[stomachmonkey]

First thing to know about infomercials.

If you see them, they are making money. The more often you see them the more money they are making. The ones that don't work, you most likely will never see. And there are plenty of them. Way more failures than successes.

Why an infomercial?

One reason, as previously stated, it is a path to retail.

To put a product on a retail shelf is not simple. You need to convince the chains category buyer that it will make him money. He is given an allocation of money and certain "open to buy" windows. If he takes a product that does not sell it's his azz on the line. So he wants to know why will people buy it, what's the USP, what kinds of dollars are you going to commit to generating awareness, what's your media plan, are you doing TV, let me see the schedule, etc....

Traditional advertising is speculative. If you have a current product selling x number of units a month then do a traditional print/radio/TV buy and sales go up you know something worked but not necessarily what worked. Part or most of your advertising dollars could have been a waste.

To a TV network "time" is a commodity with an expiration date. If you do not sell 100% of your available commercial time in a 24 hour period it is gone. You have not monetized it.

This is what makes DRTV work. You buy time 2-3 days in advance when stations are starting to sweat it. you pay .30 on the dollar for it so you can buy 3x's as much. $10k gets you 2 weeks of test time. You don't care where it runs, that does not matter in the beginning.

You don't care because each spot has a phone number, each station gets a different phone number. I run a spot today, tomorrow I get a report that tells me what stations it aired on, how many times, during what time periods and how many orders were generated. Some stations will do well, some will not, some will only do well during a particular time slot. So you discard the total losers, focus your money on the performers and within a week or two you have found your target audience. Now you start pouring money into it.

Here's the fun part, you are making money the whole time (with the right product).

There are 4 criteria for what makes a good infomercial product which we won't get into now.

When you run test spots you are looking to hit an MER (media efficiency ratio) of 1.5. For every $1 you spend in media you are getting back $1.50 in sales. That's the magic number that tells you that you have a viable campaign. So during your test you are refining the stations to bring the MER up as high as possible, you get into the 2.0 range and you are printing money.

You can turn a $10 k per week spend into a $1M per week spend in 12 weeks. Here's how. You start with $10k, get 1.8 MER so you come away with $18k. Take 85% of it and roll it into next week, x's 1.8 you come away with $27.5 k, repeat that for 12 weeks and you are up to $1,075,488.42 per week in media spend and have made $833,177.86 in gross profit and are generating revenue of $290,381.87 per week.

One of the things that makes the barrier to entry low is the product itself. If you see an add that says "Only $19.99, try now just pay shipping and handling of $9.99" It's almost a guarantee that $9.99 covers not only S/H but the COGs as well.

Here's the other fun part, "Allow 4-6 weeks for delivery". You build two weeks of product to keep on hand for the customer willing to pay a higher expedited shipping charge. The rest you build AFTER orders are placed and the money has already hit your bank account. You are paying for the manufacturing from proceeds already received. The customer is paying you for a product that has not been built yet.
Those "orders in hand" are collateral. You can now go borrow a nice chunk of cash and ramp your media spend even faster.

Then there is the upsell, you call for your $19.99 product but after my phone rep gets done with you they have sold you 2-3 additional items not even mentioned in the spot and your order total was $50-80.

If I can get you on a continuity, (ie a vitamin/supplement subscription) recurring monthly product shipment with pre approved monthly hit on your card I'm doing a happy dance.

If you get as few as 12% of the people buying the TV offer to opt in for $9 monthly continuity after 3 years those customers have made almost as much money as the main offer even with the attrition rate factored in.

DRTV is BIG business. It may look like a joke but it's serious stuff.