DR Adds Spark to Consumer Electronics

Consumer electronics sagged in 2009.  Nevertheless, direct response marketing kept sales from sinking lower – and for good reason: DR fits consumer electronics like a plug fits an electrical outlet. You could say direct response and consumer electronics are like the “you-got-your-chocolate-in-my-peanut-butter” moment from the old Reese’s peanut butter cup ads.  Together, they’re a winner. And, actually, their marriage is much older than you might realize.

Direct response isn’t new for consumer electronics.  “Not many people know this, but DVD players were first marketed with infomercials,” says Tim O’Leary, CEO of R2C Group, a DR firm in Portland, Ore., that’s been using DR to sell consumer electronics since the early 1990s. O’Leary explains that clients clamor for DR when they understand it. “When you explain to a consumer electronics client that DR media time is 60 to 70 percent off normal media costs – plus they get more time to demonstrate their product, which consumer electronics often needs – and that they recoup the ad money they spent, then you can get a company to spend millions on DR,” he says.  “These companies never thought of their brand ads as having metrics.  Even if we’re driving retail, let’s put the algorithms in place and you start to see the budget go up.” Some of those big spenders are well known, too.  DirecTV, Philips, Toshiba and even AT&T tapped DR as early as the mid-1990s.  And in the late-90s, DR helped sell Apple computers as a better option over personal computers.  In fact, R2C Group and Apple took home a CLIO for their 30-minute infomercial.

“These companies didn’t think they were DR kinds of companies, but now they’re coming around to the idea of DR,” O’Leary says.  “I’m getting well-known brands coming to me, particularly in this economy, and showing interest in DR.”

A Kodak Moment
It’s not just product brands migrating to DR, traditional ad agencies are moving beyond the “toe-in-the water” tests of DR, especially for consumer electronics.  One example is the Kaplan Thaler Group, a brand agency in New York.  It has created a direct marketing arm called KTG Direct Effect, which took home some trophies recently at the 30th Annual Telly Awards, which honor cable television’s best commercials and programs, for its work with Kodak.Linda Kaplan Thaler, CEO and chief creative officer at the Kaplan Thaler Group, says her company applies the same creative philosophy and strategic approach to DR marketing.  “It [KTG Direct Effect] provides DR marketers with a bigger bang for their buck,” she says.  “KTG Direct Effect creates excitement about our clients’ products, captivates their consumers and closes the deal with a single showing… [it] clearly drives traffic to retail and catapults sales.”KTG created three 30-minute programs for three Kodak products: the ESP 7 all-in-one printer, the EasyShare printer and the EasyShare camera.  TV personalities Caroline Rhea, Richard Karn and Kirsten Gum hosted the shows.

“With the Kodak shows, it was important to achieve just the right balance of humor, product demonstrations and audience participation,” Kaplan says. Kaplan says the Kodak shows, which aired nationally, delivered “strong numbers” for Kodak and “far surpassed” sales expectations. “Kodak received so many printer orders after the initial airing of the EasyShare printer show with Caroline Rhea that it actually sold out of inventory in less than a month,” she contends (for more on this campaign, see Response, May 2009).

Fattening Slim Margins
Regardless of the success stories, problems still exist for DR in marketing consumer electronics.  Slim margins are tough, especially for hardware, unless that hardware is high-end, such as TVs and DVD players.  “When you look at these items from a direct sale viewpoint, it’s one of the biggest problems for DR,” O’Leary says. Another difficulty is that some consumer electronics marketers tend to overestimate just how much consumers really understand  how their product or service works.  The communications company Vonage is a good example.  “Vonage thought everyone knew what it did,” O’Leary says.  But for one campaign the company learned the hard way and had to re-pitch with a clearer message.

He also contends DR works really well if you can place the message “in a light of what consumers understand and add a strong value statement.”  And thorough testing for offers is popping up more.  David Echegoyen, account director at the ad firm Saatchi & Saatchi, says letting consumers try products is key.  “Marketers are getting good at letting shoppers experience their products,” he contends.  “Most consumer electronics retailers now have, and encourage, a hands-on approach versus the behind-the-glass-counter approach of old.”

Demonstrating Value
Insiders say another lesson they’re learning is that value is carrying more weight – specifically, demonstrable value to reassure consumers they’re making the right choice and that the product has the longevity that’s commensurate with the size of the purchase. Shawn DuBravac, chief economist and director of research at the Consumer Electronics Association in Arlington, Va., believes 2009 taught marketers that consumers are still interested in value.  “Marketers are trying to show that value…many consumers have become more frugal and are asking themselves if a product is really worth their money,” DuBravac says. O’Leary adds that software is “a value-benefit issue.”

“The Web and mobile phone apps have caused consumer valuation to dip,” he says.  For instance, O’Leary has an app on his iPhone called “Lose It” for fitness.  “It’s a free app, so there’s a devaluing of what can be sophisticated products.  You have to put a value proposition in front of the consumers that they really understand.  Often that is saving money or so entertaining you’re going to save money.” Wii Fit, Nintendo’s fitness game, is one example.  “We’re replacing hard fitness products and getting in shape for a lot less money” he adds.

Corporate Communications Specialist Aaron S. Fowles, Sanyo North America Corp. in San Diego, adds that along with value, the message has to be “fresh and exciting.”

“This can be extremely challenging, but if achieved, it can drive consumers to the site or retail where they can buy the product continuously,” Fowles says. When it comes to sharing value via the Internet, O’Leary says to expect consumer electronics makers to be more Web marketing savvy than other kinds of clients because their demographic understands the Web and Web metrics. Sanyo is a good example.  It has proven its hip to interactivity.

This year Fowles says Sanyo held a contest to see who could create the best infomercial with the company’s dual cameras, and the videos featured links back to either the Sanyo site or other online partners, such as Amazon, to buy the product. And Sanyo has recently redesigned its Web site and added an online store function to market its products directly to consumers.  “We’re adding a small sentence to our signature line of our E-mails, adding links to it in our press releases, prominently displaying it at the top and around the pages on our Web site, and in promotional materials handed out, such as brochures, USB memory and other items,” Fowles says.

Electronomics
Regardless of how consumer electronics are marketed, the economy may have the final say on just how well sales go. Fowles believes consumer electronic products are often seen as the least necessary when money is tight.  To stay competitive, Fowles says prices usually have to drop, adding, “That means the entire production to customer process may need to be re-evaluated, finding cheaper raw materials and production, as well as logistics planning.” The result? Cutting-edge developments are delayed until things stabilize, says Fowles.  But DuBravac says flat-panel TVs are up almost 30 percent this year, and that audio and sounds bars did well.  “As a share of spending, consumer electronics has never been higher,” he says. Still, he admits 2009 was a down year.  “Consumer electronics dropped almost 8 percent, but it’s held up better than a lot of industries…we’re still seeing spending on some electronics, such as single lens reflex cameras and Blu-ray.”  But he still predicts a “slow, muted and shallow” economic recovery. O’Leary says clients are challenging him on production budgets on the front end “because they’re risk adverse because of the economy and that’s reflected in their budgets – budgets are down across the board.” Fowles adds that consumers “surprisingly return [to market] and buy” these products once things start going well again.  “The issue is…to keep the product fresh and new enough that once the consumers do return, it can be a trend-setter and jump start the drive to consumer electronics.”

To read the article online, visit http://www.response-digital.com/response/200912#pg38