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Direct Response Marketing

Art & Science

1 Oct, 2013 By: Nicole Urso Reed Response

DRTV marketers focus on creative ways to drive response and audience engagement in an increasingly fragmented market.

Heading into 2013, signs of a rebounding economy and the bullish media landscape pointed to predictions of tightened inventory and increased media rates for the first and second quarters. In terms of media spending, 2012 sounded like the comeback story that everyone had been waiting to hear since the economy began to trample sales back in 2008, but first-quarter results this year were down in both short- and long-form, leaving mixed opinions on what factors were at play.

“When you have a strong economy, there’s more supply and demand on commercial inventory because there are more companies looking to put more ad dollars into the TV marketplace, taking up inventory and driving up rates,” says Jeff Lazkani, director of business development and strategy at Icon Media Direct. “The other part of it is that there are just more direct response advertisers in the marketplace.”

According to Response media billings research, 2012 short- and long-form sales finished strong for the first time in years. In 4Q 2012, the rise in spending among the largest short-form campaigns drove a $35.5 million increase over the same period in 2011, and an overall lift of 4.1 percent in short-form spending for the year. For the first time since 2006, long-form media billings were up. Total time slots purchased during 4Q 2012 were down slightly 1.9 percent, but the price of a half-hour block jumped 5.6 percent, which contributed to the 3.6-percent boost for the year.

In Response’s May issue “Media Buying & Planning Guide,” which focuses on the network perspective, media executives reported that DRTV advertisers faced more competition from the general sales side in the first and second quarters of 2013. Maria Kennedy, senior vice president of direct response paid programming at Discovery Communications in New York, and a member of the Response Advisory Board, said that inventory was tight across all networks starting at the beginning of the first quarter, and the general sales side was also seeing a strong scatter market during the second quarter. At Univision Communications, New York-based Shirin Peykar, vice president of direct response, said that DRTV was benefiting from the boost in the economy, so much so that Univision invested in the first-ever dedicated direct response team in Hispanic media.

As the numbers rolled in for first-quarter media billings, however, spending was down in both short- and long-form media. According to Response media billings research, short-form plummeted 17.5 percent compared to 1Q 2012, for a total of $875.1 million. The loss of $185.9 million pushed first-quarter results below the $900 million mark for the first time since 2006. Cable was hit the hardest with media spend down almost one-third compared to 1Q 2012. It suffered a loss of $254.6 million, totaling $564.4 million. Network TV lost $13.2 million and syndication was down $8.4 million.

There was some positive news from Hispanic network TV, where short-form spending increased $81.6 million for a 71-percent jump to $196.5 million — but aside from that, there was little else to celebrate.

Long-form media billings were also back down — way down — totaling $264.5 million in 1Q 2013, the worst of any first quarter since 2005.

“Until the month of September, it’s been a soft year overall, meaning clients haven’t been spending as much, and response hasn’t been that strong,” says Peggy Gobel, vice president, cable media director at Cannella Response Television in Burlington, Wis. “I don’t know if you can relate it to the economy or the weather. A lot of people have thrown theories around as to why things have been so soft.”

However, as Gobel explains, everything is starting to flip.

“Fourth-quarter rates are going to skyrocket, and I think the networks are going to get the numbers that they need — that they haven’t been getting all year. It’s really a push, because the marketers want the time and they have budget expectations for fourth quarter. So the demand is coming from the marketers in the space, and it’s nice to see that there’s that demand after this summer where clients weren’t spending much.”

Spending Trends

“Demand for inventory is much higher this year, which is impacting pricing,” says Peter Koeppel, president of Dallas-based Koeppel Direct and member of the Response Advisory Board. “That trend is being driven by general advertisers, who have been aggressively buying up TV time and putting pressure on DR rates. Rates have increased up to 20 percent year over year throughout 2013, and I don’t expect for that to improve as we head into the holiday season and 2014. With long-form, we have seen prices drop anywhere from 10 to 25 percent during 2013 versus 2012. However, we expect to see a 10- to 20-percent increase in long-form rates and increased spending as we head into the holiday season and 2014.”

Although pricing has been a challenge, many DRTV marketers are still reporting better business this year than last.

“The way that we gauge the health of the market is by how enthusiastic marketers are for us to try and add time on their behalf — and last year was not as good as this year,” says Steve Netzley, chief executive officer at Havas Edge in Carlsbad, Calif.

Netzley, a member of the Response Advisory Board, says that 4Q 2012 was actually a much more difficult period for DR advertisers because of the presidential election and the strain it put on inventory.

“That garnered a lot of attention, a lot of planning, a lot of conservative approaches to the market, and this year what we’re seeing is that there will be a decent — not as big as it’s ever been, but certainly strong and solid — scatter market,” he says.

The amount of time that they purchase this year will be up, as well as the amount of money that they spend, Netzley says, and response rates — quarter-to-quarter, and year-over-year — will either be slightly up or flat, but “definitely not down.”

Response rates this year have been mixed with experts pointing to a variety of factors — from seasonality to audience fragmentation.

“Response for short-form campaigns has been favorable for 2013 through August,” says Koeppel. “We’ve seen some drop off in response in September, which traditionally shows improved response versus the summer months. This year, the new TV season on the broadcast networks isn’t starting until around October 1, which is adversely affecting the viewing habits of consumers in September. National cable has benefited from the late start of the broadcast TV season in terms of spending, but there hasn’t been a commensurate increase in response through the first two weeks of September. Again, this is likely due to the late start of the broadcast TV season. I expect for response to improve as we head into the holiday season and 2014.”

Long-form response rates also fluctuated based on various factors, but overall, Koeppel has seen short-form results outpace long-form and expects that this will continue through the rest of the year and into 2014.

“There’s been more challenge with response rates in the long-form space,” says David Savage, executive vice president and managing partner at R2C Group in West Chester, Pa., and a member of the Response Advisory Board. “The successful marketers are leveraging their long-form dollars across all channels, not just television, and I would say that short-form has been a little stronger.”

Savage explains that although long-form response rates are down, in many cases advertisers are seeing a lift at retail. He says that clients will invest in infomercials but also on digital, print and radio as a multi-channel DR and branding effort, so while they may not be receiving the same response at a call center, they see the response at brick-and-mortar retailers.

Getting Creative

Another challenge facing DRTV advertisers is the influx of hybrid campaigns: traditional brand advertisers using direct response marketing methods, entering into the space.

“I think [DRTV advertisers] are getting hurt in the marketplace because the hybrids are so strong, and they’re willing to pay the price, and when you have that happening, a lot of people are going to turn to the hybrid account to take over their inventory,” says Adam Tucker, vice president at Viacom Media Networks in New York.

Tucker has noticed that many DR clients are using push-to-Web ads to try to figure out different ways to compete with the branded-response campaigns that have bigger budgets. However, he says, the challenge is that the response rates are usually not as strong on the Web as they are on TV.

Even in the digital space, pricing continues to climb, according to Tucker.

“Digital has become such a talking point in the marketplace during upfronts and during scatter business that they have a budget too and they can’t just give it away,” he says. “I could see years ago they were giving it away just to get it going. Now it’s a really strong business. It’s getting stronger, it’s getting bigger, and budgets are growing.”

It’s one of the main reasons why Viacom has been investing in new advertising opportunities on emerging content platforms. It recently introduced an updated Nick app by Nickelodeon where viewers can stream live video and video-on-demand (VOD).

Savage says that for clients with hybrid goals — response metrics and brand awareness — online video advertising has been a successful part of the mix.

“We’re definitely seeing increasing success on VOD platforms,” says Savage. He believes it’s one of the biggest opportunities and challenges. “We’re currently buying online video, like on Hulu and other platforms, but it’s really more of a brand buy than it is a DR metric buy.”

Audience Fragmentation

These new advertising opportunities also add to audience fragmentation. So, even if consumers have more TVs in their homes and watch more television as they check their smartphones and tablets, advertisers not only have to compete with channel flipping, they have to compete for audience attention.

“Media continues to fragment, so the more media options there are, you start to lose audiences,” says Robert Yallen, president at the Woodland Hills, Calif.-based Inter/Media Group of Companies. “Once you start to lose audiences, whether you’re a retailer, a brand and looking for traffic, or a direct advertiser looking for media results, if you’re paying the same rate, that’s not a good deal.”

Yallen, a member of the Response Advisory Board, believes that although the economy is doing better than it has in previous years, it’s not fully recovered, and advertisers need to be smart about the investments they make. “It’s OK to pay more money, “ he says, “but if you’re paying more money, you better be getting value.”

And although he says he is a numbers guy first, creative is key.

“You have to be smart creatively,” says Yallen. “I think creative is becoming more and more important now because as audiences are shrinking and media rates are artificially going up, it’s the advertising messaging that’s becoming more important.”

Yallen recommends looking into emerging networks for the most efficient balance of viewership and rates. His company even developed its own network, CPM, which aggregates local media to create its own national footprint.

“It helps us hedge against increased media rates and decreased audiences,” says Yallen. “It’s been a big help for us. It helps us to have more robust media plans in a changing media landscape.”

Compelling content in all of its formats only creates more opportunities for growth, according to Tucker. Whether on TV, the Web or various channels of VOD, quality content will develop an audience. “Anywhere you could possibly get content, people are able to get it, and if you have the content and people are able to get it, they’re going to take it,” says Tucker.

Today’s consumers are also growing accustomed to two-way communication with brands. Koeppel points out that the DR industry needs to focus on participative advertising rather than interruptive.

“Let’s not lose sight of the fact that infomercials and home shopping are themselves forms of programming,” says Koeppel. “While it’s true that consumers can increasingly avoid advertisements, the desire to discover and opt in for new and innovative products and services is not going to go away. We need to evolve our messaging and offers in a way that doesn’t insult the audience, but rather invites them in. That is simply a steadfast tenet of good marketing.” ■

About the Author: Nicole Urso Reed

Nicole Urso Reed

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