Higher Media Rates Mean More Complex Strategies

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As most of the Fortune 500 companies have discovered, direct response TV marketing is a very cost-effective channel that is now being utilized by nearly every industry. It allows companies the ability to communicate a visually demonstrative and emotionally compelling message to a broad range of consumers.

Because media inventory is less available on cable channels, the dynamics of DRTV marketing are changing. Higher media costs make it increasingly difficult for traditional DRTV clients to succeed with profit-making campaigns. It's even more difficult for smaller companies to participate in the burgeoning DRTV market, which has led to the shakeup now underway across the industry.

As media costs have increased, so has the complexity of the marketing strategies deployed in the DRTV channel. One of the primary industry changes is the increased use of a "push to retail" strategy, in which an integrated marketing strategy quickly pushes products to retail after or even at the same time as a DTRV campaign.

Because this "push to retail" strategy has made DRTV campaigns less profitable on television, some companies are now taking a contrarian tract of intentionally making the television offer more exclusive to increase television-driven sales. Consumers have been taught to think they can easily buy the product down the street at retail, which is dissuading them from calling in to buy the product off of television.

Escalating Price Points

An additional and very important industry change is the escalating price points of the products offered through DRTV. Because escalating media costs require a higher per unit profit for a given product, the marketing strategies deployed through this channel are evolving from relatively simple to increasingly integrated and complex. Retail and catalog distribution, outbound telemarketing, up-sells and continuity programs are all necessary to leverage TV media expenditures into greater profitability.

Government deregulation of some industries, including pharmaceuticals and public utilities, have led many new companies to test and fully deploy programs designed to acquire and retain customers. The Food and Drug Administration's new rules and increased patient sophistication mean that pharmaceutical companies are now using direct-to-patient sales pitches coordinated with traditional field sales to increase market share. This is enabling the pharmaceutical segment to launch new product introductions quickly in a "push to physician" strategy.

Up-Sells More Important

The channel changes have caused the demand for available media inventory to grow very quickly, squeezing the most profitable time slots, and forcing many other direct marketers to take great risks to improve profitability.

Product up-sells are becoming increasingly non-complementary with the base product offering in order to increase sales and profits. The strategy is working extremely well in some cases. The thinking is "since we have a buying customer on the phone with a credit card in hand, why not try to sell them something else." While it works well, it could significantly increase the duration of the call and associated costs. Some companies are up-selling highly profitable credit cards, for example, alongside more traditional household or fitness products.

Marketers can also increase conversion rates by aligning base sales more strategically with different up-sells that work best for a particular media buy in a particular market. Media spending that fails to provide the desired results can be redirected to media that delivers targeted sales expectations, or marketers can switch up-selling strategies mid-program.

Technological Advancements

Real-time access to call center results are one new tool that can help DRTV marketers improve the bottom line. With the ability to determine the performance of an individual spot or infomercial time in, marketers can make near real-time decisions regarding media spot buys. They can assess the impact of a media buy quickly, calculate the media's return on investment and redistribute media spending within a matter of hours. This is being done by using data marts and other new technologies to access the information.

This vitally important financial performance indicator will not only drive the future media buying decisions of direct response marketers, but it provides a larger benefit as well. One of the key obstacles to success in the DRTV marketing channel is the struggle to accurately forecast the number of calls at a particular time of day. If forecasting is not done properly, a call center may not provide the right level of staff to accept all calls offered, which would have an adverse effect on sales. There is a huge economic benefit to this channel if this issue is resolved.

Given the scope and speed of the changes in the DRTV channel, it is important to establish a partner relationship with a proven call center outsourcer who has the experience, breadth of services and scale to make a DRTV program successful. The race is on by the primary DRTV call center providers to provide the market with a large-scale, integrated solution. The high fixed costs of DRTV campaigns are driving the race for teleservices agencies to provide large-scale, integrated services that can capture customer calls. All kinds of marketers are benefiting from the results of this race, as the DRTV industry moves toward a new, more effective economic model that will maintain DRTV direct marketing as a cost-effective channel for everyone.

Doug Jones is vice president of account management at Matrixx Marketing Inc., a teleservices company in Ogden, UT.

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