NordicTrack Shifts Focus Toward Retail
While continuing to focus on development of new home fitness equipment and products, Chaska, MN-based NordicTrack is not planning to rely on direct response marketing as its primary advertising vehicle, said Michael Smith, corporate spokesman.
Instead, the company will now focus on selling its equipment through its more than 150 existing NordicAdvantage retail outlets, as well as through other national and regional retail partners, including Sears, Roebuck & Co. and Target Stores.
"We have found that our direct response efforts have not been efficient at reaching our core customers, people who seek premium products and lasting value," said Smith. "Direct response advertising is not as efficient ... because of skyrocketing advertising rates, changing television viewer buying habits and an infusion of fad fitness products."
Still, NordicTrack, a division of CML Group, a holding company in Acton, MA that is also undergoing a reorganization, is not completely abandoning DRTV marketing. The company is seeking to outsource direct response operations, both manufacturing and advertising of specific products; NordicTrack would still handle product development.
As part of its restructuring, NordicTrack said it would cut back telemarketing operations, close down a manufacturing facility in Minnesota and lay off about 50 people in its direct response marketing department.
"We feel what we bring to the category is product innovation and quality of product and that it would be more efficient to outsource our direct response program," Smith said. "We feel it would allow us to react faster to changing market conditions."
Industry sources indicate that to date, Nordic Track has contacted Guthy-Renker, Kent & Spiegel and American Telecast as possible outsource partners. Executives at those companies declined to comment on possible conversations with Nordic Track.
Script to Screen, Encino, CA, which has produced the last six NordicTrack infomercials, including the half hour show for the company's Ellipse elliptical trainer, said it is not currently working on any direct response campaigns for NordicTrack.
At the same time, Icon Fitness, another maker of fitness equipment, is also said to be undergoing a similar change in direction, with the company also contacting direct response agencies for a possible alliance. Icon executives did not return phone calls.
Direct response industry executives believe that the change of direction for both NordicTrack and Icon doesn't mean that fitness equipment no longer can be sold through DRTV.
"What it means is that we [direct response marketers] take a completely different approach to marketing," says Randy Seffren, vice president, Kent & Spiegel. "We don't just focus on fitness equipment, but we focus on products, on unique items, that need the magic of storytelling to sell. Our focus is direct response television. Their [NordicTrack's] focus is on in-line equipment. Selling via direct response is such a specialty, that companies can easily lose their way and get into trouble."
Instead of starting with a product and making it fit into the infomercial/direct response format, direct response television executives say it is far more appropriate to make the product fit the direct response format.
"Fitness equipment sells very well through direct response simply because the consumer always is looking for something different to stay in shape without having to go to health clubs," notes Bruce Goodman, senior vice president, National Media. "But you can't expect to make an infomercial fit around a piece of equipment...you have to make the equipment fit into the infomercial format."
Price points of exercise equipment also are a sensitive issue, industry executives point out. NordicTrack's Smith said that during the last three years, many competing products were introduced, most of which were priced at $199 and below. Most NordicTrack equipment starts at $399.
"It makes it tough to compete," he said.
The cross-country ski machine remains NordicTrack's claim to fame. The company is credited with having started the entire direct-to-consumer exercise craze by both manufacturing the equipment and selling it directly to consumers through 800-numbers infomercials, magazine ads and telemarketing campaigns.
However, sales of the ski machines, which peaked industrywide at $350 million in 1993, have declined steadily since then, according to the Sporting Goods Manufacturers Association. In 1996, sales of ski machines dropped 5.6 percent to $255 million, the association said.
"Everyone has a ski machine, many of them NordicTrack, and there's no continuous need for those cusotmers to continue to come back for more," said Otto Grote, a retail analyst with Derby Securities, New York. "A big problem with this business is that there are no demands for spare parts. NordicTrack ... has to continually find new customers to take the place of those who have already purchase a machine."
Smith says by concentrating on its core customers and products as well as outsourcing direct-response marketing and manufacturing, NordicTrack will become a more nimble competitor in the fitness category.
Smith points to the new line of Ellipse exercise equipment, which NordicTrack claims is just beginning to catch on with consumers. A cross between stair steppers and cross-country ski machines, elliptical exercisers are touted as "the next big thing" in home work-outs.
"We continue to see opportunities in this category, like the Ellipse," Smith said. "Only we don't feel we have to be the ones any longer that do the direct response marketing and manufacturing."