensive testing is conducted before launching a direct response marketing initiative.  

Want to know more? Read last week’s article on making Infomercial Advertising work for your business.

GreyTV employs an innovative direct response production methodology, that is designed to maximize the financial results of your DRTV spot or Infomercial. Our proprietary process combines the fundamental principals of direct response with behavioral and cognitive psychology, and an emphasis on brand-building for the continuity of your product and the longevity of your business. Our DRTV production approach allows our clients to take calculated risks, and generates in outlier financial outcomes.

	Overview & Process		Targeting & Media		Methodology		DRTV Ad Ratings

 

OVERVIEW & PROCESS

We believe every successful relationship starts with communication, so, the first step for new clients (and periodically for existing clients), is the process of Discovery.  This is an engaging and structured conversation that allows us to understand the big picture, as well as the nuances of your business, historical sales and marketing activities, and specific goals for your campaign.
Now that we’ve spent time getting to know each other, we plan how to make it happen.  GreyTV will work with our national network of media outlets, including Cable TV, Online, Print and Radio to optimize your media budget, while insuring your voice is heard by the audience that best suits your product or service.  Once the media plan is established, the creative process begins, incorporating rigorous quality standards based on GreyTV’s proprietary Ad Grading Methodology.
When the media plan and creative are in place, we’ll launch your campaign.  Innovation continues as we begin measuring results, monitoring them against the goals established during the Discovery process.  Finally, GreyTV will conduct market research using the data from your ongoing campaign to optimize your performance in real time, and maximize your results.
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