Latest trend: as seen in discounters - direct selling

Discount Store News, Jan 6, 1992

Latest Trend: As Seen in Discounters

A growing number of companies are exploiting their successful use of direct response TV programs as the initial merchandising and marketing medium for new products by turning to discount stores and other retailers to expand the distribution of their merchandise.

These marketers use their direct response TV programs to create identification and hopefully demand for their products, just as manufacturers a century ago used older technology - newspapers and magazines - to develop their brands and grow their business.

Major manufacturers in such categories as housewares and beauty care products are expected to join this TV marketing trend by promoting selected items in their own direct response commercials, using these programs to both generate more interest in slower selling items and sell merchandise directly to consumers.

The young direct response marketing industry is likely to expand into additional areas in the next few years as new TV technology makes interactive TV a reality and regional telephone companies start up telephone/computer "gateways" through which consumers can directly access manufacturers and distributors.

Discounters and other retailers, meanwhile, have responded to the success of "as seen on TV" goods by featuring selected direct response TV products in promotions and even in special sections that showcase a variety of TV advertised merchandise.

At least one major retailer has also discussed sponsoring its own direct response TV program, trade sources said.

Discounters' merchandising of TV promoted goods is a relatively new marketing phenomenon, reflecting both the sales success that "as seen on TV" items have achieved and retailers' need for lower priced merchandise in the current weak economy.

Direct response marketers estimate that sales through TV amount to about 8% to 10% of the potential volume of an item sold through traditional retailers. Retailers are interested in these products because TV has pre-sold this merchandise, creating potentially high demand for goods that carry margins ranging from 10% to 50%.

One indication of discounter promotion of "as seen on TV" goods can be seen in a tracking of the use of these products in seven retailer's flyers over a two-month pre-Christmas period, by Market ADvantage, a Northbrook, Ill.-based advertising information service. These chains were just a sampling of the merchants featuring direct response items during the period.

During this eight-week period, Venture devoted 0.55% of all its advertised merchandise to TV promoted products. The overall percentage that this merchandise accounted for among all the items in the flyers of the other were as follows: Bradlees, 0.16%; ShopKo, 0.20%; Target, 0.34%; Kmart, 0.41%; and Caldor and PayLess Northwest, 0.48% each. The weekly percentages in flyers ranged from a low of 0.20% at Bradlees to 1.13% at Venture.

Other discounters that have promoted "as seen on TV" goods include Wal-Mart, ShopKo, Fisher's Big Wheel, Rich's and Ann & Hope. But the marketing of direct response TV goods cuts across all merchandising formats, with membership warehouses like the Price Club and BJ's Wholesale Club, specialty discounters like Phar-Mor, Pep Boys and Montgomery Ward and catalogers like Service Merchandise and Best Products also spotting this merchandise on store shelves.

The air time for direct response TV ads sponsored by manufacturers and distributors runs from one and two minute commercials to 30 and 60 minute informercials. But all the TV presentations have a number of core features in common: * All the goods are actually demonstrated by a host, as opposed to traditional TV ads which feature voice-overs for the product shown and/or used in mini-dramatizations.

The raison d'etre for the direct response TV programs are the demonstrations, whereby hosts show and tell the features and uses of products in more detail than is possible in a print ad or in-store signage. This is especially important for new, unique or exclusive products. * The merchandise is presented in an entertaining format, with the hosts oftimes celebrities who interact with a studio audience. The celebrities are meant to discourage viewers from zapping from one channel to another while enhancing the credibility of the product.

But the nature of the programs also force direct response TV marketers to only offer goods that can be demonstrated in an entertaining, host/audience interactive setting. Many direct response marketers counter their sharply curtailed TV merchandising by offering additional goods through catalogs, credit card inserts and other mail order formats. * All the commercials give viewers a toll-free phone number and an address for ordering the merchandise.

The goal of the direct response TV merchandising is to generate impulse sales through the toll-free phone as the main way to buy the merchandise.

Direct response markets have turned to traditional retailers to further sales of their merchandise because of the limited potential of their TV marketing. While many people will buy a TV promoted item blind and wait for delivery, most consumers prefer instant gratification - touching and examining the merchandise, then buying and bringing home the item; they also want the comfort of being able to return the product for an instant refund.