Direct Advice for Entrepreneurs


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By:  Mark Biglow, Vice President of Sales and Marketing, Mercury Media Santa Monica

Marketers with a new product may find today’s retail landscape daunting.  With a handful of powerful bricks and mortar retailers controlling the landscape for most product categories, the magnitude of financial resources required represents a formidable barrier to entry for many.  These powerful retailers can dictate margins, inventory risk, and allowances for returns and co-op advertising that leave the marketer with little more than the proverbial lump of coal.  Fortunately, there is an alternative: direct response (DR) advertising where the marketer makes a direct appeal to the consumer, thus cutting out the middleman.

The advantages of DR are numerous.  Some crucial factors to consider include:

  • The ability to maintain better margins than the standard bricks and mortar retailer’s keystone mark-up (effectively double the retail price).
  • An ideal launching pad to create public awareness for a product and its unique features and benefits, a significant advantage when negotiating with mass retailers for margins and shelf space. (e.g., OxiClean)
  • Even if you get shelf space, if the public doesn’t understand the unique selling proposition (USP) of your product, it will languish on the shelf and you’ll lose your space.
  • Similarly, establishing a brand that it is meaningful to consumers means it cannot be easily knocked off or replicated by a retailer’s private label brand.
  • In fact, DR can act as a push marketing tactic because as retailers see it repeatedly on TV, online, and the like, they’ll be calling on you wanting the product instead of you going to them hat in hand (e.g., Snuggie).

In fact, ironically the idea of cutting out the middleman is exactly what retailers have done by increasingly using private label products and their motivations are the same: they can get a better margin by cutting out the manufacturer.  Since the reality is you’re going to have to finance the inventory anyway, why not control your own fate?

But to improve your chances of success, entrepreneurs should take an objective look at their product and see how it holds up against these critical success factors:

  • Does you product truly have a unique selling proposition or is it a “me-too” or follower product?  Consumers want to be surprised and delighted by something fresh and innovative.
  • Is the market for the product truly mass?  When employing a tactic such as DRTV, which is as mass as mass media gets, the product should appeal to as broad an audience as possible but certainly no less than 10 million U.S. households (e.g., if it’s a pet product, how many households have that pet?)  If your product doesn’t hold up to this benchmark, more niche-based marketing tactics may make more sense.
  • Does your product have sufficient margins?  In other words, is your manufacturing cost 1/5th to 1/10th what you expect to get for the full retail price?  You’ll need this type of margin to afford the media and ancillary costs (telemarketing, fulfillment, etc.) that a direct campaign requires.
  • Do you possess adequate capital to fund a DR campaign, including the cost of media?  DR is not a license to print money, and adequate forecasting of the resources required is vital.

With the failure rate of many direct programs commonly cited as high as 90 percent it is also absolutely critical that you align yourself with experienced practitioners who understand the strategies and tactics that will work and have the practical, real-world experience to help you succeed.  It is also worth noting that the companies that are succeeding in direct marketing these days are tenacious and not afraid to try and try again, for DR is a process that relies on trial and error.  The rewards for such fortitude can be remarkable as direct marketing-launched products can build product sales of $50, $100, even $200 million in revenues.  In fact one skincare line launched via direct is rumored to be a half a billion dollars per year business!  If you think you’ve got the goods and the resources to succeed in this exciting, alternative arena, Mercury Media is here to be your resource and help you navigate your way to direct success!

Mark Biglow is the Vice President of Sales and Marketing, New Business for Mercury Media in Santa Monica.

Mark can be reached at Big@mercurymedia.com

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