Defusing Global DRTV Land Mines

You have a successful domestic direct response television campaign and you want to start distributing internationally. After all, how hard or different can it be? You beat the odds and are a success in the United States, the largest market in the world – surely international should be a walk in the park.

Wake up and smell Chef Tony’s fish-kebabs. If you want to take your products internationally, my first question is, “Do you have patience?”

Before a product’s on-air debut, there usually is an upfront investment of $15,000 to $25,000. These costs are primarily for translations, voice-overs and editing in a wraparound to give more of a local flavor. In some countries, infomercials need approval by government bodies, which further increases costs and adds an extra month’s ramp-up time. Frequently, these authorities place restrictions and arbitrary demands that prohibit market entry.

For example, my company wanted to air a car wax whose product subname contained the word “revolutionary.” The Broadcast Advertising Clearance Centre in the United Kingdom said we needed to prove this wax was “revolutionary” compared with all other car waxes, past, present and future.

Another factor is that certain cultures dictate specific moral standards, believing that showing too much exposed midriff or any bare skin is unacceptable. And some countries won’t allow doctors in white coats.

The next vital step is evaluating the marketability of the product. The ideal international product is one that has no clearance issues and is lightweight, compact and hard to knock off. Such products are rare, so let’s go through the process required for those that do not fit this bill.

During the past six years, many successful U.S. infomercials have been for cosmetic lines and digestible items. All topicals and digestible items have to be cleared in every country, and in some nations such as Brazil, the tariffs imposed on this category make it challenging at best to enter the market. However, the potential revenue these products generate from continuity marketing makes finding a solution to the problems vital.

If you are a product owner with these types of products, there some options. First, decide as a company whether you have the option of waiting a year to 18 months to start realizing revenues. If not, determine whether you would allow local manufacturing in a particular territory. Not only does the local manufacturing route allow you to circumvent the expensive and labor-intensive task of clearance, but it also allows you to bypass those countries that impose high tariffs on all imported cosmetic goods.

The best option is to find a vehicle in which you can conduct a dry test, which will show whether it is worth pursuing clearance or local manufacturing. One such route would be to test the show on pan-regional networks across a continent. Comparatively, this is the least risky and quickest, safest and most cost-effective mechanism.

The next major challenge internationally is the knockoff business. In the United States, the definition of a knockoff product varies. Knockoffs in the United States usually involve a competitor that rides on your media coattails and produces a DRTV spot selling a very similar product at a cheaper on-screen price.

In the international arena, a knockoff has a far more sinister connotation. In some markets, the local direct response company that has been assigned the rights to shows will initially buy the product from the legitimate supplier. It then will source the product from a different and cheaper manufacturer but continue airing the show. The natural consequence is to stop conducting business with such a company.

But what happens when there is only one direct response person in that particular territory? Many times, your actual manufacturing plant will sell your actual product through its back door. To prevent this, it is vital to get patents and trademarks of your product name, particularly in some key markets. On the top of the list should be Japan, Taiwan, Brazil, Hong Kong, South Africa, Argentina, Israel and the Middle East. As a supplier that is committed to the international market, ensure that you budget for these critical legal expenses. Most importantly, cultivate and nurture your relationships with your factories and distributors.

The next key criteria of making an international campaign successful are relationships and communication. Having worked with U.S. suppliers for an extensive period, the major challenge has been determining the value that the U.S. supplier places on its international business.

For instance, if you discovered in midstream that you could cut costs by changing your product’s manufacturing point from South Korea to Hong Kong, you might implement this without realizing there could be catastrophic consequences to international sales. However, something as seemingly innocent as changing manufacturers from one country to another can bring a campaign to a halt. Should the new manufacturer and the freight on board point change from, for example, South Korea to Hong Kong, in order to continue the campaign, it could be necessary to go through the six-month clearance process all over again and put the campaign on hold. In Mexico, a product made in China has extra tariffs slapped on, up to 150 percent for some classifications, making it price-prohibitive to continue sales.

One crucial point in international distribution is price. Domestically, you work on a three- to four-time markup; internationally, it is usually a five-time markup. In some countries, such as Argentina, it gets as high as six to seven times. Price also can be a critical component for deterring knockoffs as well. On the financial side, be flexible with how you collect money. Ensure that you have a secured way of collecting money for your goods, but keep an open view to accepting letters of credit. Your company’s financial institutions need to be aware of the details involved in international wire transfers and the various options available.

The international DRTV arena is exciting and highly profitable, if you have the wherewithal. As a U.S. supplier, ask yourself these questions:

• Are you committed to working with your international partner to overcome the inherent challenges?

• Are you willing to invest more in the short term?

• Are you willing to allow dry testing?

• Is local manufacturing a possibility?

DRTV is an incredibly powerful selling medium, and every product and market is different. Keep an open mind when it comes to international. Do your homework, put yourself in the shoes of the international direct response marketers that face challenges, including 20 percent credit card penetration (a whole different article) and choose an international partner that has learned from mistakes and offers profitable solutions.

• Priya Ghai is co-president and corporate futurist at Williams Worldwide Television, Santa Monica, CA.

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