“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
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
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.
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
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.
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.
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.
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.
“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
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
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
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.
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.
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
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.]