The Eight Most Frequently Asked Questions
- ↓ What products work best within the infomercial format?
- ↓ How do you find the right person or company to produce an infomercial?
- ↓ How much does it cost to produce an infomercial?
- ↓ What kind of show format should I use?
- ↓ How much does it cost to air an infomercial?
- ↓ Should I buy the time myself?
- ↓ Do I need a celebrity?
- ↓ How much money will I make?
- ↓ What conclusions should I draw from this article?
What products work best within the infomercial format?
I always advise potential business partners to turn on the TV and see what's selling. In general, the big categories are always vanity/sex appeal, housewares, financial opportunities, personal improvement, and, to a lesser degree, entertainment. This quarter the big products are hair extensions (vanity/sex appeal), exercise—especially “ab and back” machines (vanity/sex appeal), pasta machines (housewares), and memory courses (personal improvement). There are other tried and true standards as well.
Try to pick a product that:
- Is unique, one of a kind, and, if you are looking for direct sales initially, not available at retail.
- Has very broad appeal. Television is a mass-audience medium, and studies show that only 25 percent of the American population ever buys a product from a television offer. If your product targets a limited or specific segment of the population, market it through such media as print or direct mail.
- Is highly demonstrable.
- Offers a solution to a problem.
- Has a minimum five-to-one mark-up. It's harder to make a profit from direct television sales due to escalating media costs and competition for viewer's dollars.
- Has an excellent price/value relationship. Television purchases are impulse decisions. Make sure customers can't resist picking up the phone and ordering.
How do you find the right person or company to produce an infomercial?
First, decide if you want to market the product yourself or license the product to a television marketing company. Probably 75 percent of what you see on TV comes from one of the five or six major infomercial companies, with the rest from independent marketers or large Fortune1000 corporations. If you want to license the product or enter into some kind of con- tractual agreement with a marketing company, again, I would advise you to turn on the television set any weekend and watch one infomercial after another.We call this channel surfing. Make note of infomercials that have particular appeal for you. To find out who is behind these particular commercials, contact John or Clare Kogler at Jordan Whitney, Inc., publishers of the TV Monitoring Report. They are an excellent and objective source on the industry and can be reached at (714) 832-2432. In both cases, look for a company or individuals with expertise and a good track record with your type of product or service. Ask for references. Along with Jordan Whitney, another terrific source for finding out the inside story is Advanstar Communications' Response TV magazine. This direct response TV magazine is published monthly, and their editorial offices are located in Santa Ana, CA.
(NOTE: If you want to market the infomercial yourself, get a recent copy of Response magazine and note the companies and people who are advertising their services.)
Finally, pick up that phone and talk to others in the industry. The membership of the DMA DRTV Council can point you in the right direction and link you up with other professionals such as service bureaus, infomercial marketers, industry watchers, and analysts. There's also no shortage of trade shows to visit and meet people face to face. The DMA, Response TV, and the Infomercial Marketing Report all host national conferences several times a year, in locales across the country.
How much does it cost to produce an infomercial?
There is a very broad range here—$75,000 to $1 million—however, most fall in the $150,000 to $250,000 category. A typical demonstration show tends to fall in the lowest range of the spectrum. A typical talk-type show might cost $250,000, while an elaborate storymercial with actors and a story line would probably fall in the upper range. Guard against budget overruns. Have a tight script that everyone signs off on and do a comprehensive off-line edit. Think how expensive it is to build or renovate a home and change your mind midstream—the same thing goes for an infomercial. You don't want to find that you have spent all your money on production and have nothing left for media or inventory. Location shoots, high-priced talent, special effects, reshoots, and overtime can all drive a budget out of control. The best advice is not to let your ego rule your pocketbook. For example, depending on your objective, the show's format, or the product, it might not be necessary to shoot all in film, which is far more expensive than video. Ask yourself if that new revolutionary widget really needs to be demonstrated with the majesty of Mount Kilimanjaro in the background. Is it important to have George Lucas' Industrial Light and Magic create special 3D computer-animated images for a kitchen cleanup product? Realistic answers to these probing questions can shave hundreds of dollars off the bottom line of production costs.
What kind of show format should I use?
If your objective is to sell a product or generate a lead, pick the format that will produce the best results for the least amount of money. If your objective is to reposition a brand or upgrade or maintain a corporate identity, you may be willing to spend more on your image than is necessary to get the job done. The main formats include the demonstration format, and the storymercial. Of course, there are some hybrids of these different formats. Housewares are normally done in a demonstration format. Vanity/sex are generally done in talk-show or documentary styles, but, again, if it is an image piece, it could be done as a storymercial. Financial opportunities, personal improvement, and entertainment products are generally documentaries.
How much does it cost to air an infomercial?
Media is generally broken into two categories: the test and the roll-out. Media tests run anywhere from $25,000 to $100,000. We usually get our feet wet with about $10,000 and start doubling it every week. You pretty much know what you have after you spend $50,000. A decent test should include a mix broadcast and national cable. The roll-out is another story. Our bare minimum for a successful infomercial is $50,000 per week; generally we spend between $100,000 and $500,000 per week for a successful infomercial. If we were to use baseball as an analogy, $100,000 is a single while $500,000 is a home run.
Should I buy the time myself?
No, you should not. Why? For the same reason you don't perform surgery on yourself, rewire the electricity in you home or give yourself a haircut—it's dangerous, costly, and, ultimately, you run the risk of looking stupid. Media buying is always best left to experts who are trained and experienced in developing media strategies and launching campaigns that can make or save you millions. They also know where to buy and when. For example, our agency of record has a database that contains almost 1,000 product histories and that chronicles results for every airing purchased since 1987. It currently purchases about $10 million per month of television time. Because large agencies buy for many clients and control a sizable amount of advertising dollars, they also have tremendous clout with stations. Many have taken years to develop and nurture long-standing relationships with key contacts. This is crucial when seeking the best rates and time slots. Buyers know when and how to ask station representatives for such things as make goods, free airings, charge backs, and other arrangements that save clients considerable money. Granted, you do pay a commission to media buyers, but all direct marketers know that it's not the commission that's important, it's the cost per order. Direct response television media buyers are also skilled negotiators who know what the market bears. This is especially crucial today as media costs are being driven out of control, making it harder to break even on individual airings.
Do I need a celebrity?
When you hire a celebrity, you are entering the alien world of the entertainment industry. As I like to say, enter at your own risk. It is a world inhabited by agents, managers, and lawyers. Need I say more?
Once again, look at the categories:
- Housewares never require a celebrity;
- Financial opportunities and personal development depend on the charisma of the spokesperson and the credibility of the testimonials and also do not require a celebrity;
- Vanity/sex appeal products may benefit from celebrities whose lives depend on vanity or sex appeal;
- Entertainment products generally feature celebrity-driven products and therefore don't necessarily require the additional panache of a celebrity host.
How much money will I make?
This is a question better to ask your psychic friend, but I'll try to give you a range. First of all, don't get into the infomercial business unless you're prepared to lose your entire investment. Even among industry experts, few people succeed more often than one in every four attempts. That means it's likely that you'll invest $1 million before you see one dollar of return. If you can't afford to lose that much money, then find a partner or license your product to someone who can afford to play the game. Assuming that you do eventually put it all together, do everything right, and hit pay dirt, you can expect to make between 5 percent and 20 percent of the gross sales as profits; 10 percent is about average. In our industry, you have a successful infomercial when your gross sales exceed $10 million—less than that, you're usually recouping your startup expenses. A successful infomercial will gross between $10 million and $50 million. When you exceed $50 million on a single infomercial episode, you enter the hall of fame.
What conclusions should I draw from this article?
Just in case you are counting, this is a bonus question. Great direct marketing always looks easy, but ask yourself: Just how easy is it to beat my control ad? To make money in this business, it has to all come together:
- A great product with the rights margin
- An irresistible offer
- A great infomercial
- The right media, inbound, order processing, fulfillment, and customer service Also, assemble a great team, double-check your references (this business seems to have many parents of great successes and none of the failures), make realistic projections, and don't ignore your chief financial officer. Remember this is a growing business with an extremely high demand for the true experts. Expect to pay a lot for their advice.