When Vertical Branding launched in Encino, CA in 2001, Nancy Duitch and her partner planned to market continuity-based products — including skin care and anti-aging items such as Bun & Thigh Max and Perfect Lift — exclusively through DRTV ads. And for a while, the channel worked wonders.
“We were strictly direct response, and our continuity programs had three- to five-year life spans,” Duitch explains. “They were extremely profitable for us.”
That is, until around the summer of 2004: “We saw media rates start to rapidly increase,” she recalls.
Little by little, the money required to buy 30 minutes of cable airtime started to outpace the revenue it would bring in. The return on investment simply wasn’t what it had been even a few months before, and Duitch had no reason to believe the trend would reverse itself soon. By the end of the year, she realized the company needed a multichannel strategy.
No longer a standalone approach
A little more than three years later, Duitch’s decision has proven prescient. As media rates have continued to rise and media consumption habits have shifted, many marketers who once relied exclusively on DRTV have been all but forced to adopt multichannel strategies. DRTV remains a healthy sales channel and is still the centerpiece of many direct marketers’ efforts — according to the Direct Marketing Association, total spend in 2007 was $22.8 billion, up 3.6% from 2006, and is projected to reach $24.2 billion in 2008. However, DRTV appears to be losing viability as a standalone sales approach.
For Vertical Branding, the solution was about more than going multichannel. After taking the company public in 2005, acquiring a product-development company and splitting with her partner, Duitch began developing products in-house and taking them straight to retail. “We basically turned our entire structure and strategy upside-down,” she says.
“We either create and develop our own products or we acquire licensed products from inventors,” she explains. “We’ll create an ad campaign for the Internet and television to drive sales and create brand equity, but you’re not going to have huge profits on television. TV is really used to drive profits to retail.”
On the retail side, Vertical Branding now sells to Wal-Mart, Target, Linens ‘n Things, CVS, and others. Successful products include Hercules Hook, Zorbeez and E-Z Folds, which have become recognizable brand names.
“Customer now ask for Hercules Hook when purchasing hooks,” Duitch explains.
She adds that retail now accounts for about 65% of her sales, while direct response accounts for the rest. Of that remaining 35%, 40% is done through the Internet, with the rest coming from DRTV and a small amount of print.
Changing marketplace realities
It may sound like a shocking admission from the head of a company that worked almost solely in DRTV just a few years ago. But Duitch is hardly alone. Paul Soltoff, chairman and CEO of direct marketing agency SendTec, says that the realities of the marketplace have forced most companies that previously focused solely on DRTV to expand their sales channels, or go out of business, in the past 25 years.
“Thirty minutes might have cost $4,000 on a major cable network on a Saturday morning in 1982,” Soltoff says. “That same half-hour today costs $45,000.”
Soltoff cites one client, vacuum manufacturer Shark Euro-Pro, that focused more on its Internet presence after seeing the shift in infomercial costs, and in just a few years went from receiving 95% of its sales via TV and 5% via post office box, to receiving nearly 50% of its orders through the Internet. But, he continues, the shift is being driven by more than rising media costs.
“In the past five years, thanks to the Internet, consumers have decided they’re going to learn about and buy products when and how they want,” he explains.
Studies also now show that consumers are increasingly browsing the Internet while they watch TV, which means a DRTV ad is almost guaranteed to have greater impact if it gives viewers the option of using that channel.
“A couple of years ago, maybe only 10% of people would go to the Web if you put your URL in a DRTV commercial,” says Peter Koeppel, founder and president of direct marketing shop Koeppel Direct. “We’re now averaging 30%, with some campaigns up to 70% to 90%, of consumers going to the Web site.”
Also driving some marketers away from DRTV this year is the spike in political activity. Because political campaigns tend to buy up the same time slots as DRTV marketers, the prices are even higher.
Koeppel, however, points out that abandoning TV in search of costumers isn’t a winning strategy for all demographics. “The senior segment is still very strong for DRTV,” he says. “They don’t have as many media options, and for the most part they are home during the day.”
That said, the days of DRTV-only sales may permanently be a thing of the past, at least for Duitch. In fact, Vertical Branding is moving thoroughly into Web 2.0, including launching a social network later in 2008 that allows people to offer opinions on current products as well as those in development.
“I think this is the way it’s going to be,” she says. “I think that people are going to have to get smart. They’re going to have to diversify and become multichannel distributors of product. I don’t see it as grim — I see it as being smart.”
