Download Branding and Marketing with Infomercials

San Diego Inventors Forum
Branding and Marketing
with Infomercials
By Ben Gage, President
The Infomercial Development Companies
Tamilee Webb’s Buns of Steel
In 1984, the FCC approved program length television commercials that are now known as
“infomercials”. In 2010, the Direct Response (DR) industry generated over $150 Billion in
total worldwide sales and this amount grows an average of 7% per year. Infomercials have
proven to resist recessions and economic downturns.
There are two types of DR campaigns: long-form, based on a 28:30 second infomercial and
short-form, based on a 2 minute spot commercial. Short-form campaigns are for products
that sell for $39.95 or less, are easy to describe and easy to ship. Long-form campaigns are
for everything else.
DR products must fall within one of four categories: they must make you thin, rich or
beautiful or improve the quality of your life. A DR product must generate an emotional
purchase response and can initially only be sold via the DR campaign. All DR products must
have at least a 5:1 gross profit margin.
Unlike traditional advertising, DR marketing simultaneously sells products and creates
branding in a self-sustaining marketing campaign.
Funding Your Project.
Why the DR Industry
Won’t Invest in Your Idea
Tony Robbins Personal Power
Many inventors believe the DR industry will invest in their idea, but it generally won’t. To
avoid a split of profits and other complications resulting from partnering with a product
owner, with rare exception DR companies prefer to do their own product development.
This leaves an inventor with the following options for the funding of a DR marketing
campaign for their product:
• Use personal funds. Several successful DR projects have been funded by personal loans
and/or the product inventor’s personal money.
• Borrow from Friends and Family. Using a well-designed business presentation, some
product owners are able to raise project funding from friends and family members.
• Find a Partner. Some DR production companies and other vendors will partner in
development of a suitable product. This is rare, but can happen for unusual products.
• Use Crowd Funding. For products with mass appeal, crowd funding is an option.
• Use a Registered Offering. This option takes time, is expensive, requires use of a
securities attorney and can be difficult during tough economic times.
Direct Response Marketing
Campaign Costs and
What You Get for Your Money
The Flowbee Vacuum
Haircutting System
A long-form DR campaign costs between $250k to $400k and a short-form DR campaign costs
between $100k and $150k. For these amounts you get the following:
• Formation of the single purpose entity for development of the project.
• Development of USP creative for use in all elements of your marketing campaign.
• Production and editing of multiple infomercials/commercials to test.
• A dedicated website to track online orders.
• Set up of project logistics (FTC legal services, media scheduling, credit card processing, call
center training, order fulfillment, customer service).
• A $25k to $30k media test run from Thursday to Sunday in 10 to 20 markets.
• Evaluation of media test results (call volume, order conversion) and calculation of the
Media Efficiency Ratio for your test.
• Set up of national roll-out or corrective action.
Evaluating Test Results
Singles, Doubles, Home Runs
and Dead on Arrival
Dual Hinge Driver
Dual Hinge 5 Iron
• The main purpose of the initial media test is to determine viability of a DR campaign
to see if a national roll-out is possible. The Media Efficiency Ratio is one tool used
to make this decision. MER = Gross Product Sales ÷ Total Media Costs.
For Example, $40k Gross Product Sales ÷ $20k Total Media Costs = 2:1 MER
• Because of fixed costs, break-even in a DR campaign is a MER of 1.4:1.
• A MER between 1.4:1 and 2:1 is a “single” with expected DR sales of $20+ mil.
• A MER between 2:1 and 3:1 is a “double” with expected DR sales of $40+ mil.
• A MER over 3:1 is a “home run” with expected DR sales of up to $100 mil.
• A MER of between .8:1 and 1.4:1 means the project “has life” but needs work
to continue.
• A MER below .8:1 is classified as “dead on arrival” with little chance of success.
What Happens If The Initial
Media Test Is Successful
Ed Strachar’s
Reading Genius
When an initial media test yields a MER of 2:1 or better, the marketing campaign is
immediately expanded for a full national roll-out and the following actions are taken:
• A bottle of good champagne is opened to celebrate the inventor’s good fortune.
• A choice is made to either: (i) go into business with a DR marketing company in a profit
split arrangement or (ii) license all rights and collect gross royalties on product sales.
• Additional product inventory is ordered to meet increased demand.
• An expanded, national media schedule is put in place and media funding is obtained.
• Vendor services are expanded to meet increased volume.
• Upsell and follow-on products begin development.
• The inventor designates someone to act as their representative to monitor the business
and financial transactions of the campaign.
What Happens If Your Initial
Media Test Does Not Achieve
A Break-Even MER
The Ab Away Pro
If the Initial media test yields a MER of .8:1 to 1.4:1, depending upon available financial
resources the product owner has several options for actions they can take :
• Do an outbound focus study to learn how the commercials, the website and
inbound telemarketing can be improved to increase the MER.
• Show the commercials and share the initial media test results with experienced DR
producers, asking what they would do differently with the campaign creative.
• Rework the creative, edit revised commercials and do another media test.
• Look to partner with a DR marketing company so they can make the necessary
corrections for a second media test.
• Focus on Alternative Marketing Strategies while working on development of a new
creative focus and media test for revised commercials.
It is important to note that many of the most successful DR marketing campaigns were
based on the 2nd, 3rd and even 4th versions of the spot commercials or infomercials.
Alternative Marketing
Strategies
The John Beck Tax Lien System
Before, during and after an initial media test, it is wise for anyone with a marketable
product to engage in some or all of the following Alternative Marketing Strategies:
• Create a compelling e-commerce website for sale of the product.
• Implement an internet marketing campaign to drive traffic to your website.
• Implement a social media marketing plan for the product.
• Present the product to influential bloggers operating in the product area.
• Present the product to distributors that represent similar products.
• Present the product to catalog companies selling similar products.
• Present the product to end users or niche retailers selling similar products.
• Present the product to home shopping channels.
• Present the product to online marketing companies selling similar products.
The key to development of a successful Alternative Marketing Strategies is to plan and
coordinate all activities for maximum results at the least cost.
Chalene Johnson’s
Turbo Jam
Direct Response Traps
a Product Owner
Must Avoid
DR marketing is a complicated, expensive business with many moving parts. Anyone
wishing to use DR marketing for the sale of their product must avoid making some very
expensive mistakes in several areas of project development.
• The product must be suitable for DR marketing.
• Project planning and key decisions should be made with the help of an industry expert.
• All agreements must be aggressively negotiated and property drafted.
• A limited liability, single purpose entity should conduct all operations and manage all
project funds.
• Everyone must be held accountable to the project budget and schedule.
• Project capital should be used solely for project necessities with no payments for
salaries of principals, travel, entertainment or other expenses outside the project.
• Allocations of gross royalties, ownership interests and other project participation must
be based on the contribution of a measurable value to the project.
• A strong system of financial accountability must be part of every relationship.
How Infomercial Development
Can Help You
Bun & Thigh Roller Concept
• Provide a no cost evaluation of your product to see if it is suitable for DR marketing.
• Create a strategic plan, budget and timeline for your DR project.
• Interact with investors to help raise project development funding.
• Identify appropriate vendors, negotiate terms and review final agreements.
• Oversee production, editing and testing of DR commercials.
• Help to design and implement Alternative Marketing Strategies.
• Coordinate all activities for national roll-out after a successful media test.
• Help to find and secure a marketing deal with a DR industry leader.
• Oversee contract and financial compliance for all relationships.
IDC provides all services on a “menu” approach. IDC is compensated for individual
services by flat fees or on an hourly basis. A full package of project development
and/or project management services require an advance payment against a small
negotiated back-end royalty.
For More Information and
A No Cost Product Evaluation
Your New Product
Please contact
Ben Gage
[email protected]
www.infomercialdevelopment.com
Phone: (619) 851-9255