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Response Magazine’s 18th Annual State of the Industry Report — The Unabridged Answers

1 Sep, 2013 By: Thomas Haire Response

Members of the magazine’s Advisory Board speak out on the current state of the direct response marketing industry.


As 2013 heads into the final stretch, the direct response marketing is relying on its knack for innovation and adaptability to maintain its crucial role in the marketing universe. With an economy that’s slowly improving, aggressive regulatory expansion and the continued proliferation of media outlets and new marketing technologies, DR is finding itself more often included in the mix with digital and data-driven marketing programs — and working harder than ever to provide quantifiable results to a vast array of marketers.

Richard Stacey, president and CEO of Toronto-based Northern Response Intl. Ltd., believes that the industry’s work ethic is second to none. “One thing I’m increasingly impressed with is how hard the DR industry works,” he says. “The level of innovation and our ability to continually adapt to change — and still evolve and grow — is amazing. I know of few other industries that have this level of creativity and complexity and do it so well. When you look at some of the companies in our industry and the perpetual innovation and marketing machines they have built, you have to totally respect that level of effort and stand in awe of just how difficult that is to do on a sustainable basis. I would put our industry members up against the P&Gs and the Unilevers of the world any day of the week.”

And Tim Hawthorne, founder and CEO of Hawthorne Direct, a full-service brand agency based in Los Angeles, Salt Lake City and Fairfield, Iowa, believes that hard work is paying off. “The industry is strong and is gaining strength and momentum,” he says. “We need to continue to generate quality, informative content and messaging and make it available to, and user friendly for, the consumer across all the channels.”

For the past 17 years, Response has asked members of its Advisory Board to analyze current trends and make predictions about the future of the direct response space. Once again in 2013, their thoughts represent a cross section of the industry: from DRTV legends to technology experts; from the international perspective to that of leading marketers. According to these leaders, this is the state of our industry.

What was the most significant accomplishment in the past year for the DR industry?
Tim Hawthorne, Hawthorne Direct: The further integration of all marketing channels and the recognition that an agnostic approach to direct response, maximizing the best ROI channels for a given campaign, is what will make any campaign most successful.

Steve Heroux, Hampton Direct: Some of the largest retailers have continued to see double-digit growth in their DRTV product sales. In the past 12 months, more DRTV items have been launched at retail than any other years past.

Peter Koeppel, Koeppel Direct: The fact that as an industry we have survived the Great Recession is a tremendous achievement! We’ve come out of the other end of it, however, very much a changed industry owing to several factors. Media usage patterns and the pervasiveness of E-commerce have really ushered in a new era, where DR acts as a kind of long-form general advertising that drives purchase behavior through multiple channels: over the phone, online, at traditional retail and so forth. That is forcing the industry to find new ways to define attribution, accountability and ROI — and that reinvention is really in its infancy.

Fern Lee, Thor Associates: One of the most significant accomplishments in the past year is the “blink” — as Malcolm Gladwell says — between the integration of digital to traditional DR occurring with the use of database management in driving decision making for multi-channel strategies. Also of note is the advent of consumer proliferation, allowing marketers to utilize customer data that provides purchase behavior, spend amount, product preference and digital engagement.

Kevin Lyons, Opportunity Media/A&E Networks: It’s the industry’s continuous innovation and adaptation to market conditions. It is an industry that has endured many economic peaks and valleys during the past 30 years.

Mike Medico, E+M Advertising: The ability of our industry to withstand and survive under the lower success rate for traditional direct response offers, given the poor performing economy and the reluctance of consumers to spend, is remarkable.

Digby Orsmond, ARM Direct Ltd.: Unlike typical brand advertising, DR will always deliver a measurable and accountable return on investment — and the almost immediate results continue to provide marketers with real day-to-day numbers. In the past, DR was often seen as the poor relation of traditional high-budget brand advertising, but in the past five years, the increased use of the Internet by consumers has narrowed the gap. This has recently led to the creation of a new, low-cost genre of TV advertising called brand response TV (BRTV). These are 30-second spots that promote a URL to drive viewers with tablets or smartphones to visit a website and make an immediate purchase. With BRTV, the focus is less on name recall and more about driving online traffic. This type of ad qualifies as direct response and allows the clients’ media agency to purchase airtime that can cost as much as 50-percent less than fixed-position brand inventory. With BRTV there is usually a more effective viewer engagement via the advertiser’s website and this more than makes up the difference in spend levels. Additionally, the airtime discount minimizes risk and allows first time advertisers to safely test TV.

Richard Stacey, Northern Response Intl. Ltd.: The DR industry model has been experiencing some degree of disruption during the past several years and the most significant accomplishment of the DR industry has been the continued evolution and transition of the DR business model to an integrated multi-channel model in response to changes in media technologies and consumer audiences.

What do you believe the hottest topic will be in the coming 12 months?
Linda Goldstein, Manatt Phelps & Phillips: The DR industry will be increasingly facing the pressure to deploy digital and mobile marketing strategies. Facebook just announced that it will be selling 15-second television commercials on its platform, and a recent survey just revealed for the first time that consumers are now spending more time online than on TV. That is a monumental shift in consumer behavior that the DR industry will need to confront in the next 12 months.

Denise Kovac, Full Service Marketing: The fact that many, if not most, people are TiVoing their shows and fast-forwarding through commercials is crucial, and it seems to be more and more prominent.

Rob Medved, Cannella Response Television: It’s the changing TV consumption behaviors of consumers as they continue to be exposed to more viewing choices. Watching content on the big screen is not decreasing, but the format and source of programming is continuing to fragment. There is a lot of buzz around cord cutting, over-the-top alternatives, Amazon, Hulu, VOD, mobile viewing, Aereo, DISH’s Hopper, Intel, Apple and more. These variables are concurrently impacting what we’ve known as the media market — making the source of TV advertising responsible for consumer response less clear. Some of these are believed to be threats to the TV ad industry, but if we take a step back, our economy and culture has always embraced and gravitated towards advertising-supported content models. Creating and navigating the DR opportunities in this less defined media marketplace will be a hot topic for some time.

David Savage, R2C Group: The hottest topic will be how to best leverage media spending across channels for most efficient ROI.

Hawthorne: It’s the increasing importance of integrated, multi-screen marketing — and the critical need for accurate attribution of leads and sales that takes into account consumer first touch/last touch behaviors.

Heroux: One of the hottest topics will be how closely some of the regulators will continue to follow our industry and how some of the practices will need to be changed.

Koeppel: With such a large percentage of DR-driven sales occurring online, the fate of an online sales tax is going to play a huge role in the coming year. If a tax becomes reality, it will take away an enormous advantage for direct marketers. The result will be that already powerful brick-and-mortar retailers will play an even more dominant role for marketers, and direct marketers will experience even more pressure on their cost of goods. The reason for the latter is simple: consumers don’t want to pay for tax or shipping and handling, so those costs will likely have to be folded into the retail price. That will simply put more pressure on manufacturing costs that are already being squeezed. But since the purpose of direct marketing has changed into more of a multi-channel paradigm, perhaps the pressure to manufacture at 20 or 25 cents on the retail dollar will abate in favor of a view that looks at the total impact DR has on sales volume across all affected channels of distribution.

Lee: The hottest topics in the coming 12 months will be: database growth as a result of savvy lead-gen brand response; and analytics resulting in knowing where the consumer engages (whether TV, radio, digital, etc.) to where and when a consumer finally purchases. There are more and more entry points for consumer purchase. The key for the marketer is to decipher and analyze where the initial touch point is and what the ROI value per vertical is. The key is finding out how many times the marketer must touch the consumer to obtain a purchase.

Lyons: Although I feel like a broken record at this point, it is clearly the economy. While the stock market has thrived, that is more a futures market and leading indicator of better conditions ahead. At the present time, the slow economic growth and concern about European and Asian economies creates a challenging environment.

Medico: There will be two hot topics: the exponential increase in response through smartphones and tablets; and the increasing relevancy of digital networks, e.g. Hulu, and the need to test their potential

Orsmond: The hottest topic in the United Kingdom continues to be the way major fashion and cosmetic brands have finally woken up to the power of BRTV and how smaller companies are now adding TV to their marketing mix. One of the most successful continues to be Barry M — the U.K.’s most successful teenage cosmetic brand — that, by switching to BRTV-style creative, have persuaded huge numbers of young British girls to tweet, go online and join their Facebook page or visit their local stockist. The result has been a substantial uplift in retail sales, and Barry M has succeeded in taking market share away from the much larger Rimmel cosmetic brand.

Stacey: What’s a hot topic may depend on what area of the DR industry you’re most involved with. Two ongoing topics are the continued integration of the DR media model with the retail model and the growth of the international DR market.

What do you believe the most crucial topics for direct response marketers during the next 12-18 months will be when considering the actions of regulators, such as the Federal Trade Commission (FTC), Food and Drug Administration (FDA), and Federal Communications Commission (FCC)?
Goldstein: With respect to the FTC, the increasingly aggressive enforcement actions and heightened substantiation burdens will continue to present one of the greatest challenges for the DR industry. Marketers looking to launch new products will be faced with the increasing challenges of having to conduct double-blind, placebo-controlled clinical studies prior to launch, which will create additional barriers to entry, heightened costs and the ability to test product without significant investment. In addition, the coming months will see increased enforcement by the FTC of its recently issued Dot-com Disclosure guidelines. These guidelines will make it much more difficult for marketers to effectively communicate incentive offers, such as free trials and negative option offers, in compliance with the guidelines. In addition, the FTC is becoming increasingly skeptical of the effectiveness of hyperlinks as a way of making disclosures of offer terms and has essentially banned the use of general terms such as “Details” and “Terms and Conditions” as a means of labeling hyperlinks. Finally, privacy will continue to dominate the regulatory environment. The advertising industry has voluntarily begun to embrace some form of “Do Not Track,” and pressures by the FTC for legislation along those lines is likely to increase. In addition, as the collection of “Big Data” by companies continues to grow, the risks of data breaches will continue to rise. Again, DR marketers would be well advised to have independent audits conducted of their data collection practices to ensure that the data is secure and that their stated privacy policies actually reflect their actual privacy practices.

Hawthorne: Consumer privacy, claim substantiation, negative options, and Web and mobile presentation of offer disclosures — especially on smartphones. How will the FCC interpret the latest round of rules that require full, clear offer details on mobile devices? Scrolling to see the details of a multi-pay or continuity program is no longer acceptable.

Heroux: These regulators will continue to be extremely aggressive. They will be looking to make some significant changes. It will be more important than ever for marketers to have their campaigns reviewed by counsel to make sure they are not putting themselves at risk.

Koeppel: It’s the online tax issue for the reasons stated above.

Kovac: Privacy issues on database management are a big issue especially the costly nature of the Children’s Online Privacy Protection Act (COPPA). The cost of implementing the new guidelines can be massive for companies with apps purchased by parents and used by children.

Lee: All things social media; negative option advertising; claims and substantiations; clinical trials; telemarketing payment mechanisms and recovery — all of these things are on the radar.

Lyons: The continuance of actions aimed at bad actors in DR will have a long-term benefit to the business. The damage that can be done by a single individual with bad intentions can be far reaching, adversely affecting the majority of entities in the business — ones that take great care of their customers.

Medico: It will be the increased scrutiny of federal regulators on the benefits, attributes and claims made for various types of direct-to-consumer offers. This applies mostly to the health and beauty categories, but it can become problem for other types of products and services being marketed.

Medved: The interstate sales tax will presumably raise the total purchase price for consumers shopping from home. That may require marketers to respond with more free shipping or promotional offers to offset the added tax. As the lines blur over where consumers watch their favorite programs, the FCC’s ruling on content distribution rights will impact the TV advertising market. It’s unknown what effects this will have on the DR segment.

Stacey: DR marketers need to be aware that regulatory policies and their interpretation are continually evolving as the marketplace changes — and they need to keep up-to-date so they can remain compliant.

How can agencies and service providers with their genesis in the DR space better reach out to branders and other big marketers who are looking to integrate direct, digital and data-driven efforts within their overall marketing plans?
Goldstein: For major brands, an integrated marketing strategy is key — as reflected in the growth of omnichannel marketing. The DR industry as a whole has not tended to adopt a fully integrated approach to its marketing efforts with digital and mobile often being the tail to television. That approach will not work with large brand marketers.

Hawthorne: Agencies must first embrace the reality that media and media rates are only part of the equation. Strategy, insight, analytics, data and attribution provide the full integration for a marketing plan. New and innovative attribution models and data-rich analytics and reporting can be extremely attractive to brand marketing leaders, who are hungry for accurate data analytics as a basis for sound decision making.

Heroux: They are doing it now with the help of some of the major brands, such as Proactiv Solution, Bare Escentuals and Zumba all organically grown in our industry. Agencies, like Hawthorne Direct, are doing a great job at capturing that market, and the more success these “big marketers” have in our space, the more they will want to be involved.

Koeppel: DR agencies and service providers have always been data/ROI-driven in their approach to marketing. More traditional brand marketers are now starting to embrace the type of metrics the DR industry has been utilizing for many years, so many more marketers are now open to employing our expertise to better target and generate profitable results for their campaigns. By demonstrating success through relevant case studies, agencies/service providers can educate the larger marketers about the benefits of our approach, whether that involves a more traditional DR campaign, branded response or a drive-to-retail/Web strategy.

Kovac: Outreach via webinars, educational sessions at trade shows and through trade journals can be effective in getting the message out to these marketers.

Lee: Agencies and service providers need to understand how to work together and deliver a coordinated, multi-channel platform for integrated touch points. The consumer is being bombarded across every media channel, and the savvy marketer will know how to break through the clutter and educate the consumer to make a decision to purchase and build brand recognition. Success is defined when a marketer has built an ongoing relationship with the consumer.

Lyons: There is no better testimony to the success of DR for big marketers than actual case studies showcasing this fact. It is sometimes a very slow process, but one that continues to build in a positive way for the DR space. The more examples of big marketers having success in DR makes it hard to ignore the need to add DR to their marketing mixes.

Medico: While I believe DR has achieved greater legitimacy within the larger brands and marketers, there are still many issues. Among those issues are the agency-of-record (AOR) status of agencies currently working with the brands, existing relationships of those agencies within large holding companies and the basic need to keep all the billings and revenues related to those brands. What DR agencies and service providers can do is to forge their own network of brand service providers and become a resource for them.

Medved: Our industry must expand its knowledge and evaluation of media performance indicators beyond the traditional set of DR metrics. That doesn’t mean we must be an expert in all fields of marketing communication and measurement, but we need to understand and articulate our role in the context of a more integrated media mix and apply our expertise accordingly.

Orsmond: In the U.K., agencies have succeeded in doing this by offering more clients the opportunity to test video-on-demand (VOD). While not exactly new — the first commercial service was launched in Hong Kong in the early 1990s — the great advantage of VOD is that substantial numbers of U.K. smartphone and tablet owners are now choosing to download their favorite TV programs and then view them later. This gives brand advertisers a unique opportunity to test in the DR zone and be able to closely target their ads to viewer’s program choices.

Savage: By demonstrating to them that: 1) you understand the business challenges they are facing; and 2) how direct response strategies and tactics can address those challenges. It’s not only about sales results. It’s about providing consumer insights and business strategy that is consistent with their overall brand objectives.

Stacey: Many agencies and service providers are at the intersection of the convergence of DR advertising and gross ratings point (GRP) advertising in a multi-media environment. This is increasing the complexity of their businesses, and they need to work to stay current, keep their customers educated, and change course as the industry and its customers evolve.

DR seems to be joining together more than ever with digital and data-driven marketing concepts. What are the three biggest no-nos for a marketer using a measurable, multichannel strategy in 2013?
Hawthorne: Inaccurate measurement systems; not creating a clear plan of how the channels work together; and not having an effective follow up strategy to engage the consumer once you have captured their interest.

Heroux: If the end goal is to create awareness for retail, marketers need to make sure they still reach out to all the different demographics and not only focus on the best ROI campaigns.

Koeppel: 1) Not understanding how to integrate a multichannel campaign, including consumer, research and response data, in order to maximize results; 2) failing to develop methods to accurately measure attribution in a multi-screen/multi-channel environment; and 3) failure to test multiple advertising mediums and relying on any one medium to drive sales/leads.

Kovac: Do not be slow to develop websites for viewing on mobile devices; do not be slow in budgeting for social media; and don’t be in the dark about the new privacy laws.

Lee: 1) Not having integrated messaging through all platforms; 2) not testing and thinking you, as a marketer, are smarter than your consumer; and 3) not having trained customer care agents that understand your product, know how to build a relationship with the consumer and can save the sale.

Lyons: Ignoring the interconnection between all factors; failing to accurately attribute response to its source; and pushing ahead with a new concept without adequately testing.

Medico: Not applying budgets to each of the channels appropriately; not attempting to monitor and allocate response to allow for optimization; and not shifting current multichannel strategies sooner due to poor performance.

Medved: First, buying 1 million targeted impressions at a great rate doesn’t generate any more sales if the messaging lacks consumer resonance and relevance. With the more digital widgets at our disposal, it’s easy to be sucked into the latest hot topic like programmatic display buying. Don’t lose sight of the fundamentals of marketing and marketing communications. Market a good product, define clear consumer benefits and a unique selling proposition, and articulate it in a compelling manner. Next, focus on your website and prioritize conversion rate above anything else. It’s amazing how many DR product websites still aren’t optimized for each device — Android, iOS, etc. Finally, take the time and invest the resource to standardize your data for the future. One of the biggest challenges marketers face is structuring fields to easily measure data across multiple channels and over a course of time.

Orsmond: We have seen several well-known DR clients switch to an online only strategy. In some cases, the making of the DRTV ads has also been given to the online agency as a way of further saving costs. We believe this is a shortsighted tactic. Once the DRTV ad is switched off, the advertiser loses the positive “halo” effect that a regular television presence produces. This has been especially evident in the debt management and claims compensation sectors, where once there were more than 35 DRTV advertisers on U.K. TV channels. In 2013, there are less than 10. Our experience is that a migration to strictly online marketing will hurt a DR advertiser in the long term, and we believe it is best to keep a wider consumer presence by using a combination of DRTV spots, VOD or Infomercials — in addition to ongoing social media activities. In addition, other no-no’s for me are when I find a DR advertiser appointing a media buying agency that: is tied to TV station deals instead of buying avails on a client by client basis; does not have a deep understanding of what makes a DRTV ad work harder; has no online PPC expertise in-house; and cannot offer bespoke campaign tracking and analysis reports

Savage: Not being flexible with how you allocate your budget across channels; not appreciating how important TV is to driving those other channels; and not having daily insight into how those dollars are driving your business.

Stacey: Some of the no-no’s for multi-channel marketers include: not setting a clear objective for a campaign and not knowing the tradeoffs between what’s realistic and what’s not — for example, making a profit from DRTV and driving retail may not always be simultaneously possible; operating in silos such that separate marketing channels do not account for the synergies between them, and that one plus one can equal three; not properly sequencing and layering the media campaigns and the distribution channels so that they are properly aligned — for example, launching in retail before live shopping or airing TV too early before retailers have stock or too late after retailers are already sending stock back.

How is the economy treating marketers in the DR business? What effect is the current economy having on campaign success rates, media rates and other areas?
Hawthorne: The sluggish economy of the past several years has been the best thing for DR business, because it has forced all direct marketers to optimize every aspect of their businesses and refine each consumer touch point to insure maximum return on every media dollar. Ultimately, this makes for a stronger business model and more profitability when the economy returns to full strength.

Heroux: Certainly as the economy has strengthened in the past couple of quarters, it has made good DRTV media less available. When Fortune 500 companies have larger advertising budgets, there is less to go around for DRTV marketers. It comes down to supply and demand.

Koeppel: The economy was stuck in neutral the first half of the year, and consumers are now beginning to tighten their belts. However, consumer confidence has been up, as well as housing prices and the stock market. Much like the mixed signals we have been receiving about the economy, campaign results have also been mixed, depending upon the type of DR campaign you are running. However, overall results have improved in 2013 vs. 2012. Every consumer purchase is now a considered purchase, rather than an impulse purchase. Lead-gen, drive to Web/retail campaigns are performing well. Marketers selling widgets on TV are breaking even or losing money on TV and are using TV to drive sales at retail and online. We are no longer seeing media rates that reflect a bad economy, as DRTV rates have been increasing throughout the year. In the digital space, the cost of search advertising is down, and advertising costs on Facebook have increased, but the largest social network is generating positive results. Integrated, multi-channel campaigns are performing best. The over-50 market is still the most responsive to TV offers and will continue to grow in importance as the baby boomers age.

Kovac: Consumers still seem to be bargain shopping. Media rates have not adjusted to the payout for DR success. Several successful TV campaigns this year did not transfer to success at retail, which can be devastating if you were dependent on that for the program’s overall profit.

Lee: The answer to this question is not only about economics — it is about the fickleness of the consumer. Consumers are very conscious of how they spend their money and want to be engaged with an efficacious product. Remember: “Product is King.” — a “Wow!” product, a must-have product, one that solves a need. When you have those properties, you have a winner no matter what our economic situation is.

Medico: The economy has had a very negative impact on all facets of our business. There are far fewer “home runs,” direct response media rates have not gone down to reflect the lower volume of response, average revenue per order is lower than in the past, and the need to get the products to retail faster has shortened the DRTV sales cycle.

Medved: The economy is slowly growing — as is the DR business. A resurgence in retail spending by marketers has been playing a larger role in the national cable landscape, creating more competition for the time. One would assume that media rates should grow commensurately. However, fragmentation of media options and changing media consumption behavior is putting more pressure on media seller rates.

Savage: In the long-form space, the economy has not been kind. Response levels are not as healthy as they could be. This has led to very aggressive rate reduction campaigns. The multiple agency scenario continues to create false sense of demand in the marketplace — with up to four agencies buying for some marketers.

Stacey: The current economic environment has made it challenging to sell some higher priced offers both by DRTV and at retail. This has impacted campaign success rates and the type of products that seem to be working well. Naturally there are exceptions, but this trend toward lower priced offers has been a general theme in the past couple of years during these difficult economic times.

How has technology changed the way your company does business in the past 12 months? How will it in the next 12 months?
Hawthorne: The increased influence of social and mobile marketing continues to be significant. Streamlined integrated dashboard reporting is key to monitoring the effectiveness of client campaigns. And significant resources are now required being implemented for data science, the analytics that ties demographic, socio-economic, geographic, consumer habits, consumer spending, online response, retail response and customer retention management. It is the technology that will impact our agency business for years to come.

Heroux: Certainly our online strategy is constantly evolving. It has certainly changed how we analyze results. And because there is so much information with online consumer behaviors and interests, it has also given us a chance to better understand the target demographic for some of our campaigns. We can use that information to make better decisions at buying TV advertising. It comes full circle!

Koeppel: Our business is constantly evolving and adapting to incorporate new technologies — research and management tools that allow us to more effectively target, track and optimize our campaigns in a rapidly changing and more fragmented media environment. Each year, the pace of technological change accelerates and during the next 12 months, I see a greater role for social and mobile media, but TV will continue to be the engine that drives every channel of the DR business. TV still accounts for 59 percent of global advertising spending and Internet advertising represents 4.4 percent. However, Internet ad spending is growing much more rapidly than TV, according to Nielsen.

Kovac: Building digital sites for streaming entertainment rather than selling CDs and DVDs has been crucial, as is reviewing technology for IP protection with downloads. And social media is becoming a bigger issue

Lee: In the digital spectrum, technology has made decision-making much more analytical. Data is now available through new channels, and metrics must be looked at by each vertical. Mobile technology gives the marketer a new way to be engaged with the consumer for easy and immediate access to educate and purchase.

Lyons: Technology brings rapid change, which can be uncomfortable due to the inherent uncertainty change sometimes brings along. However, technology continues to provide opportunities and create efficiencies we did not have in the past.

Medico: Many more responses are coming in via smartphones and tablets than in the prior year. Software that helps allocate online response from offline media will continue to improve in the next 12 months.

Medved: We have always been a strong advocate and user of data analytics — and that hasn’t changed. We continue to invest more resources in that area. Technology will continue to offer us more data points to evaluate.

Orsmond: I cannot comment on all 28 European Union countries, but here in the U.K., we recognized several years ago that the best way to help our DR clients keep ahead of their competitors was to invest in creating the “armada” software program, a bespoke analytical tool which allows our DR clients remote online access to their daily sales data from wherever they are in the world. Several of our DR clients are multi-national companies and they can now log on and view their sales data — everything from daily response per TV channel, per telephone number to airtime and budget reconciliation per DRTV or infomercial creative. British consumers are now devoting almost half of their waking hours watching TV plus using their mobile phones/tablets according to the U.K. communications regulator OFCOM. The accepted wisdom is that while these same consumers may be spending less at retail, dedicated TV viewing remains a central part of their lives throughout the day. OFCOM reports that smartphones in the U.K. are increasingly being used for multimedia, but live TV still remains the main entertainment within the home.

Savage: Our clients are appreciating our ability to leverage proprietary online technologies to obtain and provide consumer insights that help them make the right marketing decisions. Consumer use of mobile is up and so is response in this medium, so we are building more mobile-optimized sites.

Stacey: Technology is constantly changing, and we continue to invest in any system that allows us to grow and improve our business, save money, provide better service to our clients, and improve our productivity. Technology is always changing — for example, you can move your interactive voice response (IVR) in-house these days for as little as $5,000. Even a small change can add up to real savings.

How are media rates affecting direct response marketers as we head into 4Q 2013 and early 2014?
Hawthorne: Media rates in 2013 became extremely competitive, negatively impacting clearance rates across almost all cable networks. This is expected to continue into fourth-quarter 2013 and 2014. Response marketers need to find a way to make back-end/online and retail deliver more sales as those campaigns that can deliver profitable, or even break even, results on the front end are scarce. The direct response campaigns of old are now competing for time with those that are offering coupon or two-step campaigns. They can afford to pay higher rates as they are now enjoying a more accountable medium at a lower cost.

Heroux: Good television media continues to be sparse and expensive. Marketers are realizing more and more that they need to roll out on campaigns with very good cost-per-order (CPO) and media efficiency ration (MER) numbers because of the challenging media environment. They can’t assume a campaign will be profitable just because their products are showcased in 50,000 doors at retail. Buyers’ sell-through expectations continue to climb, and a product needs to meet those expectations to remain on the shelf.

Koeppel: The general advertising marketplace on TV is strong, which is pushing up rates and limiting the inventory available to DR advertisers, particularly with the broadcast networks and syndication. I anticipate things will remain tight in 4Q — and if 1Q 2014 is similar to 1Q 2013, DR inventory will continue to be tight, which will impact rates. Despite the pressure on inventory and higher rates, many DR campaigns are performing surprising well, with clients committing to higher media budgets vs. 2012.

Kovac: Media rates have not adjusted based on the number of eyeballs actually viewing the stations.

Lee: Media, whether long-form or short-form, is quite fragmented between cable and broadcast stations being added. While we can still find deals out there, fourth-quarter rates continue to increase as seasonal brands participate more at this time of year. In first-quarter 2014 — where we once saw rates go down — we expect them to stay moderately flat.

Lyons: The current media environment is one that benefits those marketers with foresight and the ability to stay ahead creatively. Those relying on old creative with an old, built-in set of assumptions will be challenged.

Medico: It is more of a balancing act than in prior quarters. There are networks and broadcast stations that will always be expensive, and they will continue to raise their rates. Where the opportunities exist are on smaller niche cable networks, unwired broadcast networks and broadcast syndication. Of course, there will always be opportunities among the larger, more expensive media — but you will need to have an offer to match the rates, and you will need to have the product at retail to take advantage of the reach these networks afford.

Medved: DRTV media sellers have a challenge on their hands. National networks have been able to secure increases from brand advertisers in the latest upfront and expect a strong Q4 scatter market, so the pressure is on to obtain similar results from the DR sales team. Unfortunately for the media sellers, we are not seeing an uptrend in consumer response on an individual airing basis to warrant a similar rate hike.

Orsmond: The U.K. economy has climbed out of recession, and retail sales in 2013 are definitely showing the green shoots of steady growth. The DRTV advertiser is benefitting from this, especially if they have a good direct-to-retail presence. Many TV channels are lowering their rates as they continue to be challenged by brand advertisers switching their spend to online only strategies. This means some savvy DRTV advertisers are now paying less for 60-second and 120-second spots than four years ago. We believe that U.K. media spot rates will probably increase in Q4 this year and that this will continue into Q1 2014

Stacey: Some of the media outlets understand the environment we’re in — and others are clinging to the past. If there are some that are perpetuating rates that are unjustified based on declining viewership and performance than that’s really a disservice to clients and the industry. However, for the most part, the media marketplace continues to find its true equilibrium, and overvalued airtime must eventually come back to earth.

The DR-to-retail game plan now seems to be a must for every campaign that hits television. What are the three most important things a marketer must do to have the right retail plan in place?
Hawthorne: Retail distribution should be in place prior to the TV rollout; a direct marketer must give the product a reasonable timeframe to gain traction — not less than six-to-eight weeks on TV, with at least $100,000 per week in media spend; and there must be a combination of national and local media spend while remembering it is not about the spend, but the reach/frequency and total ratings points and impressions viewing the creative spots

Heroux: Proper funding — at a minimum for a middle of the line item would be around $5 million; distribution to all major retailers — a minimum of 50,000 doors — it has become too cost prohibitive to buy media for just a few retailers; and great packaging while keeping in mind space constraints of some of the retailers. One of the criteria of how a product’s performance is judged is the size it takes on the shelf. Sell-through expectations on larger items will be much higher than smaller items.

Koeppel: 1) Plan your retail strategy before your campaign is launched on TV; 2) be prepared to take your product to retail as soon as you experience positive results on TV; and 3) work with an agency that understands the mechanics of buying media that will effectively drive retail and how to optimize the media plan utilizing POS data from the retailers.

Kovac: Already be a “vendor of record” at the important accounts when the project goes live; have the best sales force for the category; have packaging and pricing strategy figured out prior to launching the DR campaign; and properly forecast the sell through by account to plan the amount of advertising that can be spent

Lee: 1) Relationships with master brokers; 2) understanding of the “set” or “planogram” timeline; and 3) brand response campaigns vs. traditional DR offer models that promote sell through off the retail shelf.

Medico: The three things that should be in place are: the product CPO should be at break even or close to it prior to release at retail; the marketer should be spending at least $150,000 in DR media per week to support sales; and explore other options to get the product added exposure on TV, PR or other media, such as home shopping.

Orsmond: In the U.K., getting your product into retail is all about whom you know and managing those relationships well. If you walk into almost any major high street store in the U.K., the chances are that you will see one of JML’s ubiquitous demonstration screens somewhere in the store. To put that into perspective: JML has 7,000 of these screens located in 3,500 stores across the U.K. Newcomers from the United States will find the European market very confusing, so my advice is to concentrate your efforts on the U.K. and link up with an established media buying agency with many years of DR experience.

Savage: Size and profile of the consumer, including demographics, psychographics and media consumption; an assessment of retail presence and retail density, as this should be factored into media strategy, and affects appropriate ratings delivery for the target demos; and develop a creative that is disruptive, including retail tags when possible

Stacey: A successful DR-retail campaign involves doing a lot of things right — combined with some luck. Marketers need to line up the right mass retail partners, a critical mass of doors to make media efficient, the right featured-placement in-store, the proper load-in quantities and replenishment inventory — and the right mixture, amount, and schedule of media to effectively drive the point-of-sale numbers. One way is through careful market testing, proper forecasting and figuring out the unique marketing algorithm for each product. In other words, “Nail it and then scale it. Run with your winners. Stack ’em high and watch ’em fly!”

What are the three biggest effects the growth of social media is having on the DR marketplace?
Hawthorne: Social presence is the new digital PR, providing social credibility which enables consumers to reassure themselves prior to a purchase decision; providing targeting advertising opportunities within the social community; and driving the need for enhanced lead and order attribution. The social aspect of “social” makes it by nature difficult to pinpoint. The drive to identify what makes consumers execute a purchase has been increased because of the existence of social sites.

Heroux: It has brought up the ante in developing and producing better quality items; it can negatively impact a campaign if consumer expectations are not met; and it creates a new platform to showcase your campaigns and validate the features and benefits of products and services by people you know and trust.

Koeppel: A recent Viacom survey found that 56 percent of TV viewers are using social media applications to interact online during broadcasts. Simply put, consumers’ TV viewing behaviors have been changed by social media, and networks and marketers must adapt as viewers multitask their attention across multiple screens. It allows marketers to do things such as monitor conversations. The hashtag has officially been adopted by all the major social media platforms, including Facebook, Twitter, Google +, and Pinterest. By leveraging hashtags in DR marketing efforts, marketers can track and quantify lift and conversations based on the number of times the hashtag is used. The data that can be pulled from the hashtags include social influence rating, demographic of users, and is a great way to target brand/product advocates. Additionally, social media exists as multiple touch points and channels where DR messaging can be distributed. Whether via a blog, Twitter feed or Facebook page, social media expands the network of traditional DR outlets to directly target brand/product advocates and social influencers, thereby increasing a campaign’s reach. Finally, marketers can build pre-launch buzz. If working on a pre-launch strategy, social media marketing has proven to be a great way to build buzz and connect with brand/product influencers in the industry. It helps in building anticipation and a following before launch, by connecting to the right people via social media.

Kovac: Blogs: positive and negative information about products and customer service is readily available; pricing is transparent across all channels; and YouTube viral campaigns can really help to promote a product.

Lee: 1) Social Media is effective in the sense that search engine optimization creates ranking which leads to engagement; 2) link building creates ranking, which leads to engagement — content is always a challenge as it needs to be interesting and relevant while making sure the consumer is educated to the brand; and 3) social media — in the sense of Facebook, Twitter and YouTube — is all about brand building and less about conversion.

Lyons: There are many effects and picking just three is difficult. Three that jump out to me are testimonial enhancement, customer service opportunity and the additional customer interaction presented by social media. While there are pitfalls, a sound social media plan and management of that plan can bring about the opportunity to build followers and brand loyalty, add another customer service avenue for customers and provide additional indirect sales.

Medico: Creating a forum for dialogue among your customers; allowing for positive feedback to help improve the product or service; and providing a chance to react to issues negatively impacting your promotion.

Medved: 1) A further push to digital orders, in part ignited by the need to see what others think — both long- and short-form marketers now see the majority of orders coming digitally, which is creating an attribution challenge; 2) brand reputation and endorsement: the DR industry has always relied on consumer testimonials as a core part of their messaging strategy and now that consumers have a larger voice due to social media, DR marketers have an opportunity and obligation to nurture brand likes and respond to unsatisfied customers with care and professionalism; and 3) a snowball effect when a brand takes on a social life of its own — we have seen numerous cases where celebrities begin tweeting and blogging about a product and how much they love it.

Orsmond: Yes, Twitter usage can be awesome! In fact, so are Facebook, YouTube, Google+, Pinterest and many other social media platforms. Twitter in the U.K. currently has 24 million accounts, with Spain next among European countries, with 8 million. Every DR business should include a social media strategy to attract potential buyers or increase product/service interest. Recent DR research by ARM Direct confirms that media-savvy U.K. consumers will key in the URL after viewing a DR ad, check out that website and then next open a marketer’s Facebook page to see what others are saying about them.

Savage: Marketers and DR agencies need to be able to respond to their customers in real time in the social space. Feedback as either kudos or complaints must be addressed publicly when the customers are commenting in the social space. Additionally, it’s becoming more and more important to place offer- and campaign-specific buys within social media to coincide with the DR efforts. Finally, campaign and offer consistency is paramount — especially during an offer testing phase, particularly with customers independently sharing their savings, offers and deals online.

Stacey: Social media is yet another outlet to access customers both passively and actively. It’s a critical part of today’s marketing mixture. Social media impacts DR in that it is now an integral part of the planning process, it can be a profit center on its own, and it can be utilized to engage consumers to help get the word out about your product.

Has the influence of mobile marketing on the industry grown in the past 12 months? How will the expansion of mobile affect DR in 2014?
Hawthorne: The advent and acceptance of mobile commerce is still moving along relatively slowly, although momentum is gaining. Special offers through text messaging are highly ineffective with very low click-though rates due to their obtrusiveness. However, special offers during mobile searches have been effective. And advances on the app side of the mobile world have created transactional platforms that create new and exciting ways to reach customers, and increase lifetime value of existing customers.

Heroux: Absolutely — not in terms of dollars but in terms of percentage, mobile marketing has been one of the fastest growing segment of our business. Lots of resources are being poured into further developing and capturing the mobile market, thus increasing the growth of our industry.

Koeppel: During the past 12 months — and moving forward into 2014 — mobile marketing channels are evolving and are offering better demographic and behavioral ad targeting capabilities, based on CPM rates. One of those capabilities includes precise “geofencing,” where you can now target ads within a three-mile radius of any location. So if a client is looking to run DRTV in specific locations only, you can create a mobile banner campaign to geotarget the same area. In addition, mobile channels are offering more integrated targeting options that are resulting in better-targeted ads. For example, through mobile ad options, we can target an end user by a combination of their target area, demographic, past online search results and social media interactions. With expanded targeting options coming online daily, it will become more important than ever to incorporate mobile marketing options into your media mix, as ads can also be specifically targeted at an audience based on their online searches, “Likes,” and interests, resulting in more qualified/lower cost leads.

Kovac: We are seeing a huge growth in this area for young children and plan on it continuing to grow quickly in most demographics. It is not as prominent for a product that we are marketing to the female 55-plus demo.

Lee: SMS technology has improved conversion rates and created lead generation for opt-in growth. Conversion rates on mobile campaigns can be as high as 20 percent, which will be a game changer for DR in 2014 as a clear addition to the marketing pie.

Lyons: Absolutely and in a positive way. Mobile, and its continued growth, provides added touch points to customers, enabling them to interact with and purchase your product and/or service while on the go.

Medico: It has grown dramatically in the past year and will continue to grow. Consumers now can watch TV with their smartphones or tablets available and are able to immediately interact with the product offer. It may not increase the total number of orders, but it will shift the way consumers order away from telemarketing and onto mobile.

Medved: In order to fairly assess mobile, we need to break it into tablet and handset. Right now, mobile marketing is dominated by handsets, social posts and proximity-based marketing. The opportunity for DR marketers is to develop mobile strategy that matches the device, situational context and media opportunity or touch point.

Orsmond: The number of U.K. smartphone users continues to grow rapidly, with 57 percent of the population now using a smartphone or tablet. Smartphones and tablets are definitely affecting consumer purchasing behavior. In the U.K., a recent study found that TV still tops the list of media activities, although consumers are now choosing to watch their favorite programs more and more on PCs, laptops and tablets. In the U.K., shopping on a tablet is more popular than from a smartphone, with 66 percent of tablet owners admitting to having made a purchase from their devices during 2012. More interesting is that research has shown that tablet online shoppers have tended to purchase multiple products with a higher price tag. What does this mean to the DR marketer? Despite increasing use of the Internet and an explosion in the choice of mobile devices available to access media and communications, regular TV still remains the U.K.’s most watched media and viewing figures actually increased between 2000 and 2012, with the average U.K. viewers now watching nearly 5 hours every day.

Savage: Device proliferation continues to broaden with myriad devices of all sizes from the smartphones and tablets that we’re used to seeing and scores of new screen sizes in-between. Marketers should be presenting user experiences that are consistent and convenient across all of those different sized devices. Because mobile devices are trending more toward being research-and-browsing devices, it’s becoming ever more important to have simple and convenient conversion processes.

Stacey: We have not yet seen a significant impact of mobile marketing on the growth of our business. People are accessing the Internet through mobile devices, but using mobile as a standalone marketing strategy to reach consumers is still evolving and will continue to grow in 2014.

Given the current state of the DR industry, what would you change to ensure its continued health and growth?
Goldstein: The DR industry needs to become better educated about the effective use of digital and mobile and how the convergence of television and online consumer viewing is impacting consumer purchase behavior. In addition, the industry needs to continue to follow best practices in terms of claim substantiation and full disclosure of offers terms. The industry should take a look at its existing best practices and industry guidelines and update as necessary based on the rapid technological changes that are occurring.

Hawthorne: DR marketers must continue enhancing our systems to capture, measure and analyze engagement from all platforms. Response-driven and measureable DRTV has been around for decades. But if we don’t constantly improve our analytics, we’ll be out-performed by our younger digital marketing cousins.

Heroux: I don’t think I would make any major changes. The most important would be for the entire industry to work together as a team. We can all help one another without getting hurt. Exchange good ideas — what’s working, what’s not working, etc. Additionally, industry leaders should continue to use many of the Direct Response Marketing Alliance (DRMA) functions as a great way to network and to continue to build our industry together.

Koeppel: The industry needs to continue to attract larger marketers, by educating them about the benefits of DR. In addition, we must attract innovative start-ups that can employ DR to help take their businesses to the next level. The viability of the DR industry moving forward will also be dependent upon existing DR marketers adopting and employing new and evolving digital technologies into their marketing mix.

Kovac: Better E-commerce and social media expertise is needed, with fewer cookie-cutter E-commerce sites. More multichannel agencies are also necessary in this changing environment.

Lee: I would change the way industry key stakeholders interact with each other. As change continues to push integrated multi-channel distribution, direct response marketing needs to spend more time collectively driving transactions with best practices.

Lyons: We need more new creative and innovative offers. We cannot rely on old creative and offers to sustain us as an industry. Product development is critical as well.

Medico: As product marketing has been the life’s blood of DR, I would hope that the development and testing of new products and offers continue despite the costs involved. Marketers should also look to expand their relationships with their customers through ongoing communications and an understanding of what other products or services they may need and provide it to them.

Medved: More rigorous research to guide and validate the creative direction and messaging strategy prior to campaign development. The DR industry has relied heavily on the marketplace and response to direct campaign development. We need to be the voice reminding the content developers and distributors that DR dollars are significant, and they must consider them as they look to distribute entertainment content is new ways.

Orsmond: In the U.K., it would be to embrace a multi-media strategy from day one. The world is changing fast, and younger consumers are quickly abandoning the buying habits of their parent. The future spoils will go to those more savvy DR companies at the forefront of the media usage revolution. Media multi-tasking — where, for example, someone makes a phone call while surfing the Internet — now accounts for one-fifth of all U.K. media consumed throughout the day and the younger the person, the more this happens. Surfing the Internet via mobile phones is the fastest growing U.K. media activity, with more than 1 million new users during first-quarter 2013. DR marketers who ignore this trend will be left behind as the economy continues to improve year-on-year.

Savage: I’d like to see increased use of strategic planning and consumer research to help inform marketing strategy, as well as increased testing of innovative products and services.

Stacey: The DR industry is facing a number of externally generated disruptions to its business model — some of which we can influence and others of which we have to adapt. One disruption is the disintegration of the mass media audience and the evolution from As Seen On TV to “As Seen Everywhere” that many marketers must make. Another disruption, and one that is not unique to our industry, is the increasing regulatory burden and punishing legal environment that is significantly raising the risk profile across all industries and resulting in the curtailing of investments in new products and innovations.

 


About the Author: Thomas Haire

Thomas Haire

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