Crowdfunding: A New Channel for DRTV

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Ron Pruett (L) and Kevin Harrington (R)
Ron Pruett (L) and Kevin Harrington (R)

For a while, the DRTV guys had it made. In their heyday, they were among the most successful at tying spend to the response rates for, say, a new stack of Rubbermaid containers. Compared to today, it was a pretty straightforward process. Step one: Log phone calls with 800 numbering. Step two: Make any necessary adjustments. Step three: Profit.

“The direct response industry has been years and years ahead of the traditional market space,” says Ron Pruett, CEO of As Seen On TV, Inc. (ASTV).

But the consumer shift to a more multichannel way of browsing and buying has made things difficult. Besides the common issues around tracking customers as they hop from channel to channel, leaving few breadcrumbs behind, some tactics that worked on television don't work as well online. Certain television celebrities, Pruett points out, are superb on television, generating tremendous results—but those celebrities tank when hawking the same wares on online video.

Television's role as a key pusher of product has waned in recent years. Whereas in the old days spots could be product-centric, today's consumers are wary of having merchandise shoved down their throats. “Today we're in the entertainment-commerce business,” Pruett says. He's referring to reality TV tie-ins and using social media to engage audiences that ordinarily would have been fixated on their TV sets.

It's a connection that Pruett and his colleague Kevin Harrington—ASTV's chairman and a former shark on the ABC reality TV show Shark Tank—seek to capitalize on. The two are spearheading an effort to rebrand ASTV in this vein, a large part of which involves the introduction of a crowdfunding platform, expected to launch by the end of this month.

Though ASTV is a well-known brand name—the red stickers that tout As Seen On TV are an established icon of American pop culture—it's actually a confederation. Different companies can use the logo on their products provided they satisfy certain criteria. For example, that the labeled products were actually on TV. The e-commerce site, AsSeenOnTV.com, is the online storefront where many of these products can be directly purchased online.

The crowdfunding platform is expected to be like a Kickstarter for inventors. While this is exactly what Kickstarter itself was supposed to be, inventors with popular products—and lots of donations—often had production difficulties (the Pebble smartwatch saga is one of the more high-profile examples of plucky young inventors overreaching and, consequently, angering their customer base).

“The problem with crowdfunding is that people come in and don't know how to do manufacturing,” Harrington says. “But we assist them in these processes. We know just about every player in the ecosystem here and abroad. We know how to get headphones made.”

ASTV specifically looks for mass-market products that aren't too niche, that solve problems, and that are unique enough to have little competition. Think Snuggies and Pajama Jeans.

If you want to find the golden egg of direct response, look for goods that additionally promise a “magical transformation” (such as in one's body) or that have documented proof, such as Proactiv ointments.

It remains to be seen whether or not online crowdfunding will successfully add a new dimension to the marketing and selling of DRTV products. It's a way of potentially grabbing a larger slice of the online pie, though some DRTV marketers are skeptical about social media.

But as DRTV sales from 800 numbers decrease, Web channels, according to Pruett, now account for 20 to 30% of sales. In-store sales are also a growing source of revenue. “For every dollar made through television, five are made in-store," says Pruett. "Television is now a place where you promote the product, or it becomes a loss leader.”

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