TV inc
INVENTORY REQUIREMENTS

“Of course, it is not the employer who pays wages.  He only handles the money.  It is the product that pays wages and it is the management that arranges the production so that the product may pay the wages.”  …..Henry Ford

How much inventory?  The FTC requires that you ship within 28 calendar days from the time you deposited the customer’s payment.  After 28 days you do not have to ship, under FTC guidelines, but you have to notify the customer of the delay.

The credit card companies require you to ship first then deposit the monies.

If you’re shipping COD, you’ll need to ship within 24 hours.  For every day after the first day, add 1% return for the CODs that did not get picked up for lack of interest.

Using the industry standards and the charts in the appendices, a 3:1 ratio of sales to advertising expense seems to work.  That is, if you spend $10000 on media, look for $30000 in sales.  If your product sells for $30, look for 1000 unit sales.  Oh boy!!  If it was only that easy.

Some will get no orders at all.  NONE!  Others will get 6:1.  You could end up with a warehouse full of unsold stock or a bunch of screaming customers.

Suggestion:  Test with no inventory commitments.  Technically this flies in the face of the FTC regs.  However, if you test in the minor markets, do not deposit the payments received, and notify the customer that your ad produced more sales than you had expected.  You will be able to make a calculated decision as to how much inventory is needed for a full roll out.

I have received numerous comments from readers concerning the previous paragraph.  They say the regulators require that an ad for inventory be supported and supportable.  These readers are wrong.  Remember that there are three ingredients to a deceptive ad and that all three ingredients must be violated in order to be judged deceptive.  Ingredient #3 is that commerce be affected.  No commerce, no ad.  If one does not process his sale or prevent a competitor from selling, or collect money, or invoice a customer, no sale was made and, therefore, no advertisement appeared. (See page 58 for more information.)

There is another advantage of TV DR marketing; build and run an ad, test and prove a market, define and project a customer base, do the whole job for less $$$$ than you’d spend on a single one page B&W print ad in the average local daily newspaper.

RESPONSE VEHICLES

Credit Card Sales:

Merchant accounts for mail order are difficult to get.  Be sure you have one in place that will accept large volume of sales.  If not, be prepared to pay 7% or more to fulfillment centers who will process your sales when they fulfill.  Bear in mind that outright factoring of credit card sales is illegal.  Anyone promising to help, regardless of how much you know about him, is putting you both in jeopardy.  If the credit card processor (bank, ISO) finds out, they will close the account and look to proceeding further.

Visa and MasterCard maintains a very thorough security department as does all processing banks.  You can bet your last dime that some of your sales will come from these security people.  They’ll want to see how fast you deliver, if you deliver what you offer, and if you process the credit card before you ship.  They’ll also compare the name of the company selling the product as compared to the name of the company that processed the sale.

Even if you have a Visa – MasterCard merchant account, you should check with your bank, ISO (independent sales organization) or processor first.  Be sure he understands that your sales could increase exponentially in a very short time.  Be sure he sees and understands your product.  AND GET HIS APPROVAL IN WRITING!!  Credit card processing is nothing more than a loan account.  The bank is at risk if your products are returned for refund and you cannot cover the refunds.  So expect them to be ultra-cautious.

Viewers expect to see Visa and MasterCard.  This will represent 80% of your volume.  American Express and Discover adds credibility and will account for 10% of your orders.  Many credit card processing companies refuse to work with products that involve travel, memberships, subscriptions, and a few others.

If you need help getting an account, let me know.

Checks & Money Orders:

This will account for 10% of your sales.  Should you hold the check before shipping?  We haven’t experienced a bad check problem.  If you’re concerned, Tele-Check can be added to protect you.

C.O.D.’s:

High mark-up items that have a strong potential for after market sales (cosmetics, vitamins, subscriptions, etc.) are good COD products because you have the chance to do business again and again.  Short mark-up or one-time sale items should avoid COD in our opinion.  If you look at the airtime that is paid per sale or per inquiry, the station may require you to accept COD’s.  If you opt for COD’s, be prepared to ship within 48 hours.  For every day past day two, look for a return/refusal rate increasing at the rate of 1% per day.

Automatic Check Debit:

This allows you to deduct the amount of the sale directly from the caller’s checking account.  It’s new and there is some controversy about it.  So check it out in advance.  Your bank may be of service to you as well.

Separate Billing:

We’ve used this technique very successfully.  The product is shipped to the customer with an n invoice.  The bad debt ratio is less than 10%.  And it gives you and your customer a stronger relationship.

900 and 700 Telephone Billing:

There have been problems of late.  Some states are requiring mini-bells and re-billers to advise customers that they do not have to pay for the call if they weren’t satisfied.  This service, while popular in the late 80’s, is losing its appeal. However, these are still profitable marketing systems.

Is it for your product?  Start out by getting a set of “rules” from AT&T and MCI, the major service providers.  These rules change from time to time and in some cases they are negotiable.

Talk to an agency that works in “interactive” telemarketing.  Call West Telemarketing in Omaha, 1-800-841-9000.

ORDER CAPTURE

These are the people who answer the telephone and capture the order.  My advice, deal with pros.  There are a number of good ones.  Budget your cost to $2 per order captured because you are also charged for calls that are not orders.  Your actual rate is around $1.25 per call to capture the name, address, city, state, zip, telephone, credit card #, and go for an up-sell.  It’s based on about 25 cents per minute.

Since you also pay for customer service calls, wrong numbers, annoying calls, etc, better plan on the $2 per “order” call.

Order capture is very competitive.  Negotiate the rates.

Bear in mind that these companies require set-up charges and monthly minimums.  You may be asked to provide a deposit.

Some order capture companies will promise great rates that they cannot deliver if hundreds of calls come in all at once, as often happens.  Ask for references.  Find out how many lines they have available.  If possible, visit their facility.

If you’re dealing with the sale of a product, you’ll probably want to use a live operator to field the calls.  With lead generation you may be able to save money with an interactive recorded message/capture system.  Then there is the combination of both.  The lead order capture companies will help you select which is best for your special needs. 

If you decide to use per inquiry advertising (the station takes a percentage of the sale in lieu of paying for the airtime), be advised that many stations have a list of approved order capture companies.  Be sure the company you select is on that list.

The 800 number itself should be easy to remember.  Bigger telemarketers have a bank of numbers from which you may select.  Vanity numbers such as 1-800-BUY-THIS have not proven their worth for ads that ask for a sale.  For lead generation ads, vanity numbers do work better.

One more thing.  It’s a nasty subject: SPIES!!  They exist.  Some of your competitors will try to plant a mole within your company and, even worse, within your order capture company.  The mole will know before you know what air times are working best and how well a test is doing.  This is valuable information an unethical competitor wants.  It’s one more reason to be absolutely certain that the order capture company you select has a reputation for protecting its clients.

BUYING MEDIA

“It’s become increasingly difficult to reach downtrodden masses in America,” a man wrote to his superior.  “In the spring they’re forever polishing their cars.  In the summer they take vacations.  In the fall they watch the World Series or football games.  And in winter you can’t get them away from their television sets.  Please give me a few suggestions on how to let them know how oppressed they are.”  …..Prof. Dexter Williams

This is singly the most important area.  It requires the biggest budget.  Doing it right will make you a fortune.  Doing it wrong will cost you your shirt, even if your product is selling well!!

Buying media for direct response has nothing to do with the size of the audience or any other demographic factor.

That’s because you are looking for the lowest CPO (cost per order.)  Everything in direct response comes down to your CPO.

Review the revenue stream charts included.  While there are variables, never let anyone change your focus away from getting and keeping low CPO’s.

Direct response advertisers do not usually find it economically feasible to buy commercial airtime at the same rates or even in the same way as typical mass marketers.  When mass marketers buy commercial time, they select a specific position in a specific program airing at a specific time on a specific day; and they pay a specific price.  For direct response buyers the situation is quite different.  Direct response media buys are usually done in one or two days.  Here’s why: A direct response commercial can be determined to be successful in a few airings over a few days.

Media buyers accustomed to placing ordinary advertising overlook the fact that there has never in the history of direct response been a single direct response ad that started badly and got better.

Running on a non-performing ad hoping to increase exposure and sales is an effort in futility.

For a test budget for a 120-second ad, a budget of $5000 to $10000 is plenty.  For an infomercial, $10000 to $25000.  For a lead generation, $5000.  You’ll know where you are with your ad within a week.  Al Eicoff told me that the huge ad budgets for DR spots, the big agencies try to promote, are the biggest waste of the client’s money there is.

Most direct response is done with Spot Buying or ROS (Run of station.)  The station tells you what day or perhaps what part of the day your ad will run.  This is cheaper because the station can sell off prime spots at top dollar and run yours in unsold times.  That also means that your ad can be “bumped” in favor of a higher paying account.  It also means that you can arrange to have your ad inserted in openings that become available because of cancellations.

Go for the worst time you can on the worst program you can find.  Anybody watching will pay more attention to your commercial than to the program.  If you can’t sell this viewer, you’ve got no chance of selling anyone who’s really interested in the program.

Per Inquiry is when the station takes a percentage of the sale or charges a flat amount per lead generated.  P.I. rates can run as low as 25% and as high as 75%.  If you want to use P.I., your best deal comes after the commercial has been tested successfully.  We recommend, however, that you pay the P.I. station as much as you can afford: they’ll run it more frequently and you have less of a chance of being bumped.  P.I. time does have requirements that you should explore with us in advance.

When are the best seasons to run direct response?  First and third quarters are the best.  Often a commercial is tested in the third quarter and “rolled-out” in the first quarter.

Cable or broadcast? Both claim to be the best.  Video Monitor Magazine reported that cable gets a 20% better response per person reached and is 75% more efficient on a CPO basis.  Mostly it’s a matter of whose numbers you want to believe.

TRACKING

Once your commercial is running, it must be tracked by your media people every day.  You need to know the next morning how well you did, what stations performed best, the weather conditions at each station at the time of the run, what times worked best, which slots to increase and which slots to cut out.  The longer you take to find the information, the worse off you are.

The late Sam Walton of Wal-Mart said he would get each store’s results within 22 minutes after closing.  Sears took 2 months.  If you want the expertise of people who know infomercial media inside and out, call Williams Worldwide in Santa Monica, CA.  There are a few others who are very good.  But of the top ten in the business, Williams is numbers 1 through 9!

One direct response advertiser was told by his media buying company not to worry about it.  Both are bankrupt.  Another client was getting results at the end of the month from his media buyer.  He lost $600000 a month for each 6 months until we stepped in.  We gave him daily results.  We were able to cut his ad budget by 90% AND increase his sales.  His profit on his product was so high that he did not go out of business.  However, most of cannot afford the luxury of losing $3.6MM in 6 months.

INTERNATIONAL INFOMERCIALS

Today companies are seeing fruit from airing of infomercials in foreign markets; Western Europe, Canada, Australia, Japan and more.

Williams Worldwide in Santa Monica, CA, is arguably the best in the business.  Ms. Katie Williams, founder and president has established relationships worldwide with reliable media companies.  In many cases, Williams Worldwide has set up offices itself internationally.

As noted earlier, this is even a stronger reason to do your editing steps.  By having your program on one master that has no titles, no CG’s, no Call-to-Action, no commercial segments, and no closing titles on it, you will be ready to inject these items for special markets.

Corporations interested in maintaining their corporate image should consider creating infomercial vehicles for each market.

However, if one is selling a typical direct response product, build your masters as follows:

Master #1 – program content

Master #2 – CG’s, title, credits, disclaimers

Master #3 – commercial segments without CTA’s

Master #4 – Call to order.

Will infomercials built overseas come here?  They are here.  “Pacific Magic” by Air New Zealand is one.  There are some out of Canada and a few from Europe.

Infomercials are international because they are inexpensive, cost effective, extremely versatile, and because they work!

[Note: a ‘CG’ is a term for Character Generated information that appears on a program. E.g., the speaker’s name, a price, a telephone number, etc.]