What’s In Store?1 Sep, 2013 By: Nicole Urso Reed Response
Today’s tech-savvy consumers are creating even more crossover opportunities for DR and retail.
A major shift happened in direct marketing about a decade ago. As pharmaceutical companies pushed their way into the world of measured response — and innovations in online advertising left brand marketers on the hook for data-driven success — the term brand response was coined to define that perfect balance between highly targeted DR campaigns and high-touch brand creative. Now it’s rare to find advertisements without a call to action, a link to special offers, and a community of socially connected customers behind them.
With the proliferation of smart devices and mobile access, today’s consumers are just an arm’s reach from the “add to cart” option at any time. Technology is not only changing when and where people shop, but how they shop — and the industry is faced with another growing cross section of opportunity, this time between DR and the variety of online and traditional brick and mortar retailers.
According to the 2013 financial report by the Grocery Manufacturers Association (GMA) and PricewaterhouseCoopers (PwC) “Growth Strategies: Unlocking the Power of the Consumer,” more than 40 percent of CPG companies plan to sell direct to consumers this year, compared to 24 percent in 2012.
“CPG companies that engage with consumers directly through digital channels and build out their direct-to-consumer processes will have the best advantage for creating new growth,” Steven Barr, PwC’s US leader of retail and consumer industry, stated. “Fifty-two percent of U.S. consumers are already buying directly online from brands they trust, proving that CPG companies now have far greater opportunities to walk alongside their shoppers in real time while driving sales of existing and new products.”
The report also illustrates that direct-to-consumer sales is a good way for companies to test new products and build brand value by educating consumers about a product.
“There’s a huge opportunity to educate consumers about cocoa and dark chocolate and what the different mixes of cocoa beans mean,” David Marberger, Godiva CFO, explains in the study. “Consumers are interested in these things; they’re not just buying a piece of chocolate.”
As a retail veteran experimenting with DR media, Peter Boutros, founder and CEO of Quten Research Institute, realized the enormous branding opportunities of DR, which he says are often missed by marketers who give up on a product too quickly.
“It seems to me that many DR marketers just accept that the product has an end cycle rather than say, ‘The direct response component of the product has an end cycle. How can I change that?’” he says. “And this cannot be done at the end. It almost has to be preplanned from the very beginning, from week one or week two. ‘How can I change it into a brand and have a different style media campaign — and extend the life of this product at retail for years to come through innovation and better product quality?’”
Boutros, whose product — Qunol — has used an innovative direct-to-retail media plan, believes that quality is most important and as marketers shift from DR to retail, they should continue to innovate and improve their product, use feedback from customers to address product concerns and build long-term retail strategy with the brand’s longevity in mind.
However, the bond between DR and retail is nothing new. If a DR product is successful on television, the next phase of advancement is to sell it at major retailers — unless it’s a TV exclusive. But given today’s hyper-connected consumers who see a product that they like on TV, research it online and then compare prices at various locations — including online storefronts such as Amazon — retail strategy is often planned from the start.
“The general equation is that 85 percent of consumers who want that product will not buy direct-to-consumer, but will buy retail,” says Shail Prasad, vice president of marketing at TELEBrands.
When TELEBrands launches a new As Seen On TV product, it measures media efficiency to determine if the DR campaign will support the move into retail, which is always the goal.
“We’re uniquely positioned,” says Prasad. “We started this As Seen On TV business back in the 1980s. AJ Khubani, CEO of TELEBrands, has really set the course for what we’re all doing as an industry today, and that is drawing the recognition of direct response TV to a retail package, which ultimately consumers will look at and say, ‘I did see that on TV, and I want to buy it.’ That business is too attractive and quite large for us to ignore, so our business model is designed to create awareness to a product, build a brand, and offer consumers the opportunity to purchase directly from us — of course — and certainly, down the road, from retail.”
Part of the company’s unique positioning lies in the relationships that they’ve built with retailers over the years. Popular As Seen On TV products are often stocked together in their own retail section and are packaged with the As Seen On TV logo. As one of the largest marketers and distributors of DR products across most categories, TELEBrands is always looking for the next hit product to bring to retail, whether it’s developed in house or part of a distribution partnership.
Prasad says that it has taken decades for them to learn the ins and outs of the DR-to-retail business and for a new business to do it all themselves is nearly impossible.
“The retail business is extremely cash-flow intensive,” he says. “You have to have very deep pockets to be able to be successful at retail. You also need relationships, and you want to monetize your campaign from direct response through to retail before your direct response campaign starts to weaken, so you have to have the ability to manufacture at a scale that makes sense to your deployment to retail. A startup has a lot of steps to get through just to get in the door of a retailer. It’s not just who you know. There’s the operational aspect of it.”
Product Is King
Millions of viewers tune in to ABC’s reality series “Shark Tank” to watch aspiring entrepreneurs pitch their ideas to prospective investors who have the capital and connections to take small businesses to the next level. It’s a glimpse into the incredibly competitive, high stakes world of retail, where simply getting a meeting with a potential buyer is one of the greatest challenges.
But this may all be changing soon. Social media and the power of online audiences have dictated that consumers are gaining control, and new businesses have more than one avenue to showcase their potential.
In an interesting twist on retail strategy, Boutros used DR media to establish a brand and drive retail sales for Qunol, a leading CoQ10 supplement, now available nationwide at Walmart, Costco and Walgreens (Response, April).
With a background in retail, Boutros knew that bringing another CoQ10 supplement into an already-crowded marketplace would be a challenge, but he believed in the quality of his product and knew that once consumers understood why it was superior, everyone would want it.
“We knew the market existed,” says Boutros. “We knew the products in the market had very poor quality. And we knew we had the best form of delivery in the marketplace.”
Unlike its competitors, Boutros explains, Qunol is absorbed very quickly into the body, which makes it more beneficial than others.
“It’s a product readily available in the marketplace, which is why we needed to hit the target audience at the highest frequency possible, which is really the key to drive retail,” he says.
Boutros did not initially plan to use direct response media, but once he realized how effectively he could target potential customers, he used the commercials to educate consumers about CoQ10 and why this unique brand was priced with a slight premium.
“You strip the message to core product benefits and product uniqueness and then you basically utilize DR media rates,” says Boutros.
All of the ads drove the consumer to retail locations.
“What we tried to do was, one, tell people here’s the benefits of CoQ10,” Boutros says. “Everybody should be taking CoQ10. Two, tell people this is the better form of CoQ10, so if you’re going to take a CoQ10, you must take ours, and the key was to grab a piece of the market, but also expand the pie.”
Using direct response to educate consumers about products and boost existing retail sales is effective for many companies who work with Jason Levesque, CEO and founder of Argo Marketing Group in Lewiston, Maine — including Nature’s Bounty, a popular brand of vitamins and nutritional supplements sold at GNC, Vitamin World and other retail outlets.
“It’s very typical,” says Levesque. “I see a lot of clients doing that. I also see a lot of clients that you wouldn’t expect to see in the DR space.”
One example is Adams Defense System, a product line of flea and tick protection for pets, which is already successful and available at major pet retailers, such as Petco.
“They wanted to stand out, and they wanted to advertise in specific markets that were hit hard by tick infestations in the northeast and southeast — places that have a high propensity for Lyme disease,” says Levesque. “They have a product to help block ticks from your yard, so they did a 30-minute infomercial, bought the media, and we handled the inbound sales calls and conducted customer care. It was a success.”
Direct response advertising was built on highly demonstrable products that solve a problem. In this case, and in the case of Qunol, consumers couldn’t watch the immediate effects of the product, but through DR, the product benefits could be better explained and directed to the right audience.
“It’s a great way to differentiate your brand from everybody else on the shelves by running DR, building some name ID and brand awareness, and following through with very robust inbound telemarketing — as well as some kind of offer configurations,” says Levesque.
With nutraceuticals and beauty products, he also sees a shift from DR to online-only campaigns. Allu Ultimate Skin Therapy is an example. After three years of selling direct online, the product is moving into retail, according to Levesque.
“I’m seeing more and more clients go only online and skipping traditional direct response advertising,” he says. “It’s more predictable. It’s more nimble. It’s more dynamic. You’re not spending half of a million dollars on a production. You’re spending several thousand dollars on online creative and media tests to really see if you have anything.”
Although he says that DRTV has an undeniable impact on shelf lift, it’s becoming harder to determine how many customers are actually reached on TV. Direct-to-consumer online marketing is a good way to get a sample size and fine-tune the messaging before making any major production investments. Plus, he says, if a company has a quality product, free trial offers are a great way to attract interested customers and get them coming back with repeat business.
In this new era of response branding and real-time conversations between companies and consumers, the idea of “yell-and-sell infomercials” may sound archaic. Today, customer loyalty is built on quality products, superior service and earned trust.
According to the GMA, “The shift in the last mile [the retail store aisle] disrupts not only how CPG companies market, advertise, and merchandise; it also changes a myriad of other fundamental elements, including fulfillment management and channel economics. Leaders willing to grapple with this disruption will be able to lay claim to previously uncharted territory for CPG companies.” ■