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Direct Response Marketing

Home Sweet Home

11 Jul, 2010 By: Bridget McCrea Response

Not immune to the economic uncertainty, home shopping channels try to find the right mix of product and pricing

Tony Little’s affinity for home shopping networks hasn’t changed much since he became the first on-air celebrity on any shopping channel back in 1986. He’s weathered a few economic cycles since then, and sees the current downturn as yet another “bump in the road” that can be tackled with solid advertising strategies and quality products that add value for consumers.

Getting through the rough spots also requires a broad product mix that appeals to home shoppers who want to spend less than $50, to those that aren’t afraid to fork over hundreds of dollars to be more comfortable, prettier, happier and/or healthier. Most recently, Little has been selling his Cheeks® Healthy Lifestyle exercise sandals in fashion prints in two-packs for around $47, along with his traditional roundup of $50 to $329 fitness products.

The price point on Little’s home shopping products tops out at around $400 for a DeStress Spa Inversion Massage Recliner — a product that he says “still continues to sell out,” despite the consumer frugality. “Not much has changed in home shopping. Consumers still want a lot of bang for their buck,” he explains. “They want value, and they want something that they can’t get anywhere else.”

That scarcity helps sell products. Cheeks footwear, for example, is only sold through HSN. “That makes the sandals more desirable because when they sell out on TV, they’re not available anywhere else,” says Little, who strives to create and market products that are not offered in retail stores. “That selling style still works, along with having items that are innovative and unique.”

Weathering the Storm
As retailers scramble to figure out what consumers want — and what they can afford to buy — in today’s economy, many home shopping channels have gone back to the basics and discovered that preferences aren’t much different now than they were 10 years ago. What is different, according to Bill Brand, executive vice president of programming, marketing and business development at St. Petersburg, Fla.-based HSN, is the way those retailers reach consumers.

“Retailers can no longer focus on getting the customer to come to them — that is not relevant in today’s world,” says Brand. “Customers need access and service on their own terms and locking them into a specific place and/or time is not realistic.” To address those changes in consumer habits, Brand says HSN focuses on offering a “compelling shopping experience across numerous platforms,” including TV, Web and mobile.

Brand says consumers also have a new definition of value, and are much more discerning. “To be truly distinctive, your brand proposition has to be decoupled from just a price and/or discount comparison,” he says. “We focus on creating compelling and differentiated products, and then [developing] a premium experience around those products at a fair value for the customer.”

As examples, Brand points to Sean “Diddy” Combs’ appearance on HSN to present his fragrance line and share his life story, and luxury jewelry expert Carol Brodie drawing upon her years of experience on the red carpet to show customers how they can accomplish “that same luxurious look for less.” Such presentations go a long way in getting consumers to watch and buy, according to Brand.

Unlike traditional retailers, home shopping channels also have the unique ability to tweak shows, offers and prices in real-time, thus ensuring that consumers get what they want and at the price points they feel are warranted. If that toaster isn’t selling enough at the $19 targeted price, for example, the channel can yank it and move on to another product, lower the price point, or even add a premium offer to entice consumers to buy.

That same flexibility extends to entire product mixes and programming. “During the height of the recession, we saw customers responding more to fashion jewelry than gold,” says Brand, “so we made the appropriate changes to our programming to meet our customers' needs.”
Brand says the changes HSN has implemented over the past few years have allowed the company to weather the economic downturn better than most retailers. It increased its best customer-buying segment, for example, by 10.5 percent in the first quarter of 2010, and has since seen increases in size and spend in all customer segments.

“In what has arguably been the most challenging retail environment in recent memory,” Brand adds, “we had absolute sales growth each year since the re-launch of HSN in 2007, with the first quarter of 2010 up 9 percent.”

Trend Tracking
Scott Hynd, co-founder of West Chester, Pa.-based Proformance Marketing, knows a thing or two about home shopping. His firm is not only located in QVC’s hometown, but it also reps products for the channel — while Hynd himself appears regularly as a product expert. “We’re tied pretty heavily into QVC,” says Hynd.

Right now, Hynd says home shopping is growing in certain product areas, and not so much in others. Across all categories, consumers are looking for deals and high-perceived value. Home environment (air conditioners and fans, for example) and consumer electronics are popular, he notes, while luxury items are languishing. As a marketer, Hynd says he strives for a diversified product mix. “In years past, you could pick a hot category and make money,” he explains. “Now you have to be more focused on a wide range of products across various categories.”

Presentation is also critical, and requires more elbow grease than ever. “We’re doing everything we can to present the product to the widest demographic possible,” says Hynd, “all the while making sure that we’re showing all the best features of the product itself.”

Those strategies have worked particularly well in the home environment category, where Proformance Marketing has seen success with its energy-efficient air conditioners, fans and related products. In a society where more and more consumers are focused on “greening” their homes, affordable solutions within that category just make sense. “This is an area where we’ve done pretty well lately,” says Hynd.

As for the home shopping process itself, Hynd says little has changed in terms of the steps networks take when selecting, airing and selling products. “If the networks get something hot, they’ll run it — probably even more so right now than ever,” says Hynd. “On the flip side, we’re also seeing more ‘one-and-dones.’ If you don’t meet the numbers, you don’t get a second chance.”

Hynd says the integration of Web, mobile and other shopping avenues have changed the home shopping space dramatically during the past two to three years. The additional channels don’t necessarily make it harder to get a hit on air, he says, but they do require a sharper focus on exactly what is going to sell, how it will sell and where the sale will take place.

“The integration of Web and mobile has definitely made us more aware,” says Hynd. “It adds a whole other layer to the process, particularly when it comes to supplying the information consumers need on TV and on the Web. We have to make sure we take care of both sides.”

The Outlook
Keith Stewart, president and COO at ShopNBC in Eden Prairie, Minn., is bullish on home shopping’s potential as the year progresses, despite the economic recovery’s fickle qualities. In the wake of a difficult year in 2009, Stewart says ShopNBC has seen 60-percent new customer growth so far in 2010, with total customer growth reaching 30 percent.

“While main street retailers like Target, Wal-Mart and Kohl’s were trying to maintain store traffic, Shop NBC was growing,” says Stewart. He points to jewelry as a particularly “hot spot,” right now for the network, which recently lowered its average selling price overall from $202 to $100. “This has allowed us to be more accessible to customers,” says Stewart. “It feeds our business, which [relies on] impulse purchases, and has helped us attract a lot of new vendors.”

Little is also positive about home shopping’s prognosis over the coming months, but says marketers will still be challenged in their quest to select the right mix of product and pricing. “Products that worked consistently in the past aren’t necessarily working right now,” says Little. “I don’t expect that to change much for the rest of the year.”

Consumers will continue ferreting out lower ticket items, with a concentration on the sub-$100 category. Limited editions and exclusive offers at higher price points will also continue to sell, predicts Little, who has seen more than his fair share of designers “coming on TV with $300, limited-edition jewelry collections that sell right out.”

Hynd, who spends a lot of time “backstage, talking to other home shopping reps,” says many marketers are scratching their heads right now, trying to figure out exactly what consumers want, and what they’re willing to pay for it. With the fourth quarter nearing, Hynd sees consumer electronics taking center stage on the home shopping channels, which have a leg up on brick-and-mortar retailers when it comes to budget-friendly options like flexible payment plans.

“Coming into the fourth quarter,” he says, “it’s going to be all about the offer and the value.”

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