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Direct Response Marketing

Response Magazine's 15th Annual State of the Industry Report

17 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.


How has technology changed the way your company does business in the past 12 months? How will it in the next 12 months?
Fays: The push to be paperless to lessen our carbon footprint is a huge initiative at MTV Networks. Currently we are processing all discrepancy paperwork online, as well as reducing the amount of hard copy paperwork sent through out our company. Our plan is to continue to “go green” in 2011.

Garnett: There’s lots of focus on production technology. But, pretty much what we’re doing now is the result of much earlier changes. At this point, technology is merely evolutionary for production — and I don’t think there’s any sales value for doing a 3D infomercial. For the next 12 months, our focus will continue to be on dragging service vendors into the modern world, so we can download all results online then analyze them for significantly more insight than we’ve ever had in the past. Sadly, despite a few superb exceptions, too many vendors have put up online interfaces that are already archaic and lack the flexibility and sophistication of a modern user interface. Fulfillment, telemarketing and dubs/distribution need to learn this lesson and move much more quickly. Those vendors who make the change will be winning more of our business.

Hawthorne: The ability to understand and utilize technology is a significant component of direct response marketing at this point. Coming from the position of being a purely DRTV agency just a few years ago, Hawthorne Direct is now predominantly an integrated DR agency, utilizing DRTV, radio, digital and mobile solutions for many of our clients. Social media is also quickly becoming an integral part of the mix, and what we are finding is that the mastery and integration of all of these channels are critically important for success in today’s direct marketing campaigns.

Lee: The consumer is looking to get more educated before they purchase through TV, radio, print or retail — and they are going online to find their answers. Web sites are becoming more educational tools as is social media. During the next 12 months, you will see the consumer using their wireless/mobile to get more coupons to make their purchases.

Medico: Our agency takes maximum advantage of technology as it relates to our media management software. Technology has also had a substantial effect on our business as we continue to develop new ways to purchase, analyze and report media campaigns across multiple platforms. We are currently developing a program to integrate both online and offline response.

Orsmond: The UK Ofcom’s consumer research from the first-quarter 2010 found that 31 percent of British households with Internet access used it to watch online catch-up TV (up eight points from 2009). This means that a growing number of TV viewers are not channel surfing as much, but instead are managing their own viewing time on a much more personal basis. The popularity of time-shifted TV services has continued to rise this year, according to the report, with the proportion of time-shifted television viewing tripling from 1.7 percent in 2006 to 5.9 percent in 2009, with a major factor in this trend being the growing use of digital video recorders (DVRs). This has meant that more of all our direct-to-consumer clients are now mixing their media by using TV, print, Internet and social media in a more effective combination.

Savage: We’re continuously adapting our service capabilities to help clients meet consumers where they interact with their brand. This means ad integration for smart phones, advertising within Facebook to build fan bases, and other leveraging of social media to help support offline media’s driving of interest in a brand.

Stacey: The technology that has allowed the proliferation of TV channels, media outlets, media devices, media applications and content — all of this has splintered the mass audience and changed the way people use and interact with media. As a result, we’ve had to follow our audiences to the places they’re interacting, whether it’s on Amazon, Craig’s List, E-mail, Twitter, Facebook, eBay, or dozens of other places they may be instead of TV.

Yallen: We have embraced online resource and analytics — which typically are used only with online media campaigns — and have adapted them to provide our DRTV campaigns full accountability for response driven to Web sites and not to call centers (which includes all of the DR metrics but also includes attitude and behavioral measurements). With the continuing growth of digital, we find that more business decisions are in alignment with IT decisions. Virtualization and cloud technology has allowed us to deliver new services in days rather than months. During the next 12 months, we will continue to merge various online analytics with our growing proprietary set of digital tools to provide greater insights in real-time.

How will the improved upfront market in the cable and broadcast world affect DR advertisers in late 2010 and throughout 2011?
Fays: This question remains unanswered as of now based on the fluctuating economy, which will dictate scatter strength/weakness along with upfront options where general clients can cancel their upfront commitments thus putting inventory back into the marketplace to be utilized by DR advertisers.

Hawthorne: The upfronts bounced back a bit this year: stronger demand, higher prices. This means a tighter short form DRTV market in fourth-quarter 2010 — higher prices, lowered clearance and profits. This is good for TV stations and cable networks, but bad for DRTV marketers. DRTV sales staffs at larger networks will have fewer 30-second units to sell which will: lead to competitive bidding for that inventory; limit 60-second accommodations on those networks; and drive more cost-conscious DR advertisers to lower tier networks, recreating the cycle down the chain of smaller and smaller networks. The impact on broadcast will be through national upfront buys on syndicated properties. The affect should not be as severe on daytime DR opportunities as with national cable because many brands prefer to steer clear of syndicated content in that daypart on broadcast stations, but demand will still be tighter than the recent past.

Lee: The DR advertiser is going to have to learn to use its advertising dollar smarter and start delving into knowing the demographics and psychographics of the consumer. More product placement and promotions will be used.

Medico: It appears that we will have a tough fourth quarter, especially on a local level, with heavy political advertising — and when that ends the holiday advertising begins. In 2011, the outlook should be better. However, this could change if consumers still remain pessimistic about the economy.

Savage: We have to be smarter and work harder. We’re buying hundreds of millions of dollars worth of media, so we’re working with networks, stations and syndicators on a daily basis to negotiate the appropriate rates and clearance levels that will work for clients. This is accomplished regularly, but it takes flexibility and a willingness to shift strategy and create win-win situations for the clients and our friends selling the time.

Stacey: In the 2010 upfront market, advertisers committed between $8.1 billion and $8.7 billion to the five U.S. broadcast networks’ coming program schedules compared to $9.2 billion in 2008 and $9.3 billion in 2007. The five U.S. broadcast networks were able to charge more for their airtime and sell more of it despite eroding ratings and competition from computers and iPods. This is quite good considering money is still strongly shifting into cable, while some cable channels have also been able to increase prices. To the extent the demand for airtime from traditional advertisers like automotive, retail and financial service advertisers have now returned to the TV advertising marketplace, that can put pressure on rates and availability of airtime. Canada and many other countries have also seen traditional advertising expenditures increasing.

Yallen: This past year saw a very strong scatter market in TV, both cable and broadcast. With more money being placed upfront and the uncertainty in the economy — as reflected by declining consumer confidence levels and lowered economic growth projections — the demand for scatter may not be as strong this year, which will create more opportunities for DRTV in the months ahead. We are very optimistic for our ability to serve our clients in this area in the upcoming season.

What are the biggest effects the growth of online video is having on the DR marketplace?
Fays: At MTVN, this is a new platform for advertisers to spend. This incentive is creating brand awareness to a different type of viewer. This is also a way for DR advertisers to gauge the effectiveness of their campaign.

Garnett: A little, not much, and none. I continue to feel that online video’s impact has been massively overplayed — in part because it suffers the same problem as all online marketing: people have to be driven to your Internet assets to view them. It hasn’t been profitable to create an online video then use TV advertising to drive people to view the video — might as well just put it on-air to make it even more convenient for consumers. Of course, everything we produce ends up being used online. Its primary use is helping close sales once people become interested in a product and find your Web site.

Hawthorne: We’ve found online video helps to create consumer trust and ultimately results in more transactions. Research shows that more than 60 percent of DRTV viewers go online to learn more about a product or service before ordering. The boom in online video is happening because “Videoactive” Web sites (using video intensively on formerly text heavy Web pages) educate consumers, entertain them and give them an opportunity to opt-in to additional information presented in a highly entertaining video format.

Lee: The online video platform has become a very useful tool for the DR marketer in 2010. From delivering greater ROI to introducing new products and educating the consumer — this venue will continue to be on a growth curve.

Medico: We anticipate online video becoming a much larger distribution channel for DR in the future. Presently however, the explosive growth of online video has not had much of an impact on DR. Rates are still at a premium and will be until video has fully penetrated the online ad space.

Orsmond: British demand for online video sites has shot up during the past year, according to a new report. Written by research firm Hitwise, it found that U.K. Internet traffic to video Web sites was up 41 percent. YouTube is the most popular destination, followed by the BBC iPlayer and Google Video. U.K. traffic to iPlayer has increased by 152 percent during the past 12 months, and it is now the 22nd -most visited U.K. Web site. U.K. traffic to video sites has increased 37-fold, and if you include sites with video content as well as dedicated video Web sites that number would be even higher. Towards the end of last year, social networking sites — such as Facebook and My Space — overtook adult sites in terms of popularity. Coupled with improved broadband speeds, video now is an integral part of most Web sites. Add to these statistics the amazing popularity in the U.K. of the latest Apple and BlackBerry smartphones, and we have every reason to believe that in the near future DR marketers will have to embrace social media channels to market rather than just relying on the tried-and-tested TV-airtime-plus-online-only approach.

Stacey: Online video has a lot of balls in the air right now in how it is impacting the DR marketplace. Thirty years ago, I was in the DR print business. We used to run small classified ads that would basically say “To Learn How to Get Rich, Send for a Free 24-Page Booklet”. The booklet would be a complete explanation of our How to Get Rich Home Study Course and an order form. We called this a “two-step”. With the Internet and online video, we’re going back to that model now where you can have a 10-second ad driving people to the Web site to see the video. You don’t even need to have an 800 number on TV. One example of this strategy is the short ads you see for the Addiction Cure book from Passages in Malibu. You’ll see more of this two-step approach in the future. Just a few years ago, it wasn’t possible because not enough people had access to online video so you still required a longer spot to explain the offer and provide an 800 number. Using video on your sites increases landing-page sales conversions. More importantly, it increases organic search rankings, which is much more impactful than relying on paid search. We’re also using online video effectively in social media releases, in viral video initiatives, and on outlets like YouTube. On the negative side, online video requires a lot more policing as unauthorized distributors and affiliate marketers can compete for Google rankings, take away from TV orders, undercut pricing and disrupt other ongoing channels of distribution.

Yallen: The utilization of online video will provide DR advertisers a more engaging and personal user experience and allow them to provide more information than is typically available with other display units. Video units, when done well, also have the ability to go viral and increase the reach and effectiveness of a DR campaign. However, even with the increased response rates, currently the cost of video units makes them a risky vehicle for most DR advertisers. But, the price of these units should decrease. As the price point becomes more inline and attractive to DR advertisers and when better targeting is available, video will become a viable DR option in the near future.

Has the influence of mobile/wireless marketing on the industry grown in the past 12 months? How will the expansion of mobile/wireless affect DR in coming years?
Fays: At MTVN, there have been less and less requests for mobile advertising. It appears that these requests are going to online and VOD.

Garnett: Mobile is no longer a separate category. It has become merely smartphone owners accessing various flavors of Web content — often via apps. However, Apple’s iAd, whether it succeeds or not, identifies a clear development. The lack of good standards on the Web becomes even more severe with mobile devices. Web chaos is manageable on a desktop or laptop. But it bogs down mobile devices to the point where they no longer deliver a good consumer experience. Apple’s trying to correct this but it’s not clear if they’ll be successful. Regardless, someone will need to be in order for smartphone advertising to become effective.

Hawthorne: Effectively integrating mobile with more traditional channels is the key. Younger demographic groups, from pre-teen to late 20s, rely so much on their cell phones and smartphones that if you want to reach those age groups, mobile is a great channel. Gen X (30-45) and Gen Y (20-somethings) are all good responders to mobile offers. Our vision is that Videoactive mobile advertising will blossom in the coming years and become just as vital as TV commercials and Videoactive Web sites are now to today’s savvy direct marketer.

Lee: The influence of mobile/wireless has grown tenfold in 2010 — from couponing to comparing shelf prices and deciding where to make an educated purchase. It will be interesting to see what new inventions the industry will come up with for mobile and how it will include all demographic groups.

Medico: The influence of Mobile/wireless is growing in the industry as marketers test new campaigns using mobile search, display ads and SMS text campaigns. Mobile couponing and promotions will be interesting to watch in the coming year.

Orsmond: Media multitasking — where, for example, someone makes a phone call while surfing the Internet — now accounts for 20 percent of all U.K. media consumed throughout the day. The younger the person, the more this happens. Among 16-24s in the U.K., almost a third (29 percent) of their media activity is simultaneous compared to just 12 percent for people over 55. There has been a surge in smartphone ownership, with growth particularly strong over the last year, up by 81 percent from May 2009 to 12.8 million users in May 2010. U.K. consumers are now generally using a single device — typically their mobile phone — for more than one type of media and communications use. In June 2010, more than a quarter of people in the U.K. said they had a smartphone, more than double the number two years previously. Barry M Cosmetics has massively increased sales to its U.K. teenage female buyers by tapping into this smartphone social media trend combining its funky sales style with DRTV and sponsorship to drive nationwide retail sales. Surfing the Internet via mobile phones is the fastest growing mobile media activity, with 1 million new users during the first quarter of 2010 (taking the total to 13.5 million, compared to 9 million in first-quarter 2009). Direct marketers who ignore this trend will be left behind as the 25+ generation enters the next decade. Social media can’t be ignored, and it is surprising just how few DRTV companies have spent serious budget on sorting out their content on Facebook, which remains the most popular mobile Internet site in terms of time people spend on it, accounting for almost half of total time spent online on mobiles in December 2009.

Savage: Absolutely. At least one well-respected technology forecasting group predicts that by 2013, mobile will be the No. 1 way the world accesses the Web. That has a profound impact on how DR marketers should be looking at mobile marketing right now. We already have mobile campaigns in place — many on a PI basis. DR marketers, if they are going to be real “direct response” minded, need to be able to reach consumers via the mobile channel.

Stacey: We’re still not seeing too much movement on the mobile/wireless marketing area in the DR industry. To the extent people can access the Internet from their cell phone it has been impactful, but there is still more logistical work to be done until customers can simply order off their phone with the click of a button.

Yallen: As the number of smartphone users grows, we are seeing an increase of mobile apps being created and the utilization of GPS-location based recommendations. More users are turning to their phone for information and purchases. Further, the response coming from cell phones now represents significant volumes. Online data shows more and more Web leads come from systems running Android and iPhone. So it’s not too great a leap to see a future where response from advertising will — literally — come either by voice or Web from handheld devices in purses and pockets. This means direct response opportunities migrate from in-home viewing during traditional dayparts to in-home/away-from-home/where-ever-you-are — 24/7/365.

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