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Direct Response Marketing

Response Magazine's 13th Annual State of the Industry Report

1 Sep, 2008 By: Thomas Haire Response

Orsmond: The strongest vertical DR short-form markets in the U.K. have always been the financial sectors with annual media budgets that have increased exponentially every year. However, it is the infomercials placed within the three-hour home shopping windows that are now generating substantial revenue — perhaps in excess of $725 million per year — in the U.K. for clients such as Guthy-Renker, TV Shop, Time-Life, Vector and others. The strongest selling product categories on U.K. TV screens remain music and video, automotive, beauty and wellness, do-it-yourself, jewelry, home and garden, computers, collectibles, health and fitness, and kitchen products.

Sarnow: Nutritional and dietary supplements, as well as fitness.

Savage: I usually mention fitness, beauty and personal care, and housewares as strong categories, and that is true again for 2008. Companies with multiple campaigns, such as Beachbody, Guthy-Renker and TriStar look to be having fine years. But there's no question that the financial services category, both before and after the housing debacle, is crowded with marketers generating leads for financial products that are designed to help people create and/or manage their financial assets.

Stacey: The strongest vertical markets are fitness, housewares and cosmetics — need, greed and vanity. TV drives shopping channels. Both drive print, and they all drive retail.

How has the continuous weakening of the dollar has affected U.S. marketers' abilities to buy and manufacture products overseas at a price that will allow them to maintain an attractive selling price and a sustainable model for DRTV?

Eden: The weakening dollar and the increasing cost of airtime have had a major impact on the success rate of DRTV programs.

Fays: MTVN's large international footprint has allowed us to meet with many overseas marketers and their belief is the weakening of the dollar is a huge opportunity for growth.

Lee: It is definitely affecting the marketer's margin and forcing more and more marketers to move to subscription-based modeling.

Orsmond: What we have seen is more U.S. companies considering setting up DR operations here in the U.K. For example, we recently tested short-form DRTV for one of the United States' biggest manufacturers of hot tubs and spas. The test was successful, and we are now planning to run the infomercial across the U.K. later in the year. The immediate advantage for this U.S. company is that they will benefit from the sterling-to-dollar exchange rate which still stands at $1.95:£1. The stronger pound definitely makes the U.K. an attractive market for American and Canadian DR advertisers right now.

Sarnow: From August 2007 until May 2008, the dollar dropped almost 20 percent against the Euro. For marketers that have products manufactured in Europe trying to sell those products in the U.S. market via television has become more difficult because of the rising cost of goods sold. From August 2006 until now, the exchange rate against the Chinese Yuan has only dropped about 15 percent but the largest drop has been in the past 12 months. These numbers make it clear that marketers must have a downstream revenue alternative besides DRTV to make their projects profitable. While there are still many products that do show a profit while airing on TV, cost-per-acquisition models with continuity and retail models for housewares and fitness products build momentum with DRTV and reap the greatest rewards in retail.

Stacey: Goods from China and many other places are priced in U.S. dollars. However, as the cost of steel, fuel and other imports has skyrocketed, manufacturers have had no choice but to pass these increased product and shipping costs onto the importer who may or may not be able to pass them onto the consumers or resellers. It's important in this environment that marketers plan into their forecast and pricing models the probability of continual cost increases so they do not develop projects that quickly become unprofitable as costs increase.

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