Frequently Asked Questions About Direct Response Marketing

What is direct response television and how does it work?

Direct Response Television (DRTV) is television advertising that uses a response medium (a toll-free number, web site address) to sell products/services or generate leads. The use of a toll-free number and/or URL transforms a one dimensional brand-driven commercial into a multi-dimensional marketing tool for capturing a plethora of product related data such as orders, customer and prospect names, addresses, product information, etc. . . Direct Response media time may cost as little as 25-40% off general advertising time and is typically bought by dayparts (25%) show/network specific (5%), and by broad rotator (70%).

What is the difference between direct response television and traditional advertising?

Traditional advertising assumes that viewers, after being exposed to an advertising message a number of times, will gradually change or enhance their attitudes towards the brand. Traditional media is bought with the objective of reach, frequency and GRP’s against a given audience – dayparts are bought against viewing habits. Since traditional television advertising does not elicit a direct response through a 1-800 number or web site address, it is difficult to quantify the success of the campaign and marketing dollars spent.

Direct response advertising spots assume no cumulative effect – each spot is a totally self-contained selling message that attempts to influence viewer behavior immediately. Even though direct response creative is developed to make the phones ring, at Paddock we blend the “hard sell” of direct response with the “image sell” of traditional advertising to develop creative that both drives sales and enhances attitudes towards a brand. Direct response media is bought according to an audiences’ propensity to buy – measured by Cost per Order (CPO), Cost per Lead (CPL) and Cost per Call (CPC). Since direct response television spots have a call-to-action for sales and lead generation, you can quantifiably track the success of each campaign and optimize creative and media according to CPO analysis.

Is my product or service right for a direct response television campaign?

There is no exact science to gauge whether your product or service is right for direct response television, but there are some basic guidelines one can follow. A product or service is right for direct response television if it meets the following criteria:

Mass Appeal: Television has the unique ability to reach a mass audience. Its most significant disadvantage is its inability to precisely target specific demographics, something accomplished much better through other mediums. Thus, the greater your product has mass appeal, the greater its success potential. Niche products tend to not do well. Ideally, there will be a wide range of demographics interested in your product.

Easily Demonstrated: Consumers purchase products and services to affect change in their lives. The more your product can visually demonstrate this change and/or use compelling, real people testimonials to support it, the greater your opportunity for profits. Products that are easy to demonstrate on television do very well.

Sufficient Margins: If your marketing goal is to sell your product directly over the television in a one-step offer; the larger the markup ratio, the greater your chance of success. Since the media expense creates a large cost per sale in a direct response television campaign, the product needs to have sufficient margins to make a campaign viable. The markup ratio is determined by dividing retail price by cost of goods. Normally, there should be a minimum of a 4-5 times markup from the selling price to the actual cost of goods. The wider the margin, the more profitable your campaign will be.

Though sufficient margins are important, at Paddock we work with our clients and media partners to develop Allowable Reports that take into account back-end margins, media costs, fulfillment, pricing and historical data of allowable costs for products in similar categories to arrive at a CPO target, that provides the best opportunity for financial success.

Which is more appropriate for direct response, a short commercial or a half-hour infomercial?

Stations and cable outlets sell time in units of one minute, two minutes, five minutes and then half-hours. There are no in-between lengths sold. One-minute and two-minute commercials are referred to as “short-form” and the half-hour infomercials as “long-form.”

Though there are exceptions to this rule, products that sell for $29.95 or less work best in a short-form campaign. The selling process for higher priced items need more information about benefits and therefore take longer than two-minutes.

Can I utilize direct response television with my existing spot and achieve similar brand DRP objectives from my traditional media buy?

To qualify for direct response rates, all you need in your television spot is a 1-800 number and/or a URL. Paddock also works with clients who are primarily concerned with building brand awareness for their product – something they accomplished in the past through traditional television media buying. After adding a 1-800 number and/or URL to their spot, these clients were able to achieve through direct response their same GRP targets for their brand, but at 40% of the cost of their previous media spending.

What are the production costs for a direct response television campaign?

A one or two-minute commercial can range in cost from $25,000 to $100,000, depending on the creative approach and the quality of the commercial. This is a fraction of what large agency’s charge for traditional brand: 30’s that average well over $300,000 per spot. We are much more efficient and take out all of the “Hollywood” hype. We still utilize the latest HD cameras, travel to locations, hire professional celebrity and voice talents, and use leading directors. The only difference between our final product and those costing half a million dollars is the price – and its ability to get somebody off the couch and make a call.

For long-form (30 minute) infomercials, the average production cost is $200,000 – $350,000. Higher quality long-form productions can range from $350,000 – $750,000.

What is media clearance and why is it important?

On the media side, Direct response spots can be “bumped” by spots that are paying full rate card. The number of spots booked, divided by the number of spots “cleared” is known as the clearance percentage. From a planning perspective, you want to achieve the highest clearance percentage possible. We have media partners that really know how to optimize your buy to get the best price and clear the most spots.

Is it true that direct response television is inexpensive because those spots only run during off-peak hours?

Our media partners plan and buy according to your marketing objectives. For clients interested in driving sales and leads, we buy according to audiences and their propensity to buy. Every spot is a self-contained selling unit. If it doesn’t sell or drive leads (make the phone ring or drive to your website), then we move the spot to channels that are performing better. For these direct response specific clients we buy dayparts not according to their time, but according to their performance.

For clients interested in prime time for brand awareness objectives, we buy accordingly during high-peak hours while still maintaining our ability to achieve a high clearance percentage average.

Is it possible to test a campaign before committing to a major rollout?

Not only is it possible – it is highly recommended. Though we have years of experience helping predict the success of any given product across any given network channel and daypart, we test all our campaigns first before committing to a national or regional campaign rollout. Testing allows us to not only optimize the channel and daypart selection, but also re-examine the creative and telemarketing scripting so that these variables can be analyzed and refined for maximum success.

How do I know that my campaign is working?

At Paddock, we work with our media partners and account personnel to check the status of your campaign everyday through our reporting software. This is standard in our optimization process.

Why should I work with Paddock and not my traditional advertising agency?

We know direct response television. That’s all we do. You need an experienced partner for this industry. For direct response specific campaigns that are not executed properly, 100% of the money invested in production and media can be lost. It is critical to work with an established company with a proven track record.