Getting a Jump on the New Year1 Jan, 2012 By: Thomas Haire Response
Members of Response's Advisory Board discuss the opportunities and challenges that the industry will face in 2012.
As 2012 gets underway, direct response marketers are faced with another year of challenges, opportunities and change. From a continuing tough economic climate to the promise of a media crunch due to expected record-level campaign spending, marketers and DR industry service providers are seeking to expand ways to reach consumers and turn them into customers.
“The DRTV industry is approaching a moment of truth in terms of what business models can really thrive in this lingering economic climate and current era of multichannel distribution,” says Tim Hawthorne, founder and executive creative director for Fairfield, Iowa-based Hawthorne Direct. “Look for a new model of success in DRTV to be a hybrid of drive-to-retail/drive-to-Web/lead generation/continuity campaigns, where media efficiency ratios (MER) and conventional TV metrics merge.”
Richard Stacey, president and CEO of Toronto-based Northern Response Intl. Ltd., agrees, adding, “Some may even argue there is no such thing as a pure DR business anymore. We are dealing with multiple business models simultaneously, and many of these models are in a constant state of change and at different stages of development. For example, while the DRTV model is slowing, you have got to figure out the retail model or the online model — but these models are also changing at the same time.”
However, change in the retail model and, especially, the online model — where social media and mobile marketing are becoming more pervasive by the day — are creating new opportunities for DR marketers to support current campaigns and branch out into new and different initiatives.
These opportunities and challenges — and how DR marketers plan to attack them in 2012 — are the topics of the first quarterly edition of the 2011 Response Advisors Forum.
What will be the two biggest issues facing direct response marketers in 2012? Why?
Linda Goldstein, Manatt Phelps & Phillips LLP: First, the Federal Trade Commission’s (FTC) increasingly aggressive enforcement posture will continue to impact DR marketers. The FTC’s recently announced settlement with Reebok in which it required that, in the future, toning and shaping claims be supported by competent and reliable clinical studies is an indicator that the FTC will increasingly be looking for clinical studies to support all health, safety and weight-loss claims. In addition, the FTC’s trend toward demanding full restitution in all of its cases is likely to put further strain on DR marketers. Second, privacy and data security issues will continue to be a challenge. The FTC’s recently announced settlements with Facebook and Google illustrate just how important an issue this is to the FTC.
Hawthorne: The over-saturated use of DRTV, an aging audience and competition with alternative media are making life tougher. DRTV is a more mature medium, so the concepts and executions need to follow. Younger people have a stronger aversion to “hard sell” and DRTV is still dominated by it. Alternate media and unlimited choices in current media — like 500+ cable channels, mobile, social and experiential media — are further fragmenting the audience. The lack of short-form inventory but — more than that — quality inventory is an issue. With many DRTV clients trying to build their brand and drive response, they want high-profile reach among a very specific, pre-qualified audiences.
Peter Koeppel, Koeppel Direct: The elections and the primaries leading up to the elections could have a significant impact on DRTV inventory. In a typical election year, campaign spending has the biggest impact in local markets. However, the ruling by the Supreme Court in 2010 that removes spending limits on corporations should also create more demand for national cable and network TV inventory by various advocacy groups, special interests, corporations, unions, etc. Another key factor is whether we will remain in an economic downturn in 2012. If the economy improves then general advertisers will demand more TV inventory and the cost of DRTV inventory will increase. However, if the job market remains moribund and bad economic news continues this could adversely affect DRTV sales and offset the lower cost of DRTV inventory.
Fern Lee, Thor Associates: Marketers must learn how to create a model that captures a multichannel approach and engages consumers leading to conversions around the tight control of the Food and Drug Administration (FDA) and FTC. The need for clear substantiations and clinical tests are a challenge, as well as the use of testimonials that provide support for the DR model. Also, defining the difference between conversations and conversions will be crucial. It is easy to “join the conversation,” meaning that branding is available. This leads to relevance of ROI modeling within social media and the digital space.
Kevin Lyons, Opportunity Media: The two biggest issues confronting direct response marketers in 2012 are the economy and the election. Although very interrelated, the economy looms large as the biggest issue. The prolonged and acute softness in the economy affects the bedrock of our business, consumer confidence and, correspondingly, consumer spending.
Mike Medico, E+M Advertising: The biggest issues facing traditional direct response marketers are eroding gross margins in the face of higher costs across the board and media fragmentation. In both instances, these issues negatively impact the ability to acquire new customers by increasing the cost to expose the message to smaller audiences and lowering the margin needed to profitably generate orders.
Digby Orsmond, ARM Direct Ltd.: In Europe, uncertainty about the economy and whether the euro will survive may bring about a double-dip recession and higher inflation. Germany and France are trying to rescue the euro. Wolfgang Schäuble, the German finance minister, called on European leaders “to do what they all promised to do in order to win back gradually the trust of investors worldwide. Time is now running out.” Only the Irish seem determined to forge ahead with their drive to resolve their debt crisis, while the Greeks demonstrate on the streets, and the rest of Europe dithers.
Stacey: It is getting increasingly difficult to make money solely from TV and also to continually find new innovative products that resonate with consumers and are suitable for the DR medium. Executing a multimedia strategy, measuring it accurately and then tying it into a multichannel distribution infrastructure is a work in progress for many traditional DR marketers. At the same time, the public is always looking for the next new thing — so products with mass appeal, good margins and those that are protectable and demonstrable are always challenging to keep finding.
What will be the two biggest opportunities for direct response marketers in 2012? Why?
Goldstein: As traditional television viewing continues to decline, social media and mobile present new channels of opportunity for direct response marketers. In addition, these platforms are uniquely suited to DR audiences. Social media provides fertile ground for testimonials and depictions of actual customer experiences. Mobile marketing, particularly through the use of apps, provides an emerging platform through which marketers can showcase their products and services.
Hawthorne: Leveraging social media applications and mobile advertising along with our more traditional direct channels is crucial. Executing work for established brands that respect the brand essence while still selling matters. A similar approach even holds true for emerging brands that want more sophisticated executions. Marketers can use short-form DRTV to generate leads for high-end products or services and utilize strong backend services to convert the sales. More marketers like Bowflex, Treadclimber, NordicTrack and ProForm have sidestepped long-form and shifted to cost-effective short-form media to generate large volume of leads. These marketers are utilizing strong and incentivized call centers to close these high-end sales.
Lee: As the political campaign becomes heated and consumers are provided with all the negatives that campaign advertising address, the DR marketer can create messaging of hope, improvement, health and wealth.
Lyons: Connected TV will provide great opportunities, although just in its beginnings in 2012.
Medico: Key opportunities are the expanding opportunities of “As Seen On TV” retailers for direct response marketers and the growing acceptance of mobile and social commerce. In the face of eroding margins, retail has become the prominent source of revenue for direct marketers who can no longer be profitable as a direct-to-consumer-only promotion.
Orsmond: In the U.K., it will be how to best make use of the more competitive airtime rates that are likely throughout 2012 as TV stations struggle to maintain their spend. Also, how to maximize online sales by using DRTV or TV program sponsorship to drive new visitors to your website will be crucial.
Stacey: One opportunity is in continuing to build on the connection and relationship between DR marketers and the retail industry. The other opportunity is internationally, where the DR industry is still going strong. Many marketers still don’t take full advantage of their products’ potential in foreign markets.
With most projections showing 2012 will be the most expensive political ad season ever, what do DR advertisers have to do to work around the burdens that will cause?
Koeppel: DR advertisers will need to closely monitor how political spending is affecting inventory and rates. DR advertisers also need to be flexible in moving their spending to various TV mediums, including cable, network, broadcast, satellite, etc., and among all forms of media, including TV, radio, online, mobile, social and print.
Lyons: A robust election ad budget could make it very difficult for short-form DR advertisers, as there will be a significant rise in demand pushing rates higher. Especially with anticipated unbridled spending from super PACs, inventory could remain scarce, especially in the third and fourth quarters. DR advertisers need to secure inventory in advance through longer-term commitments in anticipation of the election spending by campaigns and political organizations.
Medico: It seems we go through this same exercise every two and four years, and the industry somehow adapts. Media fragmentation also means media opportunities to try testing unwired networks — radio, mobile and social can all help to stabilize unsettled media landscape.
Stacey: Media availability at cost-effective rates is always a struggle. DR marketers will buy the time that they can get and that makes sense. Rates will fluctuate according to demand and supply.
With an economy that is lingering near recession levels, how can DR advertisers best break through consumers’ malaise and prompt them to become customers?
Hawthorne: Strong creative, compelling offers and incredibly focused media placement will help us hit our target every time. We can’t afford spillover or wasted eyeballs. And when we reach them, the message needs to be extremely compelling. For short-form, try new conceptual approaches and/or executional tactics like jingles, music mnemonic devices, more engaging graphics, new ways to demo products and devices, along with irresistible trials and offers. In long-form, it is all in execution, much like other content genres on television. Casting, scripting, directing, editing, effects, etc., keep these shows fresh.
Koeppel: DR advertisers must be more creative than ever in developing products, offers, pricing and payment plans that will appeal to a more frugal consumer. Consumers have less money for discretionary spending, so products that save the consumer money and time and lift their spirits will be particularly appealing. Creative must be positioned to appeal to an audience that is looking to take advantage of great deals.
Lee: Conversions and customer engagement rely on credibility of product, education, substantiation and proof of concept. Let us never forget, “Art inspires, but logic sells.”
Orsmond: Add better value — that is how to manage business through tough times. Standards of order taking and delivery have to be top class, and you need to make customers part of your success. Many DR advertisers want simply to make the sale and are often terrible at getting customers onside through follow-on offers or discounts — either online or via call backs.
Stacey: Lower-priced products with free offers and easy payment plans generally do better than higher-priced offers. Strong value offerings are also important to entice the consumer to order.
How will DR advertisers utilize retail sales opportunities (either brick-and-mortar or online) to their advantage in 2012?
Hawthorne: If DRTV is the introduction, retail allows for a relationship where consumers learn, touch, feel, ask questions and provide feedback. DRTV spots and infomercials educate the consumer, demonstrate the product, and provide competitive advantages and testimonials as they prime the viewer to purchase the product at retail. Any product-oriented marketer must utilize brick-and-mortar and online retail sales, and their agencies will have to be strategic in the rollout and execution of national cable DR and local DR to support retail sales.
Koeppel: With more DR sales occurring at brick-and-mortar stores and online, plans for retail distribution must be established prior to the launch of a campaign. A DRTV drive-to-retail plan must also be utilized to take full advantage of this trend. Employing a distinctive and consumer-friendly website and a robust online campaign that integrates with a DRTV campaign will lead to improved online activity and conversion.
Lee: Retail sales opportunities will rely on taking advantage of using DR rates and messaging to support branding that produces sell through and leads to increased revenue. More DR marketers are using digital forms of retail: QVC.com, AsSeenOnTV.com, Drugstore.com, Costco.com, etc. This is a very important part of our marketing pie.
Medico: In the end, it’s all about the sales numbers — the greater the sales revenues, the greater the contribution to margin and the allowable for advertising. Margin drives media and media generates sales on all levels, but especially retail.
Orsmond: DR advertisers must make the most of the months when TV airtime rates in the U.K. are at their lowest (January-April). Getting your product into U.K. retail is all about who you know and managing those relationships well. For a newcomer from the U.S., it pays to link up with an established media company that can make the introductions and navigate around European sales regulations.
How will the roles social and mobile marketing play in DR campaigns change in 2012?
Goldstein: With traditional television viewing continuing to decline and the increased costs of media, social media and mobile marketing provide cost-effective and highly relevant platforms through which DR marketers can promote their products and services to consumers. Direct response marketing is uniquely suited to social media because it affords a platform through which marketers can build consumer communities. Mobile marketing is an attractive platform for DR marketers because it affords new and highly interactive ways to encourage consumer engagement and purchase. Mobile marketing combines some of the core features upon which direct response advertising is based.
Hawthorne: It’s the future of DR, although social and mobile help close the sale, not make the sale. However, a marketer should continue to use social and mobile media to pay close attention to what engages consumers or potential consumers, what categories are piquing their interest, what products should be launched, how and what motivates their enthusiasm to share a product, when to enhance or update and offer. Social and mobile are already making a dent as another “authentic” way to reach people.
Koeppel: Facebook is becoming a powerful marketing tool that needs to be part of every DR marketer’s media mix. Mobile search also needs to be considered, since it is growing rapidly as more consumers are conducting searches and responding to DR campaigns through their smart phones.
Lee: By following the consumer anywhere they are, whenever available, however available — the DR marketer has the upper hand in capturing revenue. Social media also avails itself to opinion formation. The use of mobile marketing is paramount, especially optimizing tablets and Web-enabled TV. By availing the consumer the opportunity to download content on a mobile device, you are essentially creating a pocketbook of offers for future uploads.
Medico: Consumers are no longer tied to their TVs or radios for information, entertainment and advertising. With that in mind, social and mobile commerce will take on increasing importance. You will see Facebook, QR codes, mobile campaigns and Twitter become integral to a campaign.
Stacey: Our company continues to explore social and mobile marketing opportunities where appropriate. However, these relatively new forms of marketing are still a long way from driving our fundamental business decisions. We use TV and print to drive the Internet, and we use organic search and affiliate marketing to boost online sales.