Response Advisors Forum: An Old Foe Becomes a Best Friend1 Apr, 2014 By: Thomas Haire Response
The members of the Response Advisory Board discuss the expanding opportunities — and built-in challenges — of partnering direct response and retail, both online and offline.
With retail distribution becoming a necessary goal for traditional direct response marketers — and an expectation from traditional branders who continue to include more direct response components into their campaigns — there’s no doubt that building a successful retail program is a bigger necessity than ever.
With retailers both offline (Walmart, Walgreens and more) and online (Amazon.com) as consumers’ purchase locations of choice, the ways DR campaigns are measured have changed immensely in recent years. “If you play big in ‘omnichannel’ marketing, you’ll need to pay attention to the media efficiency ratio (MER),” says Doug Garnett of president of Portland, Ore.-based Atomic Direct. “Just remember that it’s only one of many metrics to consider. For example, if you lose sales to online retail you’ll see an MER drop. But if you look at full sales numbers, an entirely different profit picture emerges. You’ll find that losing those direct sales has been more than worth it.”
Richard Stacey, president and CEO of Toronto-based Northern Response Intl. Ltd., adds, “I view retail simply as an extension of DR, and we follow many of the same principles as DR — such as testing, tweaking, rolling out, building continuity, database marketing, offering line extensions and upsells, and so on. It’s funny to hear some DR marketers will tweak a show a dozen times testing various elements. For some reason, these same marketers often forget everything they know when they go to retail.”
Those are just two of the many responses we received when we turned to our Response Advisory Board of industry experts for our second quarterly edition of the 2014 Advisors’ Forum with a series of questions regarding the importance of retail in today’s DR universe.
Retail distribution is now a crucial cog for traditional DR marketing campaigns. Why has retail become such an important facet for those marketers?
Doug Garnett, Atomic Direct: Retail has become critical because consumers want to buy where they prefer — not where the marketer dictates. Today, those options include more than just phone and your website. Consumers love retail, third-party websites, such as Amazon, and catalogs. It’s this world that has become known as omnichannel.
DRTV’s biggest profit opportunity is through omnichannel. After all, any time a DRTV ad appears, it influences a mass of customers. A portion of those customers will want to buy or contact you directly. The majority prefers to buy through other channels. By opening all the channels, your media dollar has far higher profit impact.
How much higher? Huge. If you have significant omnichannel distribution, for every one sold directly by your company, another 5 to 15 are sold through stores and other channels. Even with higher margins on direct sales, the profit possibilities in omnichannel dwarf the profit potential from just direct sales.
So these large profits have made retail and omnichannel a key focus in DRTV. But there’s a second reason: success rates. Remember how only one in 20 campaigns succeed on direct sales alone (phone plus Web)? It’s different in omnichannel. When you have retail in place, that success rate can jump to roughly seven or eight out of 10. Neither retail’s profit nor these higher success rates can be ignored.
Tim, Hawthorne, Hawthorne Direct: As higher media rates and lower response rates intersect at the corner of DR and TV, the reality of lower media efficiency ratios (MERs) dictates that the retail channel needs to be an integral part of any successful DR marketing campaign. The truth is that most viewers will not purchase via 800 number or online, so it’s a smart bet to take advantage of your electronic media exposure by having substantial retail distribution, where consumers who have seen your electronic advertising, but did not respond, can eventually buy your product.
Peter Koeppel, Koeppel Direct: Retail sales online and through brick-and-mortar stores have become a significant component of overall sales for successful DR campaigns. It used to be that retail sales were typically five-to-10 times TV sales, but now retail sales often account for an even higher multiple of overall sales vs. TV. Retailers want to see that a campaign ranks high on the accepted DRTV ranking charts before taking on a new product. Today, DR marketers may have to run media at a loss to support retail and ensure that product is moving off the shelves, so they don’t get stuck with unsold inventory returns from retailers. Utilizing a DRTV campaign allows marketers to run media that can cost up to 50-percent less than general media, which helps to minimize their losses.
Fern Lee, THOR Associates: Retail has always been a crucial part of the marketing pie. The difference in today’s world is that marketers are now using a multichannel platform to push all touch points to the end goal of retail. Both digital and traditional touch points are of great importance to create a branded initiative on the retail shelf. The opportunity for marketers to use direct response pricing to push inventory off the retail shelf is a great way to save media dollars spend when first entering into retail.
Kevin Lyons, Opportunity Media/A&E Television Networks: Volume-retail creates tremendous sales volume, providing a robust monetization of marketers advertising campaigns. There is also consumer demand for their products built up through that advertising, creating a consumer need retailers need to respond to.
Mike Medico, E+M Advertising: The traditional direct response model that allows for profitability on the direct-to-consumer (DTC) side has all but evaporated. Even enhanced revenue through upsells has not generated enough margin to allow for a company to show results at lower than breakeven. Retail takes advantage of all the awareness created via TV and online sources and allows for higher margins so campaigns can stay on air for longer periods of time.
Rob Medved, Cannella Response Television: For non-continuity or heavy back-end offers, it is due to the fact DRTV marketers can sell more product at a better margin at retail. Marketers have always known the power of DRTV to create and drive a brand through ancillary channels of distribution. Increasingly during the past decade, marketers have moved their risk profiles from needing to make money on the front-end sale, to breaking even or losing money in order to support the retail sell-through. Many marketers will hit retail as soon as they see life on TV, then support spend at a loss to keep the product awareness moving retail units. It has definitely moved from a business that lived off the front-end TV sale and benefited from retail gravy, to living off the retail sell-through after losing money on the media side of the DRTV campaign. And once the DRTV marketing community moved to that model, there was no going back, as it put increasing pressure on the media rates.
Greg Sarnow, Allegro Response Teleservices: In the mid-1990s — which seems like a century ago — retail distribution of direct response products became commonplace. The line between selling and branding, long a distinction between general and DR advertising, has now become so blurred that launching products with DR is a huge advantage for retail distribution. Media, the engine that drives DR campaigns, has become so expensive in the past 15 years, that without retail distribution or other downstream revenue opportunities, DR campaigns would not be able to support themselves.
Richard Stacey, Northern Response Intl. Ltd.: As the traditional media environment has fragmented so have the traditional distribution channels. We are moving from an “As Seen on TV” model to an “As Seen Everywhere” model and — at the same time — from a “Not Available in Stores” model to a “We Will Be Wherever You Want Us” model. Take a lesson from Coke: there’s no place they don’t sell it. In the old days, DR used to be a profit center. Today, it is often a cost center and needs retail distribution to help support it.
This is not to say that different distribution channels don’t have different margin structures, but the distribution channel is not the brand. The choice of distribution channel can be related to target markets or optimizing the “value chain” and capturing margin but is not necessarily a brand decision — as Coke teaches us. Like Coke does, we normally address the differences between channels through SKU differentiation, rather than forgo a channel altogether.
Robert Yallen, InterMedia Group of Companies: For the last 15 years, media venue audiences have been slowly deteriorating while same media costs during this period have risen disproportionally. This dynamic has given rise to an imperfect media storm where advertisers are now paying more but reaching fewer eyeballs.
This environment has been weakened further by a substantial increase in the number of DR marketers utilizing a direct-to-retail strategy.
Finally, consumers have become increasingly savvy to advertised products and offers and, as a result, do not respond to DR pitches as they did in years past. Many know that they can now wait until these DR products appear in retail, where they are often available at lower price points.
Is a top-down approach (getting into major national retailers first then trickling down to regional and local stores) or a bottom-up approach best for marketers looking to utilize a DR campaign to drive retail distribution, and why?
Garnett: In general, DRTV influences a mass market. So as soon as you’ve got DRTV on-air, you are driving demand that needs national retailers to get full payout.
Which is best? It depends. Many marketers find better success with a top-down approach, starting with at least one national retailer and DRTV. After all, regional retailers often take just as much effort to set up, and are sometimes more risk-averse than the national players. And, regional sales volumes won’t justify a very large order, or a large media budget.
That said, there are times when it is strategically wise to start smaller. National retailers often demand price cuts too early — losing important margin at the beginning of the campaign. And, many products need to prove themselves in order to get national retail distribution. Regional and local stores are able to provide that proving ground.
Hawthorne: Top down — we encourage our clients to get their products into major national retail chains first. Using TV to drive retail is more cost efficient using national cable nets vs. local TV stations.
Koeppel: It’s now more difficult for smaller marketers to attain national distribution. National chains want to see a history of sales that were built up on a regional level before taking on a product nationally. Stores don’t want to take on products that aren’t going drive consumer demand. Walgreens, CVS and Sally Beauty are examples of chains that will do regional tests, whereas Walmart prefers products that will work nationally. Getting placement on “As Seen on TV” kiosks in stores can also give you a read on the viability of a product before taking it to national distribution.
Lee: The real answer is that it depends on the genre of the product: is it a supplement, a housewares product, a $19.95 widget or gadget, or a piece of fitness equipment?
Let’s use supplements as a case study in which a marketer would approach retail from the local level up. The initial key for success is the heritage of the media spend (TV, radio, print and digital) while still running media with an 800 number and a URL. This will first entice the “mom-and-pop” pharmacy buyers across the country. The best way to reach these retailers is though distributors (i.e., ABC, HYVEE, Cardinal, Kinray, Rochester Drug, GNC, Vitamin Shoppe, etc.). Once you have success on these small retailers’ shelves, it’s time to move to the “Drug” retail chains: CVS, Walgreens and Rite Aid.
Now the media changes to a 30-second format and is URL driven only. Marketers will sometimes end tag the name of the retailers or drive to their websites, which will have store locators and coupons. With success in the drug chains, the marketer now moves to “Grocery” and then the “Big Box” retailers: Costco, Sam’s Club and Walmart. Once you have reached the pinnacle, it becomes a volume-based business for a robust ROI.
Initiating a 30-second, flighted, pulsed media schedule using DRTV is recommended for retail sell-through. The more impressions, the bigger your retail spend. A multi-channel media integration with radio and digital is also necessary to complete your retail plan for success. Without a disciplined media plan, it is a plan for failure on the retail shelf!
Medico: A top-down approach seems to have worked best for our clients. Given the reach of direct response schedules on national cable, national syndication and network media, major retail chains, covering all DMAs, are in the best position to provide the consumer with the goods they have seen on DRTV.
Medved: It really depends upon the item. Still, about a dozen retailers typically account for 80-90 percent of all the volume moved at retail on a typical DR item, so the top-down approach is better. Also, the top-down approach keeps the competition from making any significant inroads into your distribution, assuming you don’t have strong patent or other protections for your product.
Sarnow: Every DRTV project presents its own opportunities and challenges. The marketers using DR are as diverse as the products offered. The process of contacting retailers depends on your organization’s track record with the retailers, as well as how widespread the DRTV campaign is. Once a short-form campaign is spending $100,000 a week for 13 or more weeks, the public will create a demand for your product and the retailers will be interested.
Most important are the stories of success you can take to retailers — and sometimes those stories come from smaller retailers. Once these positive stories become known, then retailers everywhere will pay attention. It is best to create retail success wherever you can, then push out with that story to retailers big and small.
Stacey: Retail strategies vary by the type of product you’re selling, the price point and your overall objectives. Generally, even if the DR campaign is working, we like to test a product first in some actual retail stores to get a snap shot of the point of sale (POS) sell-through. If the product sells well, we can then build a forecast to roll it out to other retailers on a national scale and support and drive it with TV and other media.
Generally, we don’t go into the major national retailers until we know we have a proven seller. The big national retailers are not the place to do testing and can return your entire unsold inventory — so you need to be sure you have a winner before you roll out to them. That’s why sometimes starting with smaller retailers can give you an opportunity to prove the market for your product and work out other potential issues before you go national.
Yallen: There are multiple variables at play here, but assuming that no significant geographic sensitivity exists and proper capital is allocated, a top-down approach is preferable. Purely from a media perspective, cost efficiencies are much more proficient driving sell-through on a national basis as opposed to a regional/local play.
What are the three biggest challenges when incorporating a retail element into a DR-centric campaign?
Garnett: First, you have to be ready for the financials. Do not use one-dimensional financials that focus only on MER. MER is important, but too many MER-only business models tie media spending to high MERs. Once retail volume skyrockets, the MER will drop — every time. Yet those high retail volumes need to be supported by continued high media spending that a strict MER approach won’t allow.
But there’s more to the financials. If you want to reduce your DRTV risk, it means you have to secure large distribution and that takes investment. The investment generates a more reliable return than high-risk, MER-only campaigns. But there is still some risk.
Beyond financials, it’s best to get placement in retail on the primary shelves — not solely on the “As Seen on TV” end caps. Those end caps sometimes offer good visibility and an easier way into the store. But they also don’t ensure that you’re able to leverage your work for the long-term.
Finally: execution. TV builds tremendous awareness, understanding and demand. But to turn that into sales, you need execution throughout the sales channels to support DRTV. Any retail ads (even circulars) need establish connection to the TV. And in the store you will see higher payout with end caps or pods in the store aisles. Every one of your in-store signs needs to help consumers make the connection: “That’s the product I saw on TV”.
When done right, execution can drive store sales as much as 50-percent higher.
Hawthorne: Foremost: will calling out retail availability impact direct response so much as to undermine the advertising’s profit goals? Second: if you have a national campaign but want to test locally first, how can you extrapolate your local results to national projections? Third: most products at retail are building or protecting a brand image. How can our creative drive immediate response without looking “too DR” and cheapening the brand?
Koeppel: The three biggest challenges are timing, price point and distributor position. If a product is selling well on TV, you don’t want to take it to retail too fast, since this will hurt TV sales. However, once TV sales begin to drop off, then it’s time to take a product to retail. Some larger DR marketers try to go straight to retail and plan a DRTV loss based on how many units they can cram into retail, but that strategy can backfire if marketers don’t keep their promises to the retailers on the TV media schedules and spending levels agreed to.
Usually you take a DR product to Walmart last, because they will undercut the retail price of everyone else. For example, if Walgreens is selling it for $19.95, then Walmart will sell the same product for $17.89, and the other retailers will get upset and want markdown dollars to match. However, if you wait too long to go to Walmart, knockoff products could beat you there. Products need to be priced attractively to sell at retail. Once it’s taken to retail at a lower price point, TV sales will drop off.
If a product is being sold though too many online and retail outlets too quickly, a bidding war could erupt and your price point might drop too rapidly. By rolling out to retail more slowly you can better protect pricing. When products are sold on Amazon, “As Seen on TV” outlets and through catalogs, it becomes difficult to tell who is selling the product and you lose control of pricing. However, again, keep in mind if you limit distribution you might invite knockoffs.
Lee: First, monies for media: spend to educate the consumer through DTC initiatives prior, and then once on the retail shelf, pulsing your media buy to create demand. Second, you must convince the retail buyer that even though you are a single SKU, that your product is efficacious and has a high value to the consumer. Finally, marketers need compliant messaging to challenge your competitors for retail shelf space and sell-through, especially and specifically in the supplement genre.
Lyons: Advance planning: the retail element has to be planned and well thought out far in advance of the campaign’s launch. Investment: considerable investment must be made in the supply chain and back end to support such an element. Inventory: also requiring investment and planning, inventory supplies and resupply must be in place for the campaign launch.
Medico: The three biggest challenges are: maintaining the integrity of the retail selling price; knowing the optimal cost-per-order (CPO) allowable to keep the campaign on-air in order to support retail; and inventory management so that overstock/returns do not become a major issue
Medved: One: competition from similar products. Two: having enough time to run enough media to build awareness before you go to retail. Three: timing of seasonality of certain products — timelines can be long if you miss one season — certain products will take 12-24 months to fully roll out. Other second-tier elements include cost of goods, size of retail box, media availability, and product category and market-size limitations.
Sarnow: Over the years, I have heard countless marketers explain that they didn’t want their commercial to look like a “slicing-dicing” type of commercial. Then when the results are less than stellar, there is an impatience to fix it and that usually means back to DRTV best practices
Rule 1: A successful campaign is more important for successful retail distribution than retail elements in the commercial.
Rule 2: The Web has far greater importance than just as a sales channel. The Web is brand building, because consumers are quick to rate products on Amazon, tell their stories of communicating with a company and looking for more info, and seek other customer’s experiences.
Stacey: There are a lot of challenges getting DR and retail to work together, but a few we often encounter are: pricing consistency of the offerings; timing the DR media with the retail roll out; and optimizing the right level of media necessary to support and drive sales at retail. You don’t want to underspend, so the product doesn’t move off the shelf — and you don’t want to overspend, so you’re just wasting money on advertising but not getting any extra sales increase.
Yallen: The first challenge is that DR revenue will decrease proportionately relative to the degree that the messaging and media plan focus on driving retail sales. If the messaging points the consumer to retail — even by just including a retailer tag at the end — this impediment is sufficient to immediately suppress direct channel response.
Not surprisingly, the more retail locations involved, the higher the likelihood that consumers will purchase the product in a non-direct environment.
Further, if selling-through via retail is the campaign’s major consideration, the associated DR income will be negatively impacted because a retail-oriented media plan is constructed considerably differently than a DR-focused version. This is because a retail plan focuses primarily on reach and frequency goals and often features non-DR-oriented elements, such as shorter unit lengths. Additionally, these plans often incorporate retail market-penetration goals and/or psychographic considerations that are often incompatible with an optimal direct media schedule.
What are the three biggest opportunities retail distribution offers DR marketers?
Garnett: First, profit — driven by the typical ratio of five to 15 retail sales per direct sale. Second, as noted above, retail distribution drives higher rates of DRTV success.
The third area may be the most interesting. Retail also gives you the best opportunity to build brand from DRTV. Too many one-dimensional DRTV campaigns succeed on TV, eventually move to retail, and then disappear once direct sales diminish.
You should demand far more from DRTV-powered retail campaigns. DRTV helps you leverage primary shelf placement — not just in the “As Seen on TV” end cap. In fact, most of the ASOTV end cap items disappear after they’ve run their rapid course.
While DRTV builds consumer demand and retail distribution for your primary product, it also sets you up to build line extensions. These extensions sell easier and with less advertising or marketing costs. So when a marketer gets its DRTV to a primary shelf spot, it can begin to add products that produce more profit and create longevity.
If you take this approach, some extensions will need DRTV campaigns to build their momentum. But you often won’t need new advertising to sell products that are smartly paired with your primary product.
Hawthorne: Longevity: creating a brand that will last decades instead of a few years. ROI: taking full advantage of your TV media exposure to drive immediate and latent sales. Quality upgrade: driving retail brands requires a more deft creative touch, and a more impactful and memorable look and feel.
Koeppel: The combination of retail and online sales often can be five-to-10 times (or more) than TV sales. Successful DRTV products can also attain immediate placement at retail. The opportunity to sell a product through various online retailers, including Amazon, has become a much more significant piece of the overall retail pie during the past five years. Maximizing this opportunity by attaining the best keyword and SEO positioning, as well as incorporating video and social media into the mix, can help a DR marketer to maximize sales through various online retail outlets.
Lee: One, it’s a way to sell 10 products to every one sold through DTC (TV, radio, print). Two, online retailers expand your opportunities. Three, building brand recognition to the masses one SKU at a time
Lyons: Scale: retail offers tremendous scale and reach for DR marketers. Enhanced revenue: with that volume, revenue increases significantly. Consumer interaction: the hands-on interaction provides an opportunity for DR brands to interact with consumers in a different way than they do with viewing the ad on various media
Medico: The three biggest opportunities are: the potential for generating sales of 10-to-20 units at retail for every one sold via DRTV; it allows the DR marketer to establish a brand; and it creates the possibility for line extensions
Medved: One, incremental sales — TV creates the brand and can move serious product, but the retail channel of distribution dwarfs the TV sales channel for almost every product. Two, there’s the potential for a long-term branded in-line play like OxiClean. And, three, it can create easier entry into international opportunities.
Stacey: The biggest opportunities retail offers DR marketers are a whole new set of customers, increased sales and long-term growth. As many as nine out of 10 people may not buy through DR but may buy at retail. No business wants to leave 90 percent of their potential customers unserviced. More important, in today’s environment the marketer can capture E-mails using warranty cards and other vehicles to build an active customer base just like they do in DR. In addition, having a place on the shelf gives the product a home and the consumer a place to find it long after the DR campaign is finished.
Yallen: The No. 1 opportunity is taking a successful DR product to retail where the product has built-up tremendous brand awareness, but its current results indicate that it has reached the end of its DR lifecycle. Unfortunately, many brands wait too long before entering the retail marketplace and consider a retail component only when the brand is no longer profitable in the direct channel. They now must deficit finance the advertising to obtain the minimal level that retailers need to launch a successful effort, let alone support sell-through.
Not all products are able to create a sustainable and profitable DR program, but the ones that do often have huge retail potential. For these, the DR model still fits into the media plan and is preferable to sinking significant, non-working dollars into a brand awareness and/or retail campaign.
Utilizing a DR approach can generate revenue while the product is being integrated into the retail marketplace. A DR model not only delivers the contribution factor of direct income, but it allows media optimization, which by definition lowers media rates plus increases audience delivery.
How can DR marketers best utilize retail distribution to maximize their media spending?
Garnett: You should use your DRTV campaign as part of your negotiations with retail channels, because a savvy omnichannel DRTV campaign will pay off for the retail merchandiser. But you’ll need to know that this requires commitment. If you can get retailers to commit a large enough purchase order (PO), you’ll be able to spend higher media budgets — driving more products through the channel.
That said, my experience is that the DRTV business isn’t planning media well enough to support retail. Too many buyers do no more than horse-trade on the MER (the process that works for traditional DRTV). Other buyers throw out results-based buying and try to look like “traditional” TV agencies by relying too much on Nielsen numbers for planning. Neither approach is right.
Your retail success will be biggest when your agency has the retail experience to keep MER in the mix while allocating and managing the media to build retail momentum. Sadly, that sophistication is lacking in many DRTV agencies.
Hawthorne: Testing the impact of your TV commercial in local retail markets first is critical for avoiding risk and maximizing your media spend. A local media test in one or more top-15 markets should be sufficient to measure a dramatic lift in local retail sales, so you can then scale the campaign up nationally with a high amount of confidence. What we like to do is determine your product’s Market Retail Penetration Index (MRPI) to decide which markets make the most sense to test. We will also identify controls markets, where we do not run the campaign, but we still measure fluctuations in retail activity, to fully evaluate your commercial’s sales lift — exclusive of any extraneous variables.
Koeppel: A combination of correctly timing the transition to retail, maintaining the right price points and consistently increasing your media spend will help to drive the most retail sales. Once a DR marketer has retail distribution and purchase orders from various retailers, it allows them to spend more money on TV during a longer period of time at a lower risk. Timing is important because you want to maximize your TV media spend before going to retail, but at the same time you need to transition to retail before knockoffs penetrate the market.
Lee: It is very hard for a marketer to gauge retail distribution from day one, and there is no true formulation for a new marketer to decide on media spend to support retail sell-through. The key is to have a national rollout and build demand through media to drive the consumer through the retail door. It is a challenge to understand when to spend media dollars and when to pull back, and the marketer needs to have a thorough understanding of flighting media buys to achieve the needed goal of sell-through.
Medico: Direct response marketers are familiar with the potential for large incremental retail sales once the product is in full distribution. Smart marketers adjust their allowable above breakeven to reflect the need to support retail. Without this support through continued exposure, product sales will fall and the risk of merchandise returns will increase dramatically.
Sarnow: I think the question would be better posed by how DR marketers can best utilize media spending to maximize retail distribution. The two are so intertwined in a multi-channel marketing campaign — because without retail, a typical DR campaign would be short and without a DRTV campaign, many products won’t reach significant retail distribution.
Stacey: It’s important to track retail sales as you do DR sales. When you run a DR campaign, you check the number of orders against your media spend. You can take a similar approach with retail. For example, all of our staff have attended Walmart University and are trained on Walmart systems. So we can see the click-through at the cash register at “Store 358 in Kalamazoo” last night. This is similar to seeing how many 800 calls we got last night. In this way, we can actually see the impact our media is having at the store level in different regions of the country each day.
Yallen: Direct channels (offline and online), retail, home shopping and social media are all pieces of a complex Rubik’s Cube for marketers in which there are literally thousands of permeations.
The first issue with retail is determining the optimal timing of entry into the marketplace, whether to make it concurrent with the product introduction phase, introduce it before direct channel sales falter, or at the end of the product’s direct channel lifecycle.
The key is not maximizing media spending — it’s about maximizing the lifecycle of a product and squeaking out all potential revenue from a multitude of channels.
How should DR marketers view major online retailers/resellers in a world where single-page sites have long been seen as the best sales opportunity for a campaign? What are the key opportunities and challenges when working with major online retailers?
Garnett: Once you shift to embrace this omnichannel idea, you don’t really care whether consumers buy from your website, Amazon.com, Zappos.com, or a specialized targeted site.
What we’ve typically seen is that when a new campaign hits, the majority of DRTV-driven online sales happen through the unique landing page. Over time, this shifts because the other online outlets are tracking search terms and sales trends to quickly start intercepting searches to their site.
You could try to draw private-site sales to your site but it’s expensive and often counterproductive — those sites are promoting your product. Instead, recognize that for every individual sale that shifts away from your phones or website, you’ll gain so many additional sales, that profit through those other channels will far exceed any profit you lost in direct.
Koeppel: Everyone has to work together when marketing a product through online retailers/resellers to take full advantage of sales though this channel. Marketers need to take into consideration how to best balance the scope of online distribution of their product vs. limiting distribution and letting knockoffs into the online distribution chain. Marketers should take into consideration whom they sell their products to online, since some outlets will sell a product at a higher price point and others at a lower price point. Typically, you develop one set of pricing for online retailers who sell directly to the public and another set of pricing for those who resell products. And generally you offer better pricing to those who buy your product in volume.
Lee: According to Forrester Research, growth in online retailing from 2012 ($230 billion) to 2017 ($370 billion) is staggering. Google Product search has trended down from 2009 to 2013 by 17 percent, while Amazon Product Search has trended up from 18 percent to 33 percent.
Amazon Marketplace is now the largest search engine for consumer products. There are more than 2 million sellers and 150 million shoppers today. As a result of online retailer marketplaces growing, the DR marketer has a larger selection of marketplaces to sell into and a high ROI margin. These marketplaces offer optimization, visibility and product movement. The key challenges are: keeping track of who is selling your product; not getting consumer data from these sales; protecting your brand; maintaining unified pricing; and a full understanding of how is this affecting your other retail channels
Medico: The more outlets for selling a product, the better. You cannot control how online retailers promote and sell products so it is up to the DR marketer to determine the best way to continually generate sales — no matter where they come from.
As I see it, the key opportunity when working with an online retailer is the potential for incremental DTC sales. The challenge is that they can cannibalize DTC sales that you may have generated
Medved: I spoke to our friends at Rutledge & Bapst, and they confirmed for me that major online retailers convert online traffic about 2-5 percent of the rate that a DRTV site converts, so any diversion of traffic will simply generate fewer orders at lesser margin. The more organic the search and sale, the better the conversion and the higher the profit are.
Sarnow: Online retailers can be a very difficult challenge for direct response marketers. For one, their pricing is often lower than the pricing in the commercial and on the website of the marketer. As consumers research most of their purchases online before making a final purchasing decision, if there is a less expensive place to buy the product, they normally will use it.
The challenges this presents have a serious impact on the campaign. If consumers buy on major online retailer sites, then the ability to attribute sales back to the media airings becomes all but impossible. Not only is the marketer making less money on a sale from a retail marketer, but the marketer will believe his results are not as strong because the consumer who might have purchased the product at the marketer’s site now purchased it somewhere else.
Stacey: We use single-page sites for individual DR campaigns, but they co-exist with other online retailers like Amazon or brick-and-mortar retailer sites like Walmart.com. It reminds me when some marketers were originally afraid to offer a dot-com address along with an 800 number. We’ve found those online DR retailers and other online and brick-and-mortar online retailers can coexist very well. The whole is greater than the sum of its parts.