Infomercial budget questions? Are you trying to understand the costs of producing an infomercial? My name is Ron Perlstein, and I started producing infomercials in the early 1990’s and run a very successful Direct Response Infomercial Production and Media Agency called InfoWorx Direct. Part of our client base includes many marketers and product developers who are new to this unique and profitable form of Direct Marketing. Please bookmark or subscribe or follow me on Twitter.

TV Infomercial Production Costs:
Short Form TV Infomercials run in 5 minute; 2 minute; and 1 minute lengths depending on your product, goals and TV media availability. Many producers charge a fee plus a royalty on the back end based on performance. There are a few DRTV Agencies (like InfoWorx) that not only produce winners, but provide media buying services. TV Production costs for these short form TV infomercials or DRTV commercials range from $5,000 to $75,000 depending on many factors.

Long form TV infomercials are about 30 minutes (most are 28:30 minutes). Again here costs can vary greatly. Do you want a production with a spokesperson sitting at a table with a black curtain or do you want to produce a TV show that is convincing with great talent, custom sets, animations and high end graphics? Take a look at these TV Infomercial production packages to get a better idea of production values.

TV Infomercial Campaign Costs:
In addition to production costs a TV campaign must include media. I recommend that a marketer test their offer or several offers. A media test on a limited national basis costs about $15k to $20k per test. These tests produce sufficient data to determine if you have a winner, moderate success, or …..ugh….a loser. The backend of a campaign or test is also imperative. Inbound telemarketing in the form of an IVR or live agent call center has setup fees ($1,000 and up) and ongoing transactional fees. A non swipe merchant account is required and nowadays a landing page e-commerce site is recommended. Also a DRTV friendly fulfillment shop is recommended to handle inventory management, pick and pack services, payment processing, and returns and exchanges. Like inbound telemarketing, there are setup fees and ongoing transactional costs associated with this aspect and having a world class fulfillment partner helps.

Check back here often. Also check my DRTV Media blog. We’re working on one now regarding rollout media budgets.

For those of you just getting started, DRTV is an acronym for Direct Response Television, which is a method of advertising on TV on a National or Local level in which the advertiser pays low, low rates which are pre-emptible or, in other words, remnant media. Savvy marketers and advertiser establish an allowable cost per order to reach sales goals that should be preset.

DRTV Response Rates are usually tracked via metrics known as Media Efficiency Ratio or Media Ratio or MER. Let’s define a few of these terms:

Media Efficiency Ratio (MER): The total number that decides an infomercial’s overall success or failure. The ratio is derived by dividing total sales by the media cost. Sales/Media Cost = MER. This term is also sometimes referred to as Media Ratio or simply Ratio. You can track your TV commercial media buying efficiency on a single airing, a group of airings by station or a week, month or quarter.

Ad Allowable: Your ad allowable tells you how much you can afford on a cost per order basis. The ad allowable is the dollar amount determined to be the maximum media expense for each unit sold in order to generate a legitimate profit. To calculate your allowable add all of the revenue per unit including postage and handling and then deduct all of the expenses including cost of goods, telemarketing, etc. Here is a tool that may help you determine your Ad Allowable.

Cost per Order (CPO): The average cost of television media to generate one product order, determined by dividing the cost of a specific infomercial telecast by the total number of orders received from it. Compare this number to your Ad Allowable and you will know if you are reaching your goal or not.

Media rates ease up significantly in the first few weeks of a new year then gradually move back up as the winter nears its thaw. First and third quarters are the best TV media buying quarters as far as rates with second and fourth quarters having the most demand from corporate and branding advertisiers who pay higher rates.

DRTV Response Rates: (The cost of short form TV advertising) Media rates across the cable network landscape are holding up and rising as large brand advertisiers have not cut back, even in slow growth 2011. In fact, political advocacy TV advertising is on the rise, in a non national election year. Nonetheless, there are many soft spots to discover opportunites where cable networks or cable aggregaters are holding lots of unsold inventory. Your media buyer needs to be connected, smart, tough and have your allowable cost per order in mind when placing your broadcast orders. DRTV media costs must be low in order to achieve a profitable cost per order. Stay tuned here and learn how to buy 60 second national DRTV spots at $5 per spot. Up to 8 million households, prominent national networks – and these are NOT overnights – $5 DRTV Spots!

Last week we had a new client call us and ask for media rates and a test campaign while comparing us to another “marketing company.” Folks – beware of any company that does not give you the rate for each spot and just gives you impressions or general information. We have seen this lately with fly by night firms offering thousands of spots as part of a “media blitz” and millions of impressions as part of the package deal for the TV Production. Professional DRTV Media Buyers and Direct Response TV Agencies show the rates and those rates are supported by invoices and affadavits from the stations with the exact same rate. We researched the so called media blitz and were able to determine that the client was paying a CPM over $28, which is more than Amercican Idol or Dancing With The Stars cost on a CPM basis. DRTV rates need to be very low to pay out. We created a plan for that client with a CPM of $0.52 and national coverage using our vast media relationships.

Make no mistake. DRTV, Direct Response TV, and TV Infomercials are a specialty that takes experience, savvy and a hard nosed approach to media negotiations. Direct Resonse TV rates change week to week and the market changes week to week based on supply and demand and most of all performance. Check back often if you want to learn how to lower your cost per order.

Payout: This is the dollar amount that the marketer pays when a call is placed and lasts for say 30 seconds. Marketers often prefer a “per sale” deal, but media outlets always prefer a “cost per call” deal since they are running the ads and generating a response. Think about it for a moment. You have a dietary supplement in skin care or men’s health. The radio station may have several offers in those categories. Which offer will generate the most revenue for the station and be the easiest sell to the station? Cost per call, of course! A smart direct response media buyer can help crunch the numbers to determine the marketer’s revenue per call. Remember, you are competing with other Per Inquiry (PI) offers, and the stations will jump on offers that give them the best revenue for their unsold inventory. Savvy direct response marketers determine a payout that is competitive in their category and costs less than the cost per call or order of their cash radio buys.

Telemarketing: Per inquiry radio advertising drives calls, and the call center or IVR must have the software and systems to track and source calls to each media outlet. Some Per Inquiry agencies may direct their own toll free numbers to point at a call center for better, more integrated tracking. If your tracking or call center is questionable, forget about per inquiry. Again, a good media buyer or per inquiry radio direct response agency will help with the setup to track the telemarketing.

Per Inquiry direct response radio advertising offers a low cost and scalable marketing strategy. Unlike TV, there is less cost in duplicating and customizing the direct response commercials for proper tracking. Check back here soon to learn more about TV Per Inquiry campaigns.

Here are 5 tips to produce compelling and telephone ringing Direct Response Radio offers.

1. Do not write a “rip and read” commercial. Consumers have learned to tune out “noise” and cramming 70 seconds of copy into 60 seconds is “noise.”

2. Test several radio direct response offers. Direct Marketing is a science. Direct Response Radio offers marketers an inexpensive testing platform for various risk free offers.

3. Repeat the telephone number 4 times! Make sure that a customer driving a car can key in the toll free number during the spot.

4. Know your audience. Smart marketers know how to catch their best customers by targeting the offer and product to the radio format and demographics. Your product may have use for everyone 8 to 80, but there is always a skew toward men or women, young or old, or in between.

5.Direct response radio rates vary widely according to market and supply and demand. Do not pay high rates! Air your offers only on stations with low CPM’s and always ask for bonus spots. Or make sure you have a bulldog for a media buyer!

Short Form DRTV: Short form TV Infomercials are actually TV commercials with a response mechanism like a toll free number or URL or both. These spots are available in :120 second and :60 second lengths with :30 seconds used mainly for TV lead generation. Production costs vary according to the Direct Response Agency or Production Company and other factors including camera equipment, size of crew, etc. Many short form direct response television producers charge about $30,000.00 plus a royalty. Beware of any producers less than $10,000.00 because too many corners must be cut. However, some companies bundle services together and provide media services in lieu of a royalty.

In addition to Short Form TV Production, other costs associated with a DRTV launch include: TV media costs, inbound telemarketing setup, fulfillment and payment processing, as well as duplication costs. As you can see, it starts to get a bit complicated so it’s always best to work with an experienced professional, not someone getting their feet wet with your project.

Long Form TV Infomercials: These are really TV shows! Since 1984 when the length of commercials was deregulated, marketers have had the ability to fully demonstrate, create emotional testimony, and make a complete pitch to truly sell their products. It’s a unique marketing platform and creates all the video assets needed for every other new media platform in the 21st century. Since you must produce about 30 minutes of content, these productions naturally cost more than short form. Rates are all over the place. Some of the best known infomercials may have a multi-million dollar celebrity and others may be shot in front of a black curtain. Costs range from the down and dirty (avoid this!) to the ultimate shoots on The Red One. Choose your producer wisely. Again, many producers must make a substantial profit on your show, while others may work close with you and gain their profits with a rollout and substantial media buying. Some product developers and owners are looking for “partners” to fund the production. If you want to keep control of your product be careful. TV Production costs and initial media tests are very affordable, and there are media funding companies who will assist with a roll out without any equity in the product.

Additional costs for Long Form DRTV are the same as Short Form DRTV, except your duplications fees are higher. The trick is knowing which format works best with your product and establishing proper metrics and goals for success. Check some of our older blog posts for lots of information on these issues.

The bottom line: TV Infomercials and Direct Response TV commercials represent a low cost, high exposure advertising method that can take your product to marketing heaven.

OK, OK, now you’ve decided that your product can work in a short TV format. Great, but how long should your TV Commercial be? 30 Seconds? 60 Seconds? 120 Seconds? 5 Minutes? Wow…..let’s see if your Short Form DRTV Infomercial guru can help!

Let’s face it media rates will drive the success or failure of your project. Unless you are deeply funded and have a long term branding strategy like a beverage company or an automotive marketer, you need frequency and immediate results and sales. Let’s take a look at the benefits of each length in Short TV Infomercials.

5 Minutes or 360 Seconds:
Pros: This format has many of the attributes of a Long Form TV Infomercial. You can tell a convincing story, include testimony that can touch emotional notes with customers, and still have enough time to pitch an irresistible offer. With this format you will have all the video assets necessary for shorter spots and interactive viewing on your web site.

Cons: The 5 minute format is in limited distribution. Most of the Discovery Networks offer them, including OWN as do many NBC Universal properties. But, there is not enough inventory for a full roll out. In addition, the short form TV media available make it difficult to fine tune your customer targeting which is a major benefit of Short Form DRTV spots.

2 Minutes or 120 Seconds:
Pros: This format is the standard for As Seen On TV product launches. There is enough time for magic product demos and the spots usually make an offer pitch for about 20 seconds and then the telephone number is pitched for 15 more seconds.

Cons: The 2 minute format is in limited distribution. There’s no chance to get your product on Lifetime or USA, for example. Most of the major cables have limited 2 minute inventory. And the rate is 400% over the 30 second rate! The world is changing and shorter spots are the trend.

1 Minute or 60 Seconds:
Pros: Goldilocks was looking for something that was “just right”. In one minute you can show negative shots, solve the problem, include multiple demonstrations and pitch a compelling offer. There’s not a second to be wasted, though. No time to say “call now” several times, no time to pitch the toll free number twice. But, nowadays 30% to 65% of the sales will come from e-commerce. Make no mistake, our world is changing, and the consumer knows that they do not have to call now. There is a lot inexpensive, cheap, if you will, media availability. Your spots can air on Lifetime or any other major cable network in a variety of distribution networks. Heck, we can get these on the air in over 27,000,000 homes for as little as $20 per spot.

Cons: You cannot waste one second or one word. If you have a high priced product, you need more time. The short form media cost is double the 30 second rate.

30 Seconds:
Pros: These spots are usually considered branding spots. However, we have been successful many times using 30’s for lead generation and a drive to the web. There is more inventory in this format at the lowest cost per spot than any other length.

Cons: You cannot sell a product directly with this length. There is just not enough time to tell the story and ask for the sale. Your messaging must be perfect and the call to action must be short.

The bottom line: In 2011 you need an integrated approach that allows the marketer to get lots of frequency with the shortest format that is feasible for your product. Please check out our earlier post regarding the benefits of Long Form TV Infomercials. Then, think about your product, your budget, and your price point.

1. For my short form product do I have enough premiums and stuff to create an irrestible offer?

2. Do I have an upsell stream or the retail backend to support a higher allowable cost per order?

3. Could DRTV or infomercials work better for me by gernerating leads and a drive to my website for closing the sale?

If you empower your DRTV Media Buyer with small test budgets to test various offers, premiums, and upsell stratgies, then your success rate will soar.

Well, let’s define allowable, or cost per order, or CPO.

Ad Allowable: Your ad allowable tells you how much you can afford on a cost per order basis. The ad allowable is the dollar amount determined to be the maximum media expense for each unit sold in order to generate a legitimate profit.

Another infomercial metric that is widely used is the media efficiency ratio. The MER is a universal metric that is discussed among all infomercial professionals. We use this metric to determine how infomercial television media is performing. Media Efficiency Ratio (MER): The total number that decides an infomercial’s overall success or failure. The ratio is derived by dividing total sales by the media cost. Sales/Media Cost = MER.

To determine MER you must be able to track media efficiency through toll free number tracking and good Internet analytics. Through the use of this analysis, we cancel non performing media buys and renew those that have MER’s that are profitable.

Allowable cost per order is such an important concept in all of direct marketing including mail and internet, that you must learn the concept, crunch the numbers and be scientific in your analysis. This is the concept that will drive your media buys, ROI, and overall success of your project.