DR sparks up consumer electronics: some of the biggest names in consumer electronics entrusted their brands to direct response this holiday season
Consumers want it all when it comes to electronics. It is not enough that Apple's iPod, the mega-hit digital walkman, can play thousands of songs in hundreds of customized orders by itself, on the computer, in the car or attached to a speaker deck. Now, the new iPod Photo holds up to 15,000 songs and 25,000 photos and plays selected songs with matching photos and displays pictures in more than 65,000 colors.
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The demand for incessant innovation and product convergence applies to the entire spectrum of electronics, whether it involves cellular phones or plasma televisions. Consumers want quicker, smarter, more efficient products that are streamlined, state-of-the-art technological wonders with all the bells and whistles. And they want those new products to work collaboratively with ones they already own.
But consumers are not the only ones who want their dollars multi-tasking. The companies that deliver these marvelous technological toys want to spend their budgets in a similar way.
This is why many of the top brands in America have abandoned the negative perceptions associated with "infomercial" advertising and have embraced the advantages of direct response. When companies, such as Dell, Gateway, the Sharper Image, RadioShack and Hewlett Packard (HP) irrigate the market with direct response advertisements, especially during the holidays, they expect to see technology working in their favor, delivering quantitative results, and working collaboratively with the brands they have already established.
Brand New Strategies
What is the first thing that comes to mind when someone says infomercial? Is it discounted media rates and quantifiable success in a variety of demographically targeted markets? Or, is it Ginsu knives?
For anyone snickering, the answer is obvious. The vast majority of people unfamiliar with the direct response industry--and perhaps even a number of people who are familiar with it--automatically associate direct response with lengthy demonstrations by caffeinated personalities grinding concrete into confectioner's sugar or slicing through soda cans.
If this is the perception, however, then why have so many reputable brands trusted their advertising dollars with direct response specialists?
The surge of corporate brands entering into the direct response arena has been an ongoing trend, and the numbers continue to increase each fiscal quarter. Companies are quickly discovering that the myths about direct response advertising simply are not true. They can reap the benefits of a direct response campaign without tarnishing their pristine brand names.
"There is no conflict between branding and direct response," said Victor Grillo, founder and CEO of Advanced Results Marketing in Marlboro, Mass. "What an agency will tell a client who is considering direct response is that you can't do direct response because you'll be known as the Ginsu-type company and your ads will run at 3 o'clock in the morning. That is what a traditional agency thinks of direct response, and of course, if that's the way [a corporate brander] made an ad it would hurt their image."
As long as an advertisement solicits some form of response from the consumer, by phone, the Internet or anything else, it falls into the realm of direct response and can qualify for the discounted media rates allotted to them.
"Direct response simply means having an element in the commercial to have dialog with the consumer and it doesn't have to be to sell anything," Grillo said. "It can be to get info, to give info or to get a retail location. So, with many of the corporate clients I do nothing more than run a traditional 30-second ad with an 800 number at the end or a Web site to initiate some kind of dialog. There really is no conflict between direct response and branding. It all depends on how you use direct response."
The Key to achieving a successful direct response campaign, especially for corporate brands, is to infuse brand awareness with a distinct selling message. More selling points in the advertisement will generate more sales.
"Dell is a good example," said Grillo. "Dell has a nice hybrid. Their ads, be it for TVs or computers, have a lot of branding elements, but they also have a sell. They say, 'Here is a unit. It's $199. It has these features. Call for it.' So, Dell has struck a very good balance between true DR and branding in that they uphold their company image and the quality of their product, but they still try to sell something on TV. It's the same thing with Gateway, same with AOL, same with SIRIUS radio and XM radio. They're all doing the same thing."
Dell uses direct response for several reasons, but mainly because it enables the company to track media dollars and monitor the performance of advertisements running in a number of different markets. It uses multiple media outlets including TV spots, Internet ads, search tabs on Web sites and Sunday newspaper supplements.
"We are a very intense metrics driven company, and because of the discipline we put around metrics and return on investment, every vehicle that goes out--whether it's a Sunday supplement, a free standing insert, a TV commercial--is going to be tracked," said Dell spokesperson Venancio Figueroa. "We do that for the obvious reason of wanting to make sure that it meets the goals of driving awareness."
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Dell also depends on direct response advertising to educate consumers on its migration into consumer electronics. During the holidays, Dell will use direct response advertisements to promote its new lineup, which includes the 20 GB Digital Jukebox MP3 Player, a direct competitor with Apple's iPod.
"People associate high quality products and great value prices with our computers, and we think that that resonates and translates to what we're doing on the consumer electronics side," Figueroa said. "But certainly we know we've got more work to do to elevate and raise the presence of the Dell brand in the eyes of those customers who are looking for non-PC items."
Brand preservation is usually the foremost consideration for corporations entering direct response. However, direct response specialists warn that only focusing on branding could hinder companies. Equal importance needs to be paid to product innovation and demonstration. Electronics companies must maintain a competitive edge by continuously introducing new products, and they must present them to consumers in a way that is both enticing and easy to understand.
"Branding is always important, but product innovation and feature sets are extraordinarily important, especially in the category of consumer electronics," said David Sarlitto, vice president of direct channel marketing at The Holmes Group in Milford, Mass.
Anyone who has perused a RadioShack catalog or spent an afternoon at Best Buy knows that there are hundreds of options to choose from for any given electronics item. Sarlitto says that it is imperative that companies set their products apart from others and provide customers with buying incentives.
Direct response advertising facilitates these challenges by allowing companies to educate potential customers either with longer TV spots or by providing contact information to call in and learn more.
"I can spend 60 seconds or 2 minutes describing a product vs. having 15 or 30 seconds only being able to throw out a jingle," Sarlitto says. He does not want to diminish the importance of brand advertising, but when dealing with consumer electronics, companies who demonstrate their products are at a much greater sales advantage than those who simply create name recognition.
The high volume of corporate vendors promoting products on QVC throughout the holidays illustrates this attitude about selling electronics. This season, QVC will feature products from Fiji, Pentax, Dell, HP, RCA, JVC and Mintek.
"We make shopping for electronics easy," said Rich Yoegle, director of merchandising for consumer electronics, home improvement and new business development at QVC. "Sometimes people are a little intimidated by shopping in consumer electronics stores because they don't know a lot about the technology, there are a lot of choices and they don't know if the sales people are being commissioned to sell one product higher than they are for another. It's an easier process and a less-intimidating process."
The pendulum swings both ways, however, and companies who focus primarily on the demonstration and new product rollout, yet neglect brand building, also jeopardize business. Demonstration, innovation and branding must work simultaneously.
"Brands are under pressure, and product innovation is king," Sarlitto says. "But conversely, I don't think anyone would say that the Showtime Rotisserie grill from Ronco is a premiere brand. In fact, I would suggest the opposite because it has not had any serious branding done to it. If it does not come out with an innovative product year after year it will end up suffering the same fate of many other direct response products. That's not a smart idea either."
Gateway exemplifies how a corporation strikes a balance between direct response and branding. The company takes a more holistic approach that focuses on an overall message or theme about a line of products and then uses direct response to disseminate that theme across a multitude of media. This holiday season, Gateway is reverting from consumer electronics back to its PC foundation. Direct response advertisements will help establish the refurbished image and will also help introduce new convergence products, such as the Gateway MP3 Photo Jukebox.
"We realize that our customers are going to be going to a variety of different channels and we're looking to create a consistent message," says Kathy Sanders, vice president of marketing at Gateway.
When balancing direct response and branding, she says, "It's kind of one of those polarities that everybody deals with. Our belief is that every piece of communication that touches the customer represents a brand and we have to consider that even if the primary purpose is to drive traffic. There's no piece of communication that goes out there that's supposed to build a brand that wouldn't be something that we wouldn't think about driving traffic. It goes hand in hand."
'Tis the Season for DR
Consumer electronics companies find the holidays ideal for selling products via direct response and fervently driving brand awareness at the same time. For companies who have previously nestled in the familiarity of traditional advertising campaigns, but want to dip their toes in direct response, Grillo offers some advice.
"The key is baby steps," he says. "Take your existing ad and put an 800 number or Web site on it. Find a direct response marketing agency and allow it to buy your media through the DR side of the networks and that will give you a 20- to 30-percent cost savings on your media budget day one."
Next, Grillo suggests creating a TV ad, then print and then Internet. The cost savings is standard across all media. After the ads start to generate calls, the company should start selling some form of backend offer, so that they can continuously generate sales whenever customers call in.
And finally, "Drink your KoolAid," Grillo says. "This is when you can run an ad that has branding but then you can aggressively try to sell ads from TV without diminishing your brand image or interfering with retail sales. Basically, your DR campaign can generate enough money so that you can pay for your advertising budget."
Grillo performed these "baby steps" with several corporate clients that traditionally used brand awareness campaigns. One of his best examples is Nextel Boost mobile phones. By incorporating direct response into its advertising campaign, Grillo increased sales by 60 percent in retail. He guarantees that his strategy can work for companies of all sizes with any media budget.
Mintek Digital, a three-year-old company that is most recognized for its portable DVD players, is a solid example of how a company with a miniscule media budget took advantage of direct response. It started out bartering for radio spots. In exchange for a few portable DVD players to give away to listeners, the radio station promoted the product and helped establish brand awareness.
Mintek also piggybacks on the direct response advertising of major retailers, such as Robinsons May and Kohls. They reserve a percentage of the department stores' purchases to be used for advertising.
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"That's how a lot of consumer electronic companies work. Kohls department store ran a series of TV ads advertising the Mintek portable DVD players. [The ads] were created by them, developed by them, contracted by them and approved by me," says Bill Daugherty, director of marketing at Mintek Digital.
Product demonstration is another element of its direct response campaign. Mintek appeared on QVC three times, twice as Today's Special Value, where the ads run every three hours for 24 hours and are mentioned on all the lead-ins.
There are a number of different ways to incorporate direct response into an ad campaign, and the holidays are usually the most important time for effective marketing methods, especially with consumer electronics. For companies interested in testing direct response, but are cautious about protecting and maintaining valued brand names, Grillo says to stick with the specialists.
"A traditional advertising agency can't do direct response," he adds. "Their methodologies are completely different and their metrics are completely different. Now that the world is turning to direct response, the clients are going to their agencies and asking their agencies to do this DR work for them, and it's failing because you need to go to a DR agency when you want to do DR. Go to a DR specialist, one who understands this business, because it is very easy to get burned. Everyone pretends that they can do direct response, but very few do it well."
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Consumer Electronic Products Heading to Short Form
Historically, the informercial format has been a fruitful one for consumer electronics companies. Philips was one of the earliest in the marketplace, promoting its "Great Wall"--a CD interactive system--in 1993 and several other of its electronics products in the years that followed, including WebTV in 1997 and TiVo in 1999.
Apple produced a series of very successful shows for its computers, the first appearing in 1994, called "The Martinettis Bring Home a Computer." Computer packages appeared frequently throughout the late 1990s and early 2000s, when shows from Reliant Interactive and Tiger TV aired regularly.
The year 2004 has seen a marked decrease in the number of infomercials produced in the consumer electronics category as compared with the prior two years (see chart below). In addition, those programs that have been produced have run with only modest frequency at best. The one exception has been the Respond2-produced infomercial for Voom, a high-definition television subscription service, which has run strongly since its debut last spring.
The lack of infomercials reflects today's rapidly changing technology, which can render electronic products obsolete before the infomercials featuring them are able to air. This constantly changing product picture makes the cost of producing shows for such items and purchasing media time to run them unsupportable.
The short-form picture has been a different one, with more than 30 short-form spots produced in this product category this year--a number of them running strongly throughout the year.