Global Perspective: DRTV Measures of Success in Germany, Austria and Switzerland1 Oct, 2011 By: Robert Loder, Florian Kulterer Response
Germany, Austria and Switzerland are markets with high purchasing power, and with a combined population of approximately 98 million, the three nations represent significant consumer markets for DRTV distributors worldwide. According to a recent Goldmedia survey, Germany sells 1.6 billion Euros worth of DRTV products annually, making it the second-largest European market for electronic direct response behind only the United Kingdom. Adding Austria and Switzerland to Germany’s totals makes this territory the largest DRTV market in Europe.
While the region has vast potential due to its size, proven performance with DRTV products, and buying power, these markets can also provide challenges to those not specifically experienced with the territory. Germany, in particular, can prove difficult for the uninitiated.
Many companies have tried to launch their DRTV businesses in Germany without success. The largest players are obviously HSE and QVC, which dominate the market. The rest of the landscape is divided among Thane Direct, Guthy-Renker, Medis Shop, Television Merchandising AG and others.
Fully-integrated in-market operations and a smooth integration of DRTV and wholesale are essential elements in achieving success in this three-nation region. Product quality, an impactful campaign, customized packaging, strong wholesale distribution, experienced media planning and buying and proactive customer relations are the ingredients for profitability in these potentially lucrative markets.
However, Germany, Austria and Switzerland are not necessarily markets for continuity programs, and reaching product longevity is an exception rather than the rule. Therefore, the best strategy in this territory is a rapid DRTV product introduction leading to a quick turnaround into retail.
Because a campaign’s life is relatively short, it is vital to protect product intellectual property before venturing into these nations in order to prevent against knock-offs. Products that perform best in the territory are in the personal care, household, beauty and fitness categories — products that will translate well into retail.
Germany is also known for its high return rates. In contrast to other global markets, Germany’s return rates can be as high as 30 percent — and they are rarely lower than 20 percent. The high return rates result from Germany’s return policy that makes returns a legal entitlement. German consumers tend to take advantage of this law. While Germany is the biggest European economy, only about 10 percent of consumers elect to use credit cards — the preferred payment method is cash-on-delivery (COD).
Digital technology has paved the way for scores of television channels to vie for viewers’ attention and is delivering more media opportunities for DRTV marketers to reach the region’s population. Germany currently has approximately 20 million cable subscribers — about a quarter of the country’s population. Because many of the newer channels are not audited for ratings in any way, it becomes necessary to supplement broadcast with other delivery channels to effectively reach these markets.
Importantly, consumers in these countries are increasingly embracing online commerce in tandem with broadcast infomercials. Placing DRTV programming on the Internet reaches consumers in the territory who watch television and surf the Web. As a result, marketers who make effective use of the online platform will enhance their opportunities to generate revenues. German audiences respond to products that evolve into brands and the synergistic combination of broadcast media, online commerce and retail distribution helps propel brand creation.
Price points are also an important consideration factor. Pricing should not exceed 200 Euros and should preferably stay below 100 Euros. A rule of thumb: Because of the cost structure and margins, for every $1 charged in the United States, you should not charge more than one Euro in Germany. Margins should be adjusted accordingly.
Consumers in the region are different from their consumers in other parts of Europe. Historically, there is not an infomercial culture here as you may see in other European markets. Consumers in these territories are more prone to hesitate before making the call. Yet, DRTV is becoming more accepted and both the infomercial format and home shopping in this region are performing respectably. ■