In 1989, I began consulting for a number of companies in the infomercial industry. I had a fairly extensive background in both direct response marketing and the entertainment industry. Both were very essential elements utilized in my new consulting role. I immersed myself in every aspect of the business—from show creation to creating product, telemarketing scripts, back-end programs, and additional marketing avenues. This early information that I learned was essential in my education. But it wasn’t until I created my own product (a perfume called Curiosity) produced my own infomercial, purchased the media time, and created my own back-end marketing programs that I really learned all aspects of the business from the trenches.

The following report is a compilation of what I learned from my hands-on experience,and the experience of others in the business who shared their startling insights with me confidentially. You’ll notice I don’t talk about any of their actual campaigns, just the lessons learned.

This report contains the most important information I’ve learned over the past 15 years in this business. It’s never been printed in any book, report, or literature previously. In fact, fewer than 10 people in the world probably know it. This isn’t an exaggeration. When I printed this information in the final issue of The Infomercial Marketing Report, the most successful company in the industry, The Guthy-Renker Corporation, made this mandatory reading for all of their employees. Everything in this report is based solely on what has been proven to work in the real world. Companies have literally spent millions of dollars discovering the secrets I lay before you. Properly applied, this inside information will be a gold mine to your marketing efforts.

Enjoy!
Steven Dworman

THE INFOMERCIAL

• No one can predict a hit. It’s very much like the movie business. You can put all the elements together, but until you test your show,there’s no way to know exactly what you’ve got.
• The only exception to the first point occurs if you find a product that’s already selling like hot cakes in a county fair-type venue and hasn’t yet found widespread exposure.Then, it’s just a matter of not screwing up a successful pitch that’s been perfected over time. Examples of this include TheSmart Mop and The Miracle Blade.
• Successful products on QVC or the Home Shopping Network do not necessarily translate to good spot or infomercial products. If this were true,these networks’ DRTV divisions would be the most successful in the industry.This situation really is a mystery. My guess is that none of these companies have a DRTV genius who can pull this off.

These networks are such an incredible testing ground. For example,companies that present a product in multiple appearances during just one weekend can often double or triple their sales from their first to their last appearance simply by paying careful attention to the sales impact of specific on-air comments and then incorporating more of these revenue generating claims and statements.

• There are only a handful of true DR geniuses with whom I would trust my own money to produce a winning show. Who are they? Steve Scott and Frank Kovacs, who produce for American Telecast; Eric Stilson, the marketing genius behind HealthRider; Lenny Lieberman of ProActive; Tony Robbins; Victoria Principal; Ron Popeil, who produces for himself with incredible results; and Mike Levy, creator of Amazing Discoveries. I also take my hat off to the people at American Marketing Systems for making Carlton Sheets such a success as it enters its second decade.
• A successful infomercial is a miraculous science of entertainment and sales. It’s a high-wirebalancing act: too much of one element at the expense of the other and you’ve lost the sale. Entertainment gets people to stop and watch what you’re doing and it keeps their eyeballs glued to the program. But too much entertainment undercuts the sales message. Direct marketing copywriters learned this long ago. That’s one of the reasons that cute headlines seldom work.
• During the early 1990s, many supposed experts recommended repeating your infomercial message every seven minutes in a “pod” format. This has never been proven effective, and I don’t believe it works. Studies show that 90% of all orders come in at the end of the show. Logically, the more you repeat yourself, the more people will feel they’ve already seen your entire message and the more they’ll tune out early. These people won’t be around to participate in that golden 90% sales window.
• Direct response TV is a mass medium. Small changes made in a show can, over a period of time, significantly impact profitability. A new word in your offer, a different bonus, different placement of your commercials—any such adjustment can generate a 1% to 2% increase in orders that will mean a $1 to $2 million increase to your bottom line on a $100 million campaign.
• Having watched infomercials for 15 years, the public has become very sophisticated. Most ofthe shows on the air now are old, tired and formula-driven. I haven’t seen anything really new and exciting in quite a while. Neither has the public. Think outside the box. What will capture the public’s attention, startle them, and get them talking the next day?
• Never make your celebrity the expert. Always have your celebrity play the role of the satisfied customer.
• Make your before-and-after examples as realistic as possible. The public is sophisticated. Don’t change filters or lighting… customers will see it in the eyes and know that what you’re promising is not true.
• Many successful shows have a certain magic about them that works, regardless of the technical polish of the presentation. I always remember a lesson that Tony Hoffman taught at one of my seminars.He showed an infomercial he had produced for a kitchen product. The show wasn’t well produced, but the product was selling extremely well. Tony figured that if he went back and reshot the show with higher production values, sales would climb even higher. He used the same script and talent as for the first show. But when he tested the new version, it bombed. Tony went back to the old, poorly produced show immediately. Maybe it was the spontaneity of the first version, maybe justvoodoo.
• American Telecast always has an announcer read the 800 phone number over the air, in addition to supering it onscreen. I have no doubt they’ve tested this and it obviously makes a difference, or the company wouldn’t consistently spend the additional time and money.
• Original music may be the most important element missing from most infomercials. Filmmakers learned the importance of music years ago. Music can make a good scene great. It tugs on the heart strings and stirs emotion and desire.
• To increase your credibility 100-fold, have a member of your talent stand in for the home audience and express doubts or disbelief about the product. In his most effective shows, Mike Levy proved a master at this. He played skeptical, asked hard questions, and then presented knockout answers.
• Want to really gain tremendous credibility? Show something go wrong during a demonstration and acknowledge the problem. The audience will believe you have nothing to hide.
• Television buyers, as a general rule, are not as faithful or as long-term as print buyers.
• Most shows use too many call-to-actions and the first one usually occurs much too early. When I ran my infomercial for Curiosity Perfume, five different women told us that they were ready to order the product about seven minutes into the show. We then put a commercial in that exact spot and re-tested the show on the stations where it had previously run. Sales dropped in half. Why? I think it was because although their heads said they were ready emotionally, the women hadn’t been whipped up into enough of an emotional frenzy to pick up the phone and dial. Unfortunately, most call-to-actions appear before the viewer is sold. But once the offer has been revealed,the viewer has no reason to keep watching.
• Expert opinion on your show can add tremendous credibility. The more authoritative your source, the more impact he or she will have.
• What can you do to create excitement during your show? Ron Popeil generates excitement in a kitchen by having multiple activities going on simultaneously. Eric Stilson produced an avalanche of excitement in the HealthRider infomercial by having a troop of attractive women perform dance movements on the machine in different settings. Mike Levy set the hood of a car on fire to demonstrate a car wax. Ask yourself: How can you get people to stop flipping channels and become mesmerized by your product?
• American Telecast claimed for years that celebrities make a huge difference in response rates. Guthy-Renker has obviously tested this and is using bigger and bigger celebrities in their upcoming shows. They wouldn’t be paying substantial pieces of the gross unless the celebrity was elevating response by a rate significantly higher than the celebrity’s cut.
• You’re not selling a product… you’re selling a solution to a problem that the viewer has. Your product is a magic elixir that will greatly improve the customer’s life. Logic is the ammunition, but emotion is the power that compels the sale.
• What demonstration will show that your product is better than anything else on the market? Can you add some entertainment value to the demonstration? Does your product have a flaw or weakness? By revealing the one flaw, the viewer will view you as honest and trustworthy. Your claims will have much more believability.
• Selling multiple products in a 30-minute show never works.I’ve seen it tried,always unsuccessfully, with fitness equipment, African artifacts, new products,and on a syndicated show featuring Joan Rivers as host. There are several reasons that multiple product shows fail.

At one of my seminars, Joe Sugarman told a story about a print ad for a watch that he ran in The Wall Street Journal. The ad pulled in a lot of business, but the watch manufacturer was upset that the ad didn’t feature the eight other models in which the watch was available (e.g.,children’s styles, woman’s styles, different colors). To placate the manufacturer, Joe created a new multiple selection ad and ran it and his original ad as an A-B split in The Wall Street Journal. The new multiple selection ad achieved a response rate that was only one-third that of Joe’s first ad. Anytime you try to sell more than one product in a single ad, you dissipate the emotional intensity you’ve carefully built up for the main product. The only exception I’ve seen to this rule was a brilliant 30-minute show created and produced by Eric Stilson. With a male and female host showcasing four or five various new products, the show was designed to identify which product—if any—might generate ahigh enough response rate to justify its own infomercial.As a benchmark,Stilson inserted into the newshow a successful direct response ad that he had run repeatedly during the previous year.By comparingthe new products’sales performance against the known commodity’s results,Stilson was able to identifyone of his most successful products ever…a product he didn’t think had a chance in hell before testing.

TESTIMONIALS

• Most testimonials are dull and unexciting. In your show, question your testimonial subjects. Play devil’s advocate. If these people really love your product, make them convince us. The public is smart. They know that when you jump-cut, something is getting cut out.
• This may be the most important subtlety I’ve ever learned about testimonials: Instead of focusing on the affect that a product has had on a person’s own life, emphasize the affect that the person testifying thinks the product will have on the home viewer’s life.
• Testimonials should always reflect as closely as possible the age range and ethnic makeup of the group you are targeting as customers. Of course,you want your testimonials to be as broad-based as possible, so that your target audience will be as large as possible.
• Testimonial style of dress should be similar to that of the customer you’re trying to reach. An authority should dress up to reflect his or her stature.
• Before-and-after shots should be as real and unaltered as possible. The public is smart. They’ve been looking at these shows for 15 years. They can tell when an image seems altered. Keep your lighting, lenses,and filters consistent from one picture to the next. Guthy-Renker does a superb job of this in their skin care shows.

OFFERS

• Offer viewers the products at half the price of retail, and then add other items to double the value.
• The lower your entrée price on a continuity program, the less qualified your lead will probably be.
• A lower price doesn’t always guarantee more orders. There are many instances when raising the price increases perceived worth of the product and therefore increases orders. The only way to know is to price-test.
• An infomercial pulls more leads on an expensive product if the full price isn’t quoted on the show. However, to make this work effectively, you need a trained team of inbound operators who receive a commission on sales.
• “Get a second one free” almost always tests as the best offer.
• It helps to put a face to your company. Try showing one of your operators standing by—that always seems to increase response.
• To further boost response, have a clock onscreen counting down the seconds left in whichpeople can place an order.
• Make your offer so irresistible that it appears that you have to be losing money on every sale.
• Begin showing the value of your product at an extremely high price so that by the time your each the real sales price, it seems dirt cheap in comparison.
• “But wait—there’s more” gets repeated over and over again for a reason.It works.
• Multi-pay generates more orders than single pay.You can generally convert over 60% of multi-pay callers into single pay with the right incentive. If you do this, it will diminish the response rate to your subsequently read upsells.

TELEMARKETING

• 90% of your phone calls come in at the end of your show.
• When a customer calls into your telemarketing center to order your product and you ask them a question about buying an upsell or additional product, a certain percentage of people will always say yes. The trick is to discover the right question at the right time so that the majority of them will say yes.
• Spend time and make the effort to learn the sequence in which your telemarketers’ order screens appear. These screens are usually programmed to act in a certain way. For example, if the customer answers, “Yes,” we go to computer screen B. After spending time uncovering this for my own infomercial, I discovered a different order for the screens that resulted in 10% more orders. Don’t assume that the way your telemarketer traditionally operates is the way that’s most profitable way for you.
• Have your telemarketing company record an assortment of your incoming telephone calls. You can learn a tremendous amount by listening to the questions that come up during calls. Use this information to rewrite your telemarketing scripts. It’s a sure bet that many more people have the same questions, but just aren’t asking. If you address the issues you hear in phone calls, viewers will be more likely to order your product.
• The most amazing, profitable, yet underused tool in the direct response television business is the A–B split on incoming telemarketing calls. Here’s how the A–B split works: You create two scripts. Each script is read with every alternate call. You can test different price points, different upsells,the order in which the upsells are read, and almost anything else you can think of. You can even test whether a certain shipping and handling cost makes a difference. I used this constantly for my Curiosity Perfume infomercial and as a result, was able to boost my upsell rate as high as 65%. I also got check debit to work (the only time in West’s history up to that point). If you’re able to increase upsell rates by even a few percentage points, that can easily represent millions of dollars to you over the life of a campaign. And the amazing thing is, this costs next to nothing to use. It’s the most profitable industry tool—bar none!
• It is not generally profitable to have dedicated operators on your in bound phone calls. However, it is profitable on back-end and customer service calls if you are selling: a continuity program,a product costing more than $400, or costly upsell items (as are often found in business opportunities). Guthy-Renker has 300 dedicated operators handling its three million ProActive customers.This is an expense you need to figure on when dealing with large-scale programs.
• At a telemarketing center like West, an average of 50% of incoming calls are for information.You pay for all those calls without seeing any return. When you test your show,have your telemarketer record these calls.You’ll find out what information people didn’t hear—or didn’t hear often enough—during the show. Then,before rolling out your show, go back to post production and insert answers to the most frequently asked questions. You’ll save a fortune in customer service calls over the course of your campaign.
• The highest positive response you’ll receive is for the first upsell you pitch to your customer. Each additional upsell will yield a diminishing response rate.
• If a customer says no to your first upsell, be prepared with a fallback, a less expensive upsell. Even if a customer refuses your first upsell offer, he or she will often say yes to a second upsell if you make it easy for them.
• For an ongoing campaign, such as for continuity products, customer service operators should all be trained and using your products. They are the spokespeople and representatives of your company. Take good care of them. Make them feel like they are part of your company. Keep them informed,and bring them into your company’s decision-making and direction-setting processes. Encourage your customer service operators to feel pride in your company and the products that you are selling together.They’ll transmit their positive attitude during sales calls, and your customers will begin to feel the same way.

OUTBOUND TELEMARKETING

• Outbound campaigns are usually much more effective if the customer first receives a mailed offer, then a follow-up phone call.
• Outbound telemarketers produce better results if they receive a commission on each sale. However, a commission pay structure can backfire by making telemarketers more aggressive and consequently more likely to alienate customers.
• If customers are thrilled with your product, they will want to hear from you. If your product isn’t everything they expected, you’ll spend a fortune on customer service calls rather than sales calls.
• I once knew I was going to have a shortage of product. I implemented an outbound campaign to my best customers to inform them that we were going to be out of product for 90 days. Over75% of the customers contacted placed an order so they wouldn’t run out of product. If you can turn a sales call into a call where you’re giving customers true inside information, they’ll not only feel appreciated and cared about,but they’ll reward you.
• Limit the number of times per year you call a customer.You are intruding on their private time at home and with their families. One call too many and you’ll no longer be welcome.
• From your customer’s point of view, make sure you have a good enough reason to call. Make sure your offer is truly special.

PRODUCT

• Product is king. A gorgeous show won’t sell a lousy product, but a poorly produced show will sell a great product.
• Television is a mass-market medium. For your product to really succeed, it needs to appeal to the largest number of people. As popular as golf is, it’s not a mass-market sport and consequently few golf shows have ever been very profitable.
• A successful product should do two things:solve a major problem for the customer and holdthe promise of tremendously enhancing one’s life.
• A product needs to sell at four to six times its cost. The more expensive the product, the lower the acceptable margin.
• Prevention-oriented products never seem to sell.I’ve seen some amazingly produced showsthat have tried to do this and failed miserably.
• A product should exceed a customer’s expectations. Many a company has been pushed to the brink of ruin by an avalanche of returns.
• Every product should have a unique selling proposition. What makes this product superior to everything else on the market? How can you best demonstrate that?
• A product that is exclusive and covered by patents is certainly preferable to one that isn’t. However, if your product succeeds, you’ll probably be forced to spend a fortune in legal fees defending your patent against knock-offs.
• The most difficult thing in the infomercial business is to be an entrepreneur who takes a chance on a new and innovative product. It’s impossible to know whether a new product will work until it’s tested. The easiest thing in the infomercial business is to be the person who knocks off a successful product and settles in court later.
• Most audio and video programs that are sold never get listened to. They sit on customers’ shelves unopened.
• The higher priced your product is, or the more payments it requires, the better your chances are of getting it back as a return.
• If you see an infomercial selling a $39.95 product,understand that it’s impossible for the seller to make money at that price. The seller plans to make money via much higher-priced back-end products or services

MEDIA

• If a product can easily be demonstrated in a 2-minute spot, don’t even think about using an infomercial. You don’t need to spend the money on the extra 26.5 minutes.
• In general, cable customers are wealthier and more likely to have access to credit cards than broadcast buyers who receive their TV signal for free.
• Media buyers make their money by selling media time. Set a minimum response rate that they must meet. It’s the only way to hold them accountable.
• Yank your show off at the beginning of April to avoid the bottomless response pit of April 15th.
• The more media you purchase on a weekly basis, the faster your show will burn out.
• In broadcast, keep in mind that compelling local events can put a huge dent in response rates. You don’t want to run opposite a big local sporting event. You want to run before or after. Likewise,a big news event will keep eyeballs away from your show.
• When a disaster occurs—a war, stock market crash, or major international incident—and all eyes turn to CNN and other news channels, get off the air. No one will watch your show.
• Make sure your media buyer gets station affidavits showing that your spot aired. Every once in a while, a show doesn’t run and the telemarketer assigns calls to the station by mistake.You may assume incorrectly that your show ran and pay for it.
• Nothing beats asking a media buyer who grew up in a local market for his or her recommendations about when to run your show in that area.
• An average of 50% of all 2-minute DR spots don’t run.
• Compared to 10 years ago, it now takes a lot more media to reach the same number of eyeballs. Cable and satellite systems offer hundreds of stations. But even though fewer eyes are watching,the cost of the media has continued to rise, as much as 500% during the past decade.
• First and fourth quarters are traditionally the best times for higher direct response rates. Summer is usually the worst.
• Every year, everyone gets shocked by the proposed third quarter rates.
• Traditionally, a media buyer should look at four categories in a media test: major metropolitan areas, rural,broadcast, and cable.
• Cable is pricing itself out of the market. Cable companies keep raising their prices while their audience dwindles or gets overlaid by local cable operators. Less cable time is available now compared to five years ago. At current cable rates, most infomercial companies are finding it extremely difficult to turn a front-end profit. The situation is only going to get worse.
• An average infomercial campaign in today’s market consists of 60% broadcast time and 40% cable time. Cable is becoming less and less efficient because of increased rates and overlays.
• The biggest danger to the infomercial industry arises from TiVo and similar digital recording devices about to be launched. These machines eliminate the need for viewers to scan channels and thereby reduces the likelihood of them finding your show by accident.
• QVC and HSN are the greatest partners a direct response television company can have. The difficulty at times is that the margins don’t work, especially with products costing less than $19.95. With some of the aggressive offers taking place, it’s nearly impossible to sell product to these networks at a wholesale price of 50% or less and the networks insist on offering their customers the bestprices being advertised.

BACK-END

• Without any doubt, the back-end is where 96% of the money is made.
• Your back-end program should be thoroughly thought out before you spend a dime to produce your show. The entire show should not only sell your initial product—it should also build anticipation and desire for subsequent products.
• One of the best investments you can ever make is a 37¢ stamp on a piece of mail making your customer feel important and special, instead of trying to sell them something.
• In today’s market, it’s essential to gather your customers’ e-mail addresses. Once you’ve builtup your list, it costs nothing to inform your customers of the latest special, product update or new product introduction.
• The greatest sales I’ve ever generated in the back-end resulted from sharing inside information on a personal basis with my customers. I tell them what’s going on behind the scenes and how they benefit as a result.
• Most companies tend to send catalogs or printed matter to their customers. Instead,try sending an offer from your spokesperson personally addressed to your customer. This will not only increase sales, but customer loyalty as well.
• Make your customer feel as if they belong to something special. Give them a free gift completely unexpectedly. Tell them you’re doing this strictly because you want them to know how much you appreciate them. Resell your customers on your commitment to them.
• When setting up a continuity business, make sure that you have the ability to instantly alter your customer’s shipping cycle or alter the products that are normally included. You never want yourcustomers to feel like you’re inundating them with products they don’t yet need or want. Customers who have this control stay on continuity plans for a longer period of time. There are only a handfulof fulfillment companies that can truly offer flexible shipping plans.
• If you’re running an infomercial promoting real estate purchasing or some other business opportunity, remember this hard-learned lesson: Your back-end programs (which is where your money is) are only as good as the infomercial driving new leads into your business. If your nextinfomercial bombs, your back-end will dry up shortly thereafter.
• American Telecast did something very unique with its continuity programs. They make every 5th kit free. The company tested this idea and found that it kept a majority of customers in the game for a longer period of time. Other companies offer a free gift. People are motivated by personal gain.
• Spend a couple of hours every month on the telephone talking to your customers. You’ll learn more this way than from any report that lands on your desk. Your customers can be your greatest source of ideas and information.
• Test different offers and/or price points for your list before rolling out to your entire customer base. That sounds obvious, but too often companies are in a hurry and don’t take the time. Again, a slight change in response can yield a tremendous upsurge in profits.
• If a customer returns a product, or opts out of a continuity program, attempt to resell them on another product. For example, if a customer decides to cancel her continuity program from Victoria Principal, send a letter from Victoria Principal stating that she’s sorry to see her go, but Victoria’s main concern is that the customer gets products that work for her. Victoria then recommends her friend Kathie Lee’s products. Enclosed is a free gift certificate worth $25.00. You can then pay Victoria Principal a percentage of sales for every customer who sticks. It’s a win-win proposition for everyone.

BUSINESS PRACTICES WITHIN THE INDUSTRY

• The public is skeptical of infomercials to begin with. The moment they see a show making disparaging remarks about a competitive product, the credibility of the entire industry suffers.
• The minute a national news program airs a story critical of an infomercial product, response rates drop dramatically for every show airing and every product being sold.
• The infomercial industry employs some of the best patent attorneys in the world to uncover ways of getting around the patents of successful products.
• When one infomercial company discovers a hot product category, a slew of other companies rush to knock off the product. The philosophy is, “Get while the getting is good and settle later.” Unfortunately, in many cases, a company can make tens of millions of dollars knocking off products. Settlements always seem to be for less than the amount gained. As long as this is the case, this practice will continue.
• Few companies have explored cooperation. I wrote an editorial about this years ago and I still believe it’s a strategy worth pursuing. Let’s say that a customer returned a Total Gym. There’s no good reason that a letter can’t go to the customer expressing the company’s regret that the machine didn’t work for that person and offering to send a Bowflex at a significantly reduced price as a thank you for trying the Total Gym. Bowflex and American Telecast would then split profits on the Bowflex sale. It’s a big win-win, and entails no marketing cost except for the letter and possible follow-up phone call.
• For infomercial campaigns featuring stand-alone products, the net profit before taxes is only8% to 12%. If you give a celebrity a 4% royalty, he or she will pocket 33% to 50% of your net profits.
• Depending on your product category, you can sell an average of four to five times more product in retail than on television. Often, companies run their television campaign on a break-even or loss basis in order to drive their retail campaign.