How to Make DRTV Cost-Effective

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There's a common misconception today that direct response television is too costly. While you can spend a lot on DRTV, there exists the opportunity to gain big returns. Savvy marketers do their homework to determine its feasibility.


One myth states that you're required to learn, or accomplish, everything the first time. In reality, focusing on a single goal, such as determining price points or creative positioning, will result in more fruitful learning and can be accomplished at the lower end of the budget.


For example, pinpointing the strengths or weaknesses of an offer through acceptance testing is a critical goal and one that can be done cost-effectively through a small but statistically valid test.


Another myth says that DRTV must pay for itself in the initial effort. Whether a program is a call to order or a call for information, it is important to focus on the actual income generated from those leads - not just the first-time offer, but for the lifetime of the lead as it is mailed in subsequent offers.


A third misconception is that DRTV is glitz and glamour, when, in fact, the programs most likely to succeed revolve around a spreadsheet rather than the camera.


Because of the magnitude of resources involved in structuring a DRTV campaign, true costs are often hidden in the details. Examine the "who, what, when, where and how" to get a feel for the project's scope.


Who. Partner with an agency that focuses on DRTV as its specialty. Ask what percentage of annual billings come from DRTV. If the answer is less than 80 percent, reconsider.


Remember that it takes a team of experts - writers, producers, directors, the crew and talent, among others - to create a commercial. Weigh the pros and cons of using union vs. nonunion talent, and scrutinize every cost, including fee structures, session costs and residual payments.


What. The "what" details can overwhelm the DRTV veteran and the novice. The trick is not to overlook or underestimate costs. Media must be structured to meet your objectives. If the test is not properly planned and executed, even a dollar costs too much.


Plan ahead and consider items such as props, voice-over talent, music, royalty fees, animation, stylists, legal review, extra insurance and catering to determine a total budget.


When. To prepare a timetable, work backward from the intended airdate. Build in time for critical elements such as station lead time, dubbing, Nielsen tracking, editing, shooting, days on location, etc. Consider that a rainy day or two on location could throw off a well-planned schedule.


Ensure that approval time is slated for key actions such as script review, talent selection, preproduction, rough-cut review and telemarketing script approval.


Talk to your media buyer. Will your media buyer be able to get a better deal in certain seasons? Consider whether direct mail results may indicate a better time to test. Ensure that when the phone rings, you'll have enough inventory to ship orders on a timely basis - delays could hinder subsequent efforts.


Where. A major consideration is deciding whether to go with a location or studio set. Get a breakdown of the costs before approving the creative. Consider whether added time and expense will enhance your bottom line. Once you're ready to air, be prepared to give the spot a fair chance by buying a diverse media bed. Evaluate geographically diverse spreads of time periods, cable systems and their demographics and the breadth of broadcast.


How. Plan to test in phases. The first time is not the time to test everything. Phased testing plans will give your product a better shot.


Once the product viability has been determined, test new creative, offers, price points and telemarketing. Create and maintain a campaign book to include items such as production schedules, scripts, media schedules, toll-free number assignments and a comprehensive line-item budget.


Do it right the first time. It is extremely costly to double back. Take the time to think through the issues. Also consider variations (price differentials, offer incentives, etc.) and use the opportunity to film and record different potential versions at one time.


About telemarketing. The only job of telemarketing is to close the sale. Determine the elements required to close the deal; this will be your starting point. Then, roll in the up-sells. Test additional offers and run a cost-benefit analysis to determine value.


When choosing a telemarketing firm, get costs upfront. Remember that fee methods vary: some charge per second, some per minute, others per question and still others on commission. Be aware of the peripheral costs, such as faxing, customer service referrals and cost of returns. These must be built into your budget to accurately determine the average cost per call. Do not be afraid to tell your telemarketing partner that you want cost estimates early and often.


Determining a realistic budget. What can you realistically expect to spend to test the DRTV waters? Here are some industry estimates that can help guide your decision.


A short-form spot can be developed for as little as $15,000 (not including the cost of talent), but consider that the production values will be minimal. A more realistic estimate may fall between $50,000 and $60,000.


A good rule of thumb for an initial test is $30,000 to $40,000 for creative and another $30,000 to $40,000 for media. For a well-established brand with graphic standard requirements, assume you'll be in the $100,000-plus range.


Another guideline suggests that you'll spend $35,000 to $50,000 per test cell for media. How much is right? Decide how many leads/orders are needed to evaluate the full process, considering returns and potential risk declines.


For long-form spots - infomercials - use a factor of the actual cost of goods. Consider that totally loaded income (cost of creative, production, etc.) should be a 5:1 ratio. If you're selling a widget that costs $1 to make, you need to sell it on television for $5.


DRTV can be approached cost-effectively if you plan ahead and take advantage of testing. Marketers that do their homework and live by the numbers can and should cost-effectively integrate DRTV into their direct response media mix.


• Joyce van Ravenswaay is executive vice president and general manager at Direct Response Media, Wayne, PA.
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