I REALLY wanted to like this article. But it doesn't even touch on how 99% of the money is made in DRTV.
Sure, almost anyone would love to see their product get picked up for retail distribution. But saying that's the #1 goal of infomercials, or that the only way they'll be profitable is if they get retail distribution is absurd.
There are MANY products that generate fortunes using DRTV as their primary front-end lead generator who never plan on having their products picked up for retail distribution. And that's why I'm disappointed in this article - because how they accomplish that is where things get really juicy from a marketing standpoint.
I can't speak for every product sold through the medium - but for the vast majority that I know of, most of this article is simply not true.
First of all the 400% ROI on the front-end product. I'm not sure where they're pulling that data from, but in almost every case the infomercial run is a loss-leader. To generate response you really have to stack the offer and bonuses. After production, testing and fulfillment, the initial sales are almost always a loss-leader.
In *most* cases you don't want prices above $19.95. The goal isn't to profit from the DRTV sales, it's to build a buyers list. More specifically an impulse buyers list of people who have proven to pick up the phone and order from a DRTV spot.
When you call to order, if they've been in business for more than 10 minutes, you're not going to be talking to an "order taker". You're going to be talking to a proven closer, and after they've got your CC details they're going to up-sell the shit out of you - and do a very good job at it.
They're going to make irresistible offers to you related to the product. Normally these are offers that you can only take advantage of at the point of sale. Free trials into continuity programs. Exclusive discounts on complimentary product bundles. They'll have an insane assortment of offers at the point of sale. And they're trained well - so at this point alone they'll be moving the average sale from $19.95 to $40-$100+ (often much higher).
And they're just getting started.
Because now they know you're a buyer AND they have your address, phone number, email and a ton of data on what you're likely to buy in the future.
You may see 30+ cross-sale offers inside of the initial product packaging. Everything from AARP life insurance to entry forms to win a Temperpedic mattress. Credit card offers, magazine offers, skin creams, DVD clubs - and on and on.
Often times these offers will have little to do with the original purchase and much more to do with your demographic. Regardless, when they're done the right way they're genius.
And they haven't even got into the real money yet - brokering/renting your data. Many of these companies don't start turning a profit until you get into the list rental side of the business.
A DRTV buyers list is as hot as it gets - and the world's savviest direct marketers happily pay a fortune for access to it.
The DRTV business is all about creating offers with MASSIVE appeal to get as many people into the funnel as possible - and then optimizing those $19.95 buyers and transforming them into $1k+ customers over the next several weeks and months.
That's the fascinating side of the business. And that's where the money is made.
Sure, retail distribution is great. But if retail is the end-game, why is it that even though you can buy Proactive at Wal-Mart they're still spending a fortune on infomercials and running lead-gen campaigns on almost every affiliate network online?
Because a $20 sale at Wal-Mart is a sale. A free-trial customer into their optimized funnel is easily worth 50-100x that or more.
I don't mean to shit on the article. It's good for what it is. But when I saw "The Economics Of Infomercials" I had high hopes. And IMO it doesn't even hint at the side of the business where people actually make money.
Regardless, nice post. I't a fun topic to talk about.
