Response Magazine's 15th Annual State of the Industry Report17 Sep, 2010 By: Thomas Haire Response
Members of the magazine's Editorial Advisory Board speak out on the current state of the direct response marketing industry.
What do you believe the most crucial topics for direct response marketers during the next 12-18 months will be when considering the actions of regulators, such as the Federal Trade Commission (FTC) and Federal Communications Commission (FCC)?
Fays: The bottom line is that it’s a supply vs. demand issue. Due to the robust general sales upfront, the possibility of less DR inventory for sale is very real. More stringent standards-and-practices (S&P) guidelines are enforced when limited inventory is available for DR sales.
Hawthorne: More actions targeting dietary and supplement marketers’ product claims who have not run at least two randomized, double-blind and placebo-controlled clinical studies before making any claims about their products, similar to the action the FTC took in July against Nestle and Iovate Health Sciences. Plus more action against advertisers who are not adhering to the FTC’s new “Guide Concerning the Use of Endorsements and Testimonials in Advertising” which remove the use of “results not typical” as a safe harbor.
Lee: Compliance, compliance, compliance.
Stacey: Three current issues that need to be watched closely are: any regulations involving the requirement to charge sales tax in multiple jurisdictions; any regulations that would allow cable and telecom companies to charge content providers based on bandwidth; and any regulations that go too far in limiting the product marketer’s ability to market. Marketing plays an important function in selling goods and services, and regulations that are well intended but ultimately limit the ability to effectively demonstrate product features or even use testimonials can become problematic if not well thought through or unnecessarily restrictive.
How have the FTC’s revised Testimonial and Endorsement Guides affected the DR business since taking effect? Has the industry reached a comfort level with these changes?
Garnett: After considerable angst and anxiety, it appears to me that the rules are working well and have only barely affected the savvy marketers who ran the most profitable campaigns.
Hawthorne: The new guidelines have raised the bar for testimonials being within a reasonable range of what the average consumer can expect from a product. We welcome the new guidelines. In the spirit of truth in advertising, we have always professed that the DRTV and direct response industry as a whole should follow stricter testimonial guidelines, scrutinize their product claims more diligently and make sure that the public trust is not violated.
Lee: All marketers should be walking a much tighter line with what they are implying and actually having their testimonials espouse. If you are a smart marketer, you will dot all of your Is and cross all of your Ts.
Medico: Our agency does very little production, so it has little relevance to our media planning and buying activity. That being said, we need to have our clients provide back-up and/or indicate when an endorsement is paid or is a “dramatization” on any creative that has testimonial and endorsement.
Orsmond: All television advertising in the U.K. is regulated by Clearcast, and U.S. advertisers often find the strict rules relating to content, testimonials and supers difficult to implement post-production. The biggest challenge, therefore, remains whether U.S. creatives comply with the more stringent European TV broadcasting rules in each country. Quite often, this means having to soften the sell or considerably alter the offer according to the local regulations. Also, whole product categories are banned on European TV. For example, it is still not possible to use DRTV spots or infomercials to sell weight-loss or vitamin supplement or alternative health remedies on TV in the U.K. What the FDA, FTC or FCC get up to in the U.S. doesn’t mean a thing to European TV regulators or TV stations. To get a product approved, especially a cosmetic or pharmaceutical, it must conform to local standards, which vary from country to country. Uncontroversial product categories like health and fitness, housewares, collectibles, music and DVDs, and cleaning products tend to be the strongest sellers and least controversial with European broadcasters and viewers.
Stacey: The testimonial and endorsement guidelines have not yet impacted the DR business, but time will tell. We have to wait to see some history on how they might be interpreted and applied and in what circumstances.
How has the credit card/payment processor crackdown affected the business throughout 2010? With datapass and other issues still on the front burner, how is the industry responding to this challenge?
Hawthorne: This action has immense impact on many companies adjacent to DRTV marketers, but little impact on our brand clients, who normally do not rely on income from datapassing to third-party clubs and offers.
Lee: For the marketer doing business responsibly, this should not have a dire effect — this should have been add-on revenue. Unfortunately, many third-party vendors have been hurt by the new bill passage.
Stacey: The credit card/payment processor crackdown has not significantly impacted the legitimate and well-managed, established operators. The credit card companies have always had merchant rules. Industry associations have formed a task force to follow the MasterCard/advance consent/datapass issues. MasterCard, for example, has indicated a willingness to review any updated industry-wide guidance in this area for consistency with its own published policies.
What do you think of the rumored “Do Not Track” list and how it could affect the online portion of DR campaigns?
Fays: Realizing this is a critical issue for Viacom, we are considering an offsite with key clients to discuss how we can get ahead of the curve and protect the business regarding this topic.
Garnett: For all the amazing claims of the power of Internet tracking, the massive data collected by tracking individuals really has rarely turned into significant profit. Restraining tracking with a “Do Not Track” list would be unlikely to change how our industry works. It’s unlikely that a solid solution can be arrived at. Telephone numbers are easy to put onto a “Do Not Call” list. It’s much more complex on the Web. And lacking simplicity, I doubt that an effective program can be developed.
Hawthorne: Again, as advocates of protecting consumer privacy, we support any online “Do Not Track” legislation. And its impact on DRTV’s Web orders is, at this point, relatively insignificant, since the majority of online orders are driven by DRTV, not Web activity.
Lee: It will be interesting to see if this will take off and be as prevalent as the “Do Not Call” list. Most DR E-mail campaigns are migrated from an opt-in list — so if you are compliant, you should have no challenges as a marketer.
Stacey: It’s difficult to speculate how a “Do Not Track” regulation may impact DR marketers without seeing it. Naturally, a complete ban would be limiting, while an opt-out or opt-in policy may be more workable. As with all regulations, there are trade-offs. Some consumers may actually find it convenient to be tracked and their preferences better serviced.
Yallen: The effect of the “Do Not Track” list on DR campaigns will depend on exactly what is covered in the actual verbiage of the bill. If this law only restricts the sharing of personal data, then the effects of the list will be far less widespread than if they stop all cookie and pixel tracking. If the “sale” of personal data is restricted, the biggest impact will be in E-mail marketing. If it is taken beyond the sharing of personal information, restricting cookie and pixeling of people’s browsers, then it will virtually end all retargeting capabilities. It is very unlikely, but it could potentially kill the affiliate business altogether. We would also see more of an effect on the targeting of online media. This would potentially drive the overall cost of media down, as it will be much less effective. Our personal opinion is we do not feel the government will pass any draconian legislation that will affect international ties, as virtually all Web sites will be affected — not just U.S. DR.
Has the economy turned around for marketers in the DR business? What effect is the current economy having on campaign success rates, media rates and other areas?
Fays: DR sales at MTV Networks have never been stronger in regards to demand/price. Paid programming advertisers, however, have been greatly affected by the economy, leading many cable networks to evaluate if those slots are better sold through short-form advertising. There is a possibility of a double-dip/second recession coming our way if Wall Street and Capitol Hill do not resolve their differences, and the BP clean-up efforts in the Gulf are not deemed successful.
Garnett: Our clients aren’t in the “DR business.” They are all clients in other industries who leverage DRTV’s power for direct sales, but especially to turn all their channels alive. Many have continued to grow in the down economy because of their DRTV campaigns. In their other businesses, the economy appears to be turning around — although much more slowly than hoped for. In part, the continued media use of negative economic headlines to draw viewers/readers may contribute to this slowness, in addition to other economic factors.
Hawthorne: The economy has not turned around quite yet, because we are still seeing typical DRTV products — whether a $19.95 short-form item or a $199.95 long-form item — bringing in lower-than-average media efficiency ratios (MERs). This is probably a function of the economic environment, combined with more competition for DRTV media time, which results in higher media costs. The key solution to this issue is to design your DR program so that you integrate a variety of response channels, like DRTV, radio, Web, mobile, retail, etc., which will enhance overall sales. These days, direct marketers look at themselves more as product distribution companies, as opposed to DRTV or Web marketing companies. Driving retail sales has clearly become the most common theme of DRTV campaigns in this economy, and I’m sure this distribution model will continue to flourish.
Lee: It is amazing that, even with the flux of the economy, DR is thriving — all we need to look at are the big box retailers and QVC, who are looking for more and more product.
Medico: Although we have experienced an increase in our client budgets and some new business acquisition, response trends appear to be flat or lower. We have attributed this as a function of the poor economy, lower disposable income and typical summer doldrums.
Orsmond: As already mentioned, British consumers are now devoting almost half of their waking hours to watching TV and using their mobile phones. The accepted wisdom is whilst these same consumers may be spending less at retail, that dedicated TV viewing remains a central part of their lives throughout the day. Ofcom reports that smartphones in the U.K. are being used increasingly for multi-media, but live TV still remains the main entertainment at home. Younger people have shown the biggest changes in how they use media — particularly using different media at the same time. But the divide between younger and older people’s use of technology is starting to narrow as more older people are watching home shopping channels, looking for a bargain purchase or getting online and finding that this is so much easier than ordering from the traditional print catalog. Brand advertising spend on U.K. TV channels declined by 9.6 percent last year to around £3.1 billion. This is good news for home shopping marketers, in that TV airtime spot rates remain on par with 2009. And, for those with deep pockets, excellent forward buying deals can be done for both short-form and long-form DR if their products are already proven successes.
Savage: With the current economic situation, success is being redefined by many marketers. Media rates may rise or fall with the market, but most marketers are having to make their media investments work more efficiently by diversifying media spends in various channels (not just in TV, but online, radio, print and alternative print), and by more rigorously measuring how TV media drives the retail channel.
Stacey: We continue to see more short-form, lower-priced products with a retail back-end. The higher priced products are still challenging. A bad economy is generally good for DRTV as HUT levels (households utilizing television) go up when people stay home to save money. Media rates can also come down as traditional advertisers cut spending and more airtime becomes available. Generally, the bad economy has been good for our business.
Yallen: The current economy is helping certain categories thrive, such as education, business opportunities, credit repair, payday loans, tax matters, legal and mass tort litigation. Housewares, widgets, beauty and exercise are still struggling in the economy due to a poor consumer confidence and spending. The direct response category was the first to see growth following the recession and has performed very well during the past 12 months. Marketers are demanding more accountability, and direct response provides the confidence that marketing spending is achieving measurable results. The current economy continues to affect consumer purchase and media behavior. Online search and social media site usage are at all time highs, and offline TV viewing is also at its highest level. Despite a lot of uncertainty in the direction of the economy, this year’s TV upfront remained very strong, especially in the area of cable TV, which is the backbone of DRTV.