Sunday, April 27, 2008

DRTV - Mistakes made & Lessons Learned

When we started the infomercial projects, my personal objective was to observe the entire process from a close distance.  We knew from our research that a successful direct response television (DRTV) campaign would require a perfect execution of video production, logistics and broadcasting.  We were also well aware that it would be a miracle to hit a home run on the first shot. While hoping for the best, the game plan from the very beginning  was to  minimize the risks as much as possible.   We were focusing on gaining the first hand knowledge of  all the pit falls of the direct response marketing while avoiding any severe negative impact on the rest of the business. As part of the risk mitigation strategy, we got several stake holders involved in the potential risk and reward of the project. 

Our initial target markets were Canada and the United Kingdom. We found out at a later point that the UK had a very rigorous and strict approval process for the infomercial before it could be aired.  We easily got the approvals in Canada but the objections from the UK approval board required us to redo the entire production from scratch.  In the future, we would not take a single step in the UK without getting the script approved first.

Another mistake that we made was that we chose to go with a product that was already selling well through our retail customers including the Shopping Channel. Successful direct response products always go from TV to retail sales. As we learned through experience, a backward scenario can create a lot of conflicts especially in the flexibility to structure the price to be successful on TV.  A product (or a similar product) that is easily available in the nearby store shelf is generally not a good candidate for DRTV.

There were some good lessons to be learned on the production front as well.  If I had to name the most critical factor in the success or the failure of an infomercial, I would say it's the host who is presenting the product. A host must be able to get in front of the camera and get the viewers to a state of mind that it will be the biggest mistake of their life if they do not buy the product right now. We selected the hosts with acting background thinking that they would not be shy in front of the camera. However, a good actor is not necessarily a good sales person also who can sell a product with conviction on TV.  An infomercial host has to be an evangelist who can demonstrate his/her passion about the product on camera.  One of our big mistakes was that we did not screen-test the hosts before the actual day of filming.  If I knew then what I know now, I would have stopped the filming and would have given our hosts few more weeks to rehearse the entire script a few dozen times using a handy cam. We had good hosts but we did not provide them enough time and guidance to master the script.

Talking about the script, we had it written by a writer who was very experienced in writing dramas and did an excellent job of writing the script more like a documentary.  Once again, if we had to do it all over again, we would give her a proper guideline to write the script.  We also counted on a producer that we hired to know all these things, but apparently, while he had some experience with the film industry, was absolutely clueless about the infomercial production.

Although it might sound like we dived into this project without thinking much but the fact is that we did put a lot of thought into this entire process from day one. We overcame many technical challenges,  successfully executed the filming process, created wonderful animations, beautifully edited the video footage and came up with an impressive CAT (call-t0-action).  We gave this project to Alive Pro Studios knowing it very well that they did not have much experience producing an infomercial for DRTV. However, it was worth the risk given that we had years of working relationship with them and knew that they will give it their best.  And they did.  The final product was an artistic master piece but just did not deliver the results for the infomercial to be a success.

In the direct response industry, the only measure of success of the infomercial is the amount of revenue that it produces.  At the end of the day, being the president of  Heaven Fresh, I take all the responsibility of less than perfect outcome of the project. The only thing I would add here is that this is not the end, it's just the beginning.  We will go back at it and and I am very confident that all of this time and money investment will pay off in a big way down the road.

If you are interested, you can watch the infomercial here.

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Monday, April 21, 2008

Heaven Fresh Infomercial Results

I have written a couple of posts in the past about Heaven Fresh infomercial and I wanted to summarize the results as we concluded the trial in January 08.  To sum it up, this experiment cost us approximately $125,000. A rough breakdown of the figures is as follows:

Total Sales:.............................. $30,000
Product Cost:........................... -$10,000
Production Cost:...................... -$55,000
Media Cost (Air Time):............. -$70,000
Miscellaneous Costs:............... -$20,000
Net Loss:................................. -$125,000

As it can be seen from the numbers above, we achieved an MER (media efficiency ratio) of 0.5  i.e. for each dollar that was spent on buying the air time, the infomercial produced 50 cents in sales.  Even though being on TV does give the company some brand exposure, a micro multinational simply cannot sustain the purchase of expensive airtime without pulling off enough sales to at least cover the air time costs. The rule of thumb is that a direct response TV campaign has to achieve an MER of  at least 2.0 for it to be considered 'viable'.  I used the word viable because, although monetarily we took a hit on this experiment, I still consider it very 'successful' as we ended up learning a lot from our first direct response venture.

Given that the profit margins are just about 10% in our business, it takes one million dollars in sales to cover a loss of $100,000.  As expensive as it might sound for a micr0-multinational to produce and broadcast an infomercial, anyone familiar with this industry knows that the above mentioned numbers are small potatoes even for running quick trial.  If an infomercial campaign takes off, it can produce millions of dollars in sales very quickly.  Obviously, this potential reward simply cannot be realized without a proportional risk attached to it.

This is not the end for us when it comes to direct response, this is just the beginning. We know what to do and most importantly what not to do next time.  Although, we hoped for the best but we also prepared for the worst. Even when we started it, in my mind, it was mostly about going through the process and learning the intricacies of the direct response industry. Obviously these valuable lessons had some tuition cost associated with it.  I whole heartedly believe that the time and money spent on this project are going to pay off for us in the near future. I will try to shed some more light on the things that we did not do right in a subsequent post.

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Saturday, November 3, 2007

Heaven Fresh UK: Sales Initiatives

The Heaven Fresh UK web site started generating sales as soon as it was launched in November 2006. After observing the online sales activity for few weeks, we were very confident that just the online business in the UK would be sufficient to break even. This initial cash flow from web sales was our life line.  Being a micro-multinational we did not have the luxury to drain our investment account for more than 3 months. Also, the second round of financing depended on our ability to quickly get the UK office on its own feet.

Although e-commerce has changed the rules of engagement for starting the 21st century businesses, the traditional sales and marketing channels still play a significant role in the growth of a business, especially the businesses involving the marketing of consumer products.  We knew that the real growth of Heaven Fresh UK was dependent on our ability to penetrate the market using all the possible sales channels particularly television and the retail shops. Therefore, we took different sales initiatives to determine the most cost effective ways to increase off line sales in the UK. Following are the short description and the outcome of those initiatives.

Telemarketing

Telemarketing campaigns have worked very well for us both in the US and Canada to get small business owners to sell Heaven Fresh products in their shops. We ran a trial to contact small UK shops in various categories but did not get a very positive response.  From the initial reaction, it seems like the people in the UK do not prefer to conduct business over the phone.  My theory is that the telemarketing works well for us in North America because it is already a norm here.  Because of the great distances involved, it is very costly for the suppliers to send sales representatives for a face to face meeting with the owners of thousands of small businesses scattered between the Atlantic and the Pacific oceans. On the other hand, one could easily drive from one end to the other end of the UK within hours, Therefore, the suppliers introduce their products in person and that is exactly why we do not get a very warm reception when trying to do this over the phone. If anyone has a different experience, I'd be very interested to find out if my conclusion has any merit or not.

TV Infomercial

TV is probably one of the best media to introduce a consumer product to the masses. We specifically tailored the Heaven Fresh infomercial to be able to run it in the UK.  Before we even started the production process, we knew that we will have to get the production approved by BACC (http://www.bacc.org.uk/) for broadcasting in the UK.  We skipped the script approval part and decided to send the video production instead for approval as we were quite confident that we were well within the guidelines based on our experience in Canada.  While the infomercial was approved for broadcasting by the Canadian regulatory body with minor changes, we had a surprise of the lifetime when we got result of the initial review from the BACC in the UK. The extent of the strictness of the infomercial advertising in the UK can be realized from the suggestion for us to remove the word "necessity" as it was debatable whether air purifiers were really a necessity in the UK. In a nutshell, our only choice was to completely redo the infomercial.  It was an expensive lesson for us that before even a single minute is spent on recording and production, we should get the advertisement script approved for TV advertisement in the UK.

Large retailers and chain stores

Getting a few of the large nationwide retailers to carry the Heaven Fresh products in the UK is one of the most crucial factors in our long term success. However, getting these big retailers on board can be a long and costly process. A process that requires both perseverance and patience. We started approaching the large UK retailers in June 07 and got a very mixed response in the beginning. Gloria Baptist-Smith, Heaven Fresh UK sales director, has been doing a tremendous job of introducing the company and the products to various buyers. With her tenacity and experience in the industry, the doors are starting to open for us. She has done a phenomenal job of getting Heaven Fresh UK on the supplier list of few key accounts including Harrods, Revital and John Bell & Croyden in a very short period of time.  I believe it is just a matter of time that the customers will be able to pick up the Heaven Fresh products from a nearby retailer.

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Thursday, August 30, 2007

Direct Response TV Marketing

I wrote a post in July about the launch of Heaven Fresh infomercial.  After a trial run for about 2 weeks, we came to the harsh realization that the chances of running a successful direct response TV campaign are not any better than winning a multi million dollar jackpot.  Well, may be slightly better. The sales produced during the trial run on Shop TV Canada were way below our expectations.  We joined our heads together to analyze the results and the reasons for the lack of desired response.  We recognized that we needed to fix our ridiculously high  expectations before anything else.  Then we have to prepare  for a long and expensive learning curve.  

Direct response TV marketing is a multi-billion dollar business.  But broadcasting a successful TV infomercial campaign means that, along with the stars,  countless factors have to be perfectly aligned.  An infomercial is generally considered successful if the Media Efficiency Ratio (MER) is 1:2, which means that every dollar spent on buying the media should produce 2 dollars in sale. If an infomercial does not achieve the desired MER then one of the following need to be considered.

  1. The media is too expensive.
  2. The frequency of the broadcast is not high enough.
  3. The TV channels is not reaching the right audience.
  4. The time slots picked are not the right ones.
  5. The particular time of the year is not the right one.

For a micro-multinational like Heaven Fresh, experimenting with the broadcast frequency, time slots and TV channels can be an expensive proposition. If none of the above work then the next thing would be to try different versions of the production with the "right" combination of the following: 

  1. A different price level.
  2. A unique offer to convey value proposition.
  3. A stronger call-to-action (CTA) to create a sense of urgency in audiences' mind.
  4. A more engaging script to convey the "key information".
  5. A different host to create a sense of trust and a bond with the viewers.
  6.  More appealing graphics and visual creativity

There can be various permutations of all the above factors. As both the media and the production process are expensive undertakings, a small company can run out of budget long before finding the "magic combination". 

Anyone involved in direct response TV marketing knows that not all the products can be sold on TV and hopefully that can be determined in the very early stages. We are very much confident that Heaven Fresh air purifier is the perfect product to be sold on TV and it's just a matter of time before we find the winning combination of all the factors mentioned above to make our infomercial a phenomenal success.

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Saturday, July 7, 2007

Heaven Fresh Infomercial & TV Marketing

Shaper Image has been broadcasting a very high-rated TV infomercial campaign in the United States for its Ionic Breeze air purifiers for quite long time now. Other companies like Ionic Pro and Oreck are also airing TV infomercials in the US for their indoor air purifiers.

Having started the business in March 2003 and being a small player in the air purification industry, we only had a wishful thinking on our part to have the Heaven Fresh infomercial running on TV. TV infomercial marketing is an expensive and risky undertaking for any company, let alone for a cash strapped small business. There are just too many variables that can be the reason for the failure of the infomercial campaign. We had a breakthrough when The Shopping Channel (http://www.theshoppingchannel.com) Canada decided to carry the Heaven Fresh products. The first show aired in January of 2005 and Heaven Fresh products have been enjoying a successful ride on TSC since then.

When Oreck started the TV campaign in Canada, our home base market, it left us no choice but to get serious about producing our own infomercial if we were to make Heaven Fresh a recognizable household name in air purification business. Although, more than a year of successful TSC run had really boosted our confidence to go for producing and televising of our own infomercial, the TV production and broadcasting were still an unfamiliar territory for us. We needed the qualified and experienced people to help us mitigate the risks of TV sales/marketing. Mainly there were following three areas of concern:

1) Financing for media and inventory

2) Television production

3) TV marketing management (Air time & TV selection, order handling, logistics, sales analysis, negotiations and coordination etc.)

We believed that the best way to move forward on the TV marketing campaign was to find partners and stakeholders in the project ,who would have a vested interest in it and take its success and failure as a very personal matter.

For financing, there was no better choice than to get our supplier, Surround Air (http://www.surroundair.com), support the project. By having Surround Air as a partner in infomercial, we not only reduced our financial risks but also got our supplier intimately involved in the entire TV marketing process. At the very beginning of the project, we got a million dollar advice from the president of Surround Air, Mr. Casey Fisher, not to go for production houses that offer bundled deals to produce and air the infomercial. Therefore we needed to maintain a deep involvement every step of the way in the production and broadcasting process. This included, script writing, hosts selection, equipment , filming, studio setup, animation, testimonials, topic experts, media selection, media editing, TV/air time slots selection, call center choice, regulatory approvals and so on .

A quality video production is one of the keys to have a successful campaign. Having worked with Alive Pro Studios (http://www.aliveprostudios.com) for some time for all of the Heaven Fresh graphics needs we knew their passion for the video production and we had faith in their ability to do quality work. Yet, we wanted them not to treat the Heaven Fresh infomercial just like any other project that they needed to finish. But instead make every decision in the Heaven Fresh infomercial production process by having the ultimate goal in mind which is to maximize the impulsive sales when people watch it on TV. Well, what better way to get Heaven Fresh project very near and dear to Alive Pro Studios than to get them to invest in the project and make them a partner in the profits. So, it was done and we had one more investor, stakeholder and partner in the Heaven Fresh TV sales.

A company can have the best video production and all the financing that it needs, but the success of an infomercial hinges on getting the right message to the right audience, selection of the TV channels and air time slots, logistics coordination, calls management, sales data analysis and several other factors. We had to have someone, who lives and breaths "marketing",  intimately involved in the TV campaign. For that we could not think of a better person than Jim Pappas of Future Management Systems (http://www.designyourbiz.com). Jim is a marketing guru and he has greatly helped Heaven Fresh with various marketing and management tasks from almost the very beginning. An experienced marketer and a very creative individual with vast management experience, Jim was the perfect partner to manage the Heaven Fresh TV infomercial campaign, only if we could convince him to invest months of his time in it for a share in the profits. Jim definitely saw the value in the project and thus became another investor, stakeholder and partner.

Every one involved in the project has given their utmost best for its success. We do not see anything that we could have done any different. Only time will tell whether the team's best efforts were good enough to achieve the desired results. But one thing is certain that every one involved is determined to make it work and they will keep doing whatever it takes until we accomplish our goal.

I have to finish this post by saying that when we started the project, the infomercial seemed like a big gamble for Heaven Fresh. We did all we could to get the odds in our favor. Coincidently, the campaign launches on 7/7/7 (July 7, 2007) at Shop TV (http/www.shoptvcanada.com) in Canada. Maybe our big gamble is about to pay off and we are going to hit the jackpot :)

Heaven Fresh infomercial

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Saturday, June 30, 2007

Heaven Fresh Distribution Startup Strategy for a New Country

Heaven Fresh is in the business of marketing and distribution of air and water purifiers. Just like any other marketing and distribution company, the biggest challenges for us in a new county are:

1) Finding "the perfect" partners

2) Reaching out to potential customers

3) Expanding the distribution network

Finding the right people

If people are the biggest asset of any business then the right people can be the difference between the survival and death of a micro-multinational in a brand new market within weeks of starting the operation. With limited capital and time, there are various challenges to face. Anyone managing the new office must be very well aware of that and must be ready (both physically and mentally) to take on this challenge. 

We believe that the kind of commitment that a new Heaven Fresh office needs can not be expected from an employee. For each new office/distribution center, we need a partner with entrepreneurial spirit,  who wants much more than a regular job. Therefore, instead of seeking employees we seek "partners" who get personally vested in the business and have a sense of ownership. These partners share the Heaven Fresh vision and are prepared to take on a difficult task.

When selecting a new partner, we try to make sure that this new partner will not only be able to handle the new office but will also be able to contribute his/her skills and talents for other HF offices as well.  The new partner can be someone who's already involved in similar business and wants to join a global team or he/she could be a fresh graduate from a college/university  and is willing to give whatever it takes to make things happen. For example, our partner in Germany, who is managing the Heaven Fresh Germany office,  was already involved in air purification business when he decided to work under Heaven Fresh umbrella.  He had years of engineering experience under his belt and had quit his job to start the business. On the other hand a young graduate with Master's degree in computer science took on the responsibility for the UK office realizing that his duties will not only be limited to software development and IT work but will also include shipping & handling of the daily orders, loading & unloading of the containers, accounting, customer services as well as the management of the every day business affairs.

Immediate reach to potential customers:

Reaching the targeted retail customers as soon as possible after setting up the office in a new country is extremely crucial for a micro-multinational company like Heaven Fresh.  If we are to achieve our goal of breaking even in just 3 months,  we must be able to reach out to the customers who are already prepared to buy our products.  This immediate cash flow is the life line for a new Heaven Fresh office. 

There is no better media than the Internet search engines and an e-commerce web site to get that much needed cash flow to sustain the new office. If a web surfer is searching for the words like 'air purifier', 'air cleaner' and  'air ionizer'  etc.,  it simply means that he/she is already thinking about purchasing such a device. The simple fact that the generic key words are being used to search for an air purifier also suggests that the potential buyer is not interested in a particular brand.  So, if we can just manage to steer the web surfers to our web site, we have a huge chance of closing that sale. 

With four of our web sites (US, Canada, Germany & UK), the first sale came in within 48 hours of launching each web site.  Each sale from the newly launched web site puts more money in the company's account to be spent on pay-per-click advertisement to direct more potential customers to the website. While pay-per-click programs such as Google Adwords, Yahoo Search Marketing, Shopzilla and shopping.com are great to get the sales cycle started with just a few bucks, the real value is to get the new web site ranking high in natural search (the non paid search results of Google, Yahoo, MSN and other engines).  Out of all the search engines, Google is my favorite as it rewards us for our hard work in other countries. Just to give an example,  our first web site for Heaven Fresh USA (http://www.heavenfresh.com) ranks high for key words like 'ionic air purifier'.  When we launched our UK web site http://www.heavenfresh.co.uk in November of 2006,  Google automatically associated the UK site to the US site as both share the domain name, the company name, the slogan, the products, the site keywords, the site structure and the cross links  on all the Heaven Fresh web sites. On the other hand Google is smart enough to know that the new site is geared towards the UK market from the company phone numbers, the physical address and the sales currency etc.  The Heaven Fresh US web site might not be much of an interest to a web surfer in the UK as there is Trans-Atlantic shipping involved there. Therefore, the new UK web site http://www.heavenfresh.co.uk automatically gets the weight of the established Google rank of the US site http://www.heavenfresh.com.  This visibility in the search engines (paid & non paid) not only helps us get the retail customers but also attracts distributors who are looking to resell air and water purifiers in that market.

Our rule of thumb is that the online sales must stop the initial bleed of the company bank account within first 12 weeks. Beyond that any further investment in the business must be reserved for the growth activities instead of the working capital.

Expansion of the Distribution Network

As a consumer products marketing company, expanding the Heaven Fresh product distribution network and using all the possible sales channels are the key factors to grabbing a significant market share in the new country.

Establishing a distribution network can be an expensive and time consuming undertaking for any company. Anyone involved in consumer products marketing knows it very well that each product has a limited life cycle. Depending on the stage a product is at during its lifecycle, different strategies and sales channels can be adopted for distribution.  In a micro-multinational company, it is very important to identify the life cycle stage of the products  in a particular country as this stage can vary from country to country. Taking an approach that a particular market is not ready to entertain or spending the time and money on experimenting with the wrong sales channels can spell disaster for a small company. We learned this the hard way in Heaven Fresh Middle East offices (United Arab Emirates & Saudi Arabia) where we made certain assumptions that were only valid for relatively mature European or North American countries. The good thing is that we recovered from our mistakes and managed to turn those offices profitable. 

Depending on the resources available and the market conditions, we either use direct sales approach, establish a network of small distributors, put the products on the shelf in the big box chain stores or sell through home shopping TV networks.  This is a simplified version of our efforts to expand the distribution network of Heaven Fresh. An entire book can be dedicated to the consumer product distribution in 21st century as well as the most effective ways to do it in a micro-multinational environment. I will write more in bits and pieces on this topic.

At the end, I have to say that we are very excited about our latest endeavor to run the 30 minute Heaven Fresh infomercial to sell products on TV. The infomercial will debut in Canada on 7th of July on Shop TV and will start on Best Direct TV in the UK on 30th of July, 2007.

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