Question: We are an Internet-based retailer preparing to launch our Web site and are considering our advertising options. What are the pros, cons and processes of direct response television for dot-com companies?
Answer: Direct response television can be a great alternative for Internet retailers, for a variety of reasons. One advantage of DRTV is that DR drives transactions – and not just traffic. In this evolving age of e-tailing, most new Internet companies are more anxious to build sales volume than simply traffic. A properly executed DR campaign is product or service specific, so consumers come to the site prepared to purchase, as opposed to surfers driven to sites by traditional brand advertising.
This sales volume also is predictable and scalable – once the campaign has gone through a successful media test – which is a big benefit to most dot-coms. It allows Web companies to accurately predict sales based on advertising budgets (which is a huge benefit for companies going through multiple financing rounds as they can predict their cash-flow requirements based on an accurate sales model). A well-run campaign also can drastically increase sales in a short period of time. For instance, one dot-com company experienced a $20 million sales increase in just 45 days after a hit campaign – serious numbers by any standard.
• DR is cost-efficient and flexible. Production costs are typically far less expensive than traditional TV advertising, and media rates are typically 50 percent or less than traditional TV time. Additionally, DRTV, by its very nature, should be modular and flexible so significant media dollars are only spent on creative and product offerings that are successfully compelling consumers to buy, and creative can be quickly changed to meet market conditions.
• DR provides immediate consumer feedback. Via DR, Web companies can get daily feedback on how consumers are reacting to specific offers, product lines, price points, site creative and ease-of-shopping issues, allowing them to make faster decisions about their product lines and site design that will ultimately increase sales.
• Co-venture money. Another positive trend is the co-venture between Web sites and manufacturers. In some cases, manufacturers are paying for a portion of the direct response campaign. This is a natural translation of the co-op money that has been a fixture in traditional retailing.
• Ability to capitalize on trends in direct response. Many Web retailers carry similar or even identical products to successful products already being sold or introduced on television. By having the systems in place to compete on television, they can quickly react when there is building consumer demand for these products. Most Web retailers are direct response companies by their very nature, so the format makes sense. However, DRTV typically requires fairly radical internal-structural changes by most dot-coms. The first advice I give any dot-com is to work with an agency that specializes in product or services specific to direct response and has the tools and expertise to create, manage and measure the campaign.
Much of the so-called direct response on television is not DRTV in its purest and most effective form, but instead a hybrid of direct response that is actually just traditional image advertising with a toll-free number and/or a URL. That kind of DRTV will never produce the sales results of an offer-focused campaign, and the agencies that create this kind of work usually don’t have the media-measurement tools in place to accurately assess the sales results. Once a dot-com decides to enter the DRTV world, the first major issue is usually the telephone. The most common mistake Web-based companies make is to underestimate the importance of their telemarketing center. Although we are certainly experiencing a drastic increase in the number of television consumers that will use the Web as a response medium, the fact is the great majority of responses will still come via the telephone for the next few years.
Most Web companies have small inhouse or specialty outsourced telemarketing centers, but they aren’t equipped for the major call volume a successful campaign generates. In most cases, dot-com companies should outsource to one of the well-run telemarketing centers for the first year of the campaign and continue to use their inhouse or specialty telemarketing center for customer service and referral issues.
Site design is another major issue for most dot-coms. Companies should mirror the creative from the campaign on their Web site and put that creative in a predominate position on the front of the site. I am constantly amazed at the number of sites that make the consumer dig for the offer and sometimes don’t even advertise the television offer on the site.
A well-designed Web site also should feature the upsells and cross-sells offered via any good telemarketing pitch. A rule of thumb is that 50 percent or more of consumers that come to the site should purchase additional products – and if your site is not achieving this upsell ratio, then you need to examine the offers and process. A properly designed site also will have built-in tracking and consumer feedback features to give feedback on media and offer effectiveness since site traffic is not easily trackable like telephone traffic.
Direct response television offers huge benefits to many Internet retailers, but the key is in establishing the proper infrastructure and relationships to orchestrate the campaign.
Tim O’Leary is founder/president of the O’Leary Group, Portland, OR, a DRTV and marketing consulting firm.