Electronic Retailer - November 2011 - 50

RICK PETRY

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The Price Is … Wrong?
$7.79. Sweeteners? That’s another matter: 100 percent of the marketers capitulate to the “But wait, there’s more!” ploy, with the average value of the add-ons weighing in at $57.73. A quick calculation reveals then, that for about $20, consumers are getting roughly $80 worth of value. When you consider that the DRTV model relies on a cost of goods sold (COGS) of about a fourth to a fifth of the retail price, that means that a marketer has to be able to manufacture their $80 worth of product for about $4.50. And in a world of unfettered word-of-mouth where only the best reputations survive, they must deliver quality for that five-spot. Houston, we have a problem. Enter the BOGO or “buy one, get one free” device. Here, for a separate processing charge, the consumer gets a second base item for free. While only two of the 10 BOGO offers revealed the processing cost, it averaged $7.47 – a number very close to the average shipping cost for the original offer. This is a scheme used in 10 of the Top 20 we reviewed and, less the additional cost to ship the second product, adds incremental revenue to the paper-thin bottom line. The challenge is that it is only a matter of time before this overused tactic numbs consumers into indifference. The point here isn’t to depress readers. We have the front-page of the daily newspaper for that. But if we want to avoid going the way of the Dodo like that said paper appears to be headed, it is time we focus on innovation, differentiation, and creating authentic and credible value for our products and services instead of relying on gimmicks to try and get consumers to pry open their wallets. Our grand experiment in social Darwinism needs fresh thinking in order to survive. Do we want to create an ecosystem where brilliant fauna is abundant, or struggle to stay afloat in a bog ruled by lowest common denominators? Order now! Rick Petry is a freelance writer who specializes in direct marketing and is a past chairman of ERA. He can be reached at (503) 740-9065 or online at rickpetry.com. On Twitter at http://twitter.com/thepetrydish.

At industry gatherings, sometimes it feels like the only thing flowing more freely than the cocktails is conventional wisdom; the idea that success is formulaic and can be dialed in by pressing all the “This is a limited time offer!” buttons. The problem with ascribing to absolutes is that success is a moving target and shrinking faster than the average disposable income. To separate opinion from fact, this author recently teamed with Toronto agency Creative Bube Tube to analyze the Top 20 DRTV spots from June 2011, as ranked by the Infomercial Monitoring Service, and quantitatively benchmarked success. Our findings were presented in a whirlwind session entitled, “The 411 of Short-Form DRTV Success” at this year’s D2C, with one focus on price. What emerges is a profile of an unsustainable business model that must be challenged and reinvented.

The problem with ascribing to absolutes is that success is a moving target and shrinking faster than the average disposable income.
First, the facts: 17 of the Top 20 spots were hard offers, in the sense that they stated a price. This is a bit misleading because a few were essentially 30-day trial offers for fitness equipment, with ultimate price points that vary from $125 to $1,300 should the consumer keep the product. What is interesting is that it was just a few years ago that everything seemed to be a soft, trial offer for a consumable product. We suspect that the reason these offers have dissipated is that as soon as a tactic is working, the entire industry gloms on to it and renders it a cliché that the public is swift to identify and turn away from. Secondly, while price points, inclusive of trials, varied from $9.95 to $39.95, the average was $19.35, very close to the magical $19.95 that is de rigueur in DRTV. In addition, though buyers loathe the idea of paying for shipping, there is not a single marketer giving it away. In fact, only two of the 20 marketers actually state the shipping cost, which averages

electronicRETAILER | November 2011

Electronic Retailer - November 2011

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