Guest Column: Old School DRTV vs. New School DRTV
Today, even though DRTV is one of the fastest-growing channels, with compelling returns on investment, succeeding requires an entirely different mindset: one I call DRTV "New School."
Let's start with the facts:
· A recent strategy analytics study stated that sales of digital video recorders (DVRs) will surpass 27 million units in 2008, bringing the total to 71.5 million. In reaction, major advertisers are already spending less on TV and increasingly moving their budgets online.
· According to Forrester Research and the Association of National Advertisers, a survey stated that the effectiveness of TV advertising has diminished in the past two years.
· 70 percent stated DVRs and video-on-demand (VOD) would "reduce or destroy" the effectiveness of 30-second spots.
Though this research didn't include DRTV advertisers, I believe it directly applies. Also, Nielsen's priority for the next two years is to understand the connection between TV and the Internet. With billions of dollars at play here, brand advertisers are quickly trying to understand these critical implications, and DRTV advertisers need to do the same thing.
The picture gets murkier.
Just a dozen years ago, industry experts used to say one out of 10 DRTV commercials would work. Then it was one out of 50 or one out of 100. For those who still use Old School tactics, I suspect it's one out of hundreds now! Plus, you have to factor in Web orders, which now account for 50 percent -- on average -- of sales.
Also, consumers are inclined first to research an opportunity online before ordering. Hence, the Old School way of conducting DRTV is over. For the New School DRTV to work today, you need:
· Extraordinary margins
· Recurring revenue
· A two-step lead generation sales mode
· You l00 percent embrace a multichannel, integrated approach with either retail or the Internet as the underlying benefactor of the DRTV campaign.
So how do you crack the code in this new DRTV Internet continuum? That's the subject of this and future columns.
As a prospective DRTV advertiser, etch my favorite proverb into your memory: "No one's baby pictures are ugly," or in this case, everyone thinks they have a DRTV winner. Reality is, most will fail and you need to be very careful before proceeding to have any chance for success. I'll expand on these basics going forward:
· Understand your sales model. Are you using a one-, two- or three-step sales model?
· Understand lifetime value. Are you accounting for one-time revenue or a revenue stream over the customer's lifetime?
· Understand how DRTV affects other channels. Is there value to consider DRTV's impact on a multichannel sale environment where profitability is predicated on a DRTV standalone model alone?
· Understand the back-room functions that are critical. Do you have the capabilities to financially model, benchmark, track, source and measure activity at all levels?
· Understand the resources you will need. Do you have the staying power to test, tweak and even re-engineer marginal programs to create success over time?
· Understand why you're using DRTV. Are you just really using DRTV to build a brand and seed the marketplace for future sales and profits in another channel (retail)?
I'll start drilling down on these six key factors in future articles, giving you practical advice and a dose of reality, gleaned from 30+ years in DRTV. Keep reading.