Feature: Interaction Is Replacing Response, Says SendTec CEO
SendTec Inc. CEO Paul Soltoff took on a professorial role at the June meeting of the Electronic Media Marketing Association in New York, teaching attendees about "Old School DRTV vs. New School DRTV."
A long-time veteran of the direct response television industry, Mr. Soltoff produced some of the earliest infomercials to air nationwide.
"Life was simpler in 'Old School' DRTV," Mr. Soltoff said. "Making lots of money was commonplace. My first major infomercial was for Aplon, a hair removal product that sold for $29.95 and we moved over 3 million units in two years. Life was good."
In comparison with today, however, product companies typically didn't think about backend lifetime value.
"Get rich quickly was the mantra of the day," Mr. Soltoff said. "In general, the direct marketers were rogues in the old days, not heroes."
Getting rich quickly was easier to do when margins were outrageously high. With media costs considerably lower in the "good old days," companies only needed three to four times cost-to-retail to make money, and often earned more than five times the media cost as a revenue return.
Cable TV drove the DRTV industry. There was a major disparity between cable and broadcast rates, with less competition for unsold time. What's more, DRTV advertisers weren't facing a litany of consumer distractions at the time: no cell phones, no Internet, no consumer bulletin boards, no chat rooms, no search engine marketing.
Judging the success of a spot was simpler too since 95 percent of the activity was by phone and 95 percent of the orders came in within minutes of the commercial's airing.
"You knew if you had a winner almost immediately," Mr. Soltoff said.
These days, "New School DRTV" is a much more complex proposition, with media and response channels blurring. It rides very much on the back of the Internet, which has changed the way consumers buy goods.
Now, the buying of products sold on TV has become more considered and well researched, rather than an impulse purchase.
Simultaneous media consumption is "increasing exponentially," Mr. Soltoff said.
"Research shows that over half the computer households have their computer in or visually adjacent to the primary room where they watch TV and most people today are two-screening," he said. "TV isn't just competing against the bathroom and the kitchen anymore."
"New School" consumers are computer savvy: text messaging, downloading, instant messaging and file sharing - multi-taskers of the highest order. Although they consume a lot of media, they aren't traditional TV watchers. They are switching back and forth between different types of media all day.
Here lies opportunity for savvy DRTV marketers.
"We're quickly learning that multichannel customers are our most valued customers," Mr. Soltoff said. "They spend 30 percent more per year than consumers who shop in stores alone. They've just taken control of the buying process, buying from the channel they want to, when they want to."
This leads to what he considers one of the biggest paradigm shifts direct marketers face in "New School DRTV."
"Interaction is replacing response as the operative word here," he said. "Good interactions lead to sales and loyalty. Bad interactions lead straight to your competitors. And interactions happen everywhere: on TV, on the Web, on the phone, in the box or envelope that arrives at the store, and in retail stores."
As a result, DRTV in a multichannel environment doesn't just entail a simple TV media buy and a phone bank. It's now about Web sites and complicated sales models with numerous touch points.
Whereas two years ago 95 percent of the activity went to the phone and 5 percent to the Web, at least 50 percent of the activity now ends up online. Marketers need to adopt a multi-stepped sales model, with ongoing programs to sell consumers over time until they decide to buy.
In 1989, a half-hour infomercial on a major cable network at 8 a.m. cost about $3,500. Today the similar half-hour costs $40,000 with the same or even fewer eyeballs. With media no longer cheap, marketers need good analytics.
"It's important to keep some of the budget in reserve for adjusting the creative and offers," Mr. Soltoff said.
Convergence is taking place in other ways, too. SendTec has seen clients improve their conversions by as much as 300 percent by incorporating real-time telemarketing onto their sites.
Cross-channel shopping is part of the reason that more brand advertisers are finding a place for DRTV in their marketing mix.
A DRTV spot producing a 1 percent response nonetheless results in the remaining 99 percent of consumers receiving a branding message.
"What we're talking about with 'New School DRTV' is generating measurable interactions with your brand." Mr. Soltoff said.
He advocates measuring the immediate response and the overall impact of a campaign. Also critical: tracking activity online that's a result of offline media. SendTec finds that 35 to 70 percent of response takes place online from DRTV advertising.
"Tracking phone and web response combined by station, commercial creative, day-part and offer, including the conversion by response channel is essential," Mr. Soltoff said.
The Holy Grail in "New School DRTV," according to Mr. Soltoff, is "generating measurable interactions with the brand. Half of all TV in the future could be classified as DRTV, because the definition of DRTV should now be considered TV that generates an immediate or near-term measurable response. "
Soltoff predicts a two-tiered class structure in DRTV in the future: "Old School," using mass run of station, and "Premium New School," using targeted and relative advertising that is measurable across multiple media and response channels. Legislative conversion to Digital TV and the move of cable to digital transmission will facilitate more precise measurement of TV viewing.
Eventually advertisers will be able to measure where consumers see and react to an advertisement across multiple channels. Technological advances will allow advertisers to target TV commercials to homes the same way they target direct mail.
"Addressable TV commercials will dramatically increase the relevance of advertising to the audience," Mr. Soltoff said, "allowing marketers to control, frequency, reduce waste, and even talk to current customers in a different voice than they speak to prospects."
Ultimately, it's all about accountability. Technology is both enabling and enforcing that accountability.
"To succeed, we must all go beyond measuring response using the 'Old School' definition," said Mr. Soltoff. "We must broaden the word response and change it to interaction."
Paul Saltoff is CEO of SendTec Inc., a St. Petersburg, FL, direct response and search marketing agency. Reach him at email@example.com.