Stronger Sales in Just 28 Minutes
Done right, a good pitch really pays off. That's why mainstream firms are lining up to learn the art of the effective infomercial.
(Business 2.0) – Fairfield, Iowa, rises from the flatlands like thousands of other small towns along the lonely roads of the Midwest. But in addition to corn, hogs, and rusty John Deere tractors, another uniquely American phenomenon has taken root here: the infomercial. At the foot of Fairfield's water tower, in a sprawling facility housed inside a former sewing factory, an ad agency called Hawthorne Direct produces many of the 28-minute commercials that have become a staple of late-night television--the get-rich-quick schemes, kitchen gadgets, baldness cures, and other pitches targeted at a nation of bleary-eyed insomniacs.
Timothy Hawthorne, the "king of the infomercial," brought the hard sell to the Iowa heartland in 1986 when he founded Hawthorne Direct, the nation's first infomercial advertising agency. But Hawthorne is no feverish late-night salesman. Easygoing and thoughtful, he practices transcendental meditation twice a day. (Fairfield has been home to an active transcendental community since the early 1970s.) His company has produced and managed more than 500 infomercial campaigns for clients such as Apple, Braun, Nissan, and Time-Life, and today counts almost 70 employees, $120 million in billings, and a 15 percent share of the $1 billion infomercial media-buying industry. "I don't consider myself an advertising guy," Hawthorne avers. "I'm more of an audiovisual communicator."
Storytelling is his big idea, the insight that made him rich. Hawthorne believes that an effective infomercial embeds a product in a tale of hope and transformation that entertains, delights, and persuades. Over the years, he's launched the careers of more than 20 top infomercial producers and specialists--former employees who learned the art of direct marketing while surrounded by Fairfield's cornstalks. The fact that Hawthorne's ideas have become commonplace goes a long way toward explaining why the industry is no longer the laughingstock of Madison Avenue.
There are other reasons as well. In contrast to the campaign-driven techniques that prevail in mainstream advertising, infomercial marketers combine rigorous product development, exhaustive consumer targeting, and daily scrutiny of advertising rates to create pitches that can be refined to maximize sales. Combine that with the opportunity to boost margins by selling directly to consumers, and you can see why both entrepreneurs and name-brand firms like Land Rover and Disney are creating their own infomercials. Last year 2,036 infomercials ran in the United States, and of those, 714 were new shows. Fortune 1,000 firms now produce an estimated 20 percent of all new infomercials.
Creating an effective infomercial is hard work--about one in 60 turns a profit--but the rewards can be spectacular. Successful pitches can generate annual sales of as much as $50 million, and breakout hits become gold mines: Ron Popeil has sold $1 billion worth of Ronco rotisserie ovens, while the Tae-Bo Workout infomercial (produced by Hawthorne disciple Mark Anuso) netted $300 million in its first year. Other benefits include viewer recall that can be three times higher than for traditional 30-second spots and phenomenal brand awareness: 92 percent of consumers have heard of the Nautilus Bowflex home fitness system--about the same number of folks that recognize the Nike brand. "It's the power of the half-hour," Hawthorne says with a grin.
Operators Standing By
The typical infomercial viewer is a mass-market consumer between the ages of 30 and 50 with some college education and an income of about $50,000 a year. Sixty percent are women. Most important, they're willing, even happy, to sit through a blatant advertisement. "Just by watching," Hawthorne says, "they've raised their hands and said, 'Yes, I'm interested in your product.'"
Hawthorne's research shows that only 30 percent of all TV viewers will buy anything sold on the tube. Just one in 100 will dial the phone number, and viewers will generally watch for 13 to 15 minutes before calling. "It's a live lab of marketing," says Ron Arp of Nautilus, a Vancouver, Wash., company that last year generated infomercial sales of more than $260 million. "We track every ad to get consumer feedback on what's pulling the sale."
Does the product appeal to men in rural areas or big cities? Did more women buy it from spots that aired on Lifetime or CNBC? Will they pay $29.95 or $34.95? By monitoring what works--and what doesn't--infomercial marketers zero in on the most promising consumers. Yet good infomercials also drive traditional in-store sales. Retail revenue from a hit infomercial (think George Foreman's ubiquitous grill) can be many times higher than actual infomercial sales.
But not every product is right for an infomercial. "You've got to solve a common-denominator problem," says Steve Dworman, a leading infomercial consultant based in Los Angeles. That's why the most successful spots speak to universal desires: fitness and diet, health and beauty, home convenience appliances, and business opportunities. Standard formats range from in-studio demonstrations to Larry King-like sit-down interviews, 60 Minutes-style "documercials," Oprah-type "rally" shows, Tony Robbins-style stand-up lectures, and fiction-based "storymercials." But regardless of category or format, Hawthorne believes that every product should feature "a magical transformation."
"The bigger the change, the more dramatic the impact," he explains. "And drama motivates buyers." That's why diet infomercials feature "then" and "now" photos. It's all about action: Ron Popeil stuffs a chicken, pops it into his rotisserie oven, and carves up juicy, delicious slices. The Little Giant collapses from a 12-foot ladder to a stubby kitchen stool. "Real people" testimonials--the backbone of all successful infomercials--add credibility. And don't forget repetition. Lots and lots of repetition. Hawthorne's mantra: "The more you tell, the more you sell."
Price is another consideration. Successful infomercials peddle high-margin wares that sell for $30 to $1,000. (A rule of thumb: The product should sell at five times its direct cost.) The fat margins are needed to cover production, telemarketing, and fulfillment--costs that generally range from $35,000 to $350,000 per spot, though they can reach well over $1 million if the pitch features a celebrity such as Cindy Crawford (Meaningful Beauty skin care) or Britney Spears (Proactiv Solution skin products). Media buying is the other big expense, with prices from $20,000 for initial small-market testing to as much as $1 million per week for a nationwide cable rollout.
Whatever the final sale price, the product must seem like a bargain--all the better to trigger impulse purchases. Infomercial marketers know which consumer hot buttons to hit. "Quick, easy, greed, new, fun, vanity," Hawthorne lists. "The infomercial needs to keep pushing as many of these as are relevant."
Although many infomercials still peddle junk--a taint that puts off many traditional product managers and marketers--that perception is gradually changing. Fortune 1,000 firms bring higher-quality products and productions that help offset more dubious offerings like GLH Formula Number 9 (spray paint used to cover bald spots) and Miss Cleo, the call-in "psychic reading" service that was charged with deceptive advertising by the Federal Trade Commission in 2002.
Costs are rising as well. Advertising rates have surged as much as 500 percent since the mid-1980s, even for slots in the dead of night. At the same time, audiences are scattering as television fragments into hundreds of cable channels and the Web, video-games, DVDs, MP3 players, and satellite radio compete for consumer attention.
Conversely, however, interactive television technologies--digital cable, satellite TV, TiVo, video-on-demand--are creating new infomercial sales opportunities. "The field will become more collaborative and more targeted," predicts Loren Grossman, chief strategy officer at direct marketing agency Rapp Collins Worldwide.
Hawthorne is sanguine about the changes. "For me, producing any kind of television, whether long form, short form, or documentary, is like composing a symphony," he says. "It's all about rhythm, tone, pacing, and phrasing. When it all comes together, it's very satisfying to both the heart and mind." Of course, whether it's still as satisfying in the bright light of the morning after is another question altogether.