How to Make and Test a Commercial on a Shoestring Budget

First, find a production house. You need someone that has made a DR commercial before, hopefully a successful one. DR means Direct Response and that's anything that has an 800# because it generates a direct response from the customer. It's not like a Cheerios commercial that is just advertising. DR is designed to get a response from the customer right now. It might sell a product via 800# or it might offer a free sample or free information using an 800#. Prescription drug spots are a good example of the television spots that offer free information.

Now, at this stage it is of utmost importance that you do your homework. Don't trust what someone else says; don't assume the production company knows what they're doing. A successful Direct Response advertisement is hard to make. Remember what I said before, only 1 out every 40 commercials that are made actually works and gets rolled out (rolled out means sent to stations all over the country). So if you are selling a hair gadget you need to get a copy of other hair gadget commercials or infomercials. If you are selling a gardening device - get copies of those productions (production is another word for commercial). Watch everything you can lay your hands on and take notes. Write down what you like and what you don't like. If you watch their commercial and you find it compelling - copy it.

This is no time to be creative. If you see something you like, do it. If you have a music offer - watch Time Life. They are the pros. You don't have time to reinvent the wheel. You need to get it right as quickly as possible and if this is your first Direct Response spot you are only going to get it right by emulating the masters.

First, I recommend you go to www.responsemag.com and subscribe. Its $30 for an annual subscription and it’s well worth it. To get copies of the spots or infomercials you need to view for your research go to www.jwgreensheet.com and shoot them an email or find their phone number and call them. I believe they charge $75 for each DVD copy they make for you. They have a copy of just about everything that has been aired on television in the last 15 years – it is an extensive archive.

You can attend the Response Expo convention and walk the floor and talk to other people in the industry. To get info on Response Expo and their conventions go to www.responseexpo.com. Steer clear of agencies that tell you, you will need $20,000 to cut a spot and $30,000 to test it on television. That’s for big guys with big budgets.

Now after you’ve done your research and you know that you want the commercial done like this map out specifics. What demos you feel will show the product best and what your package is – 2 widgets for $19.95 and then at the end you are going to add a $5 rebate while mentioning the money back guarantee – or whatever. Just map it out so you have a plan. Now you’re ready to shop for production studios.

You want to know that they have done Direct Response spots before and you want to see a viewer (DVD) of those spots. Hopefully you will recognize some of their stuff, that’s very reassuring. Be aware that if they show you a viewer of all lead generators – that would be spots that offer free information rather than selling a product that you need to ask if they’ve done any products. And were those campaigns successful? An unsuccessful campaign is not necessarily their fault unless they wrote the spot and did everything from the ground up. They are supposed to take your script and help you bring it to life. Now, if they’ve done a successful campaign your next question is what these spots cost on average. You shouldn’t spend more than $20,000 to produce a 60s spots. Unless of course there’s something about your product that you need computer generated animation and special effects. The other thing you are looking for is someone who’s thrifty. You want to know that they are going to spend your money they way they would their own.

Every dollar they spend should not be to make your commercial fancy or cool or cutting edge – your goal is to sell. Production houses tend to wander from this goal, they are by nature artistic.

Now, assuming you find a production studio with several Direct Response successes under its belt and you go to work. The next step is to work on the backend. The IVR (interactive voice recognition – a computer is taking the order) are the least expensive way to go. The charge per minute is around .18 cents and there is an additional transcription fee of .35 cents for each order. There are set up fees because the script you hear has to be recorded and set up to take calls. They also have to send an encrypted file with the order information so the credit card can be processed and the order filled.

Or you want to find a local answering service that can take orders for you. They have to be open 24 hours a day, 7 days a week. You shouldn’t be paying more than $3.50 per order, $1.75 an orders would be a deal. Then you have to hammer out charges for customers that don’t order – they ask for the mail order address or they have a question about the product – these should cost $1.00 to $1.50 each. Hopefully they have an 800# you can use otherwise they will be able to get for you. The set up fee to work with them should be about $200 and they might charge you a monthly minimum of $75. You don’t want to go to a big inbound center because they require $2000 on deposit and the set up fees and monthly minimums are likely to be about $500 a piece. So you test with the local service center and if you have a winner then you move up to the big guys. Right now you are putting as little money at risk as possible until you prove that your product is going to make it.

Next step, a merchant account. You will have to process the credit card orders yourself and you will have to ship the orders yourself. This aspect is called fulfillment. You handle your own fulfillment initially. The big centers are looking for accounts with 100+ orders a day and again there’s a large deposit a set up fee and monthly minimum. So, you go to COSTCO, yes I said COSTCO – $25 to set up your merchant account ( now that’s my kind of number). You will get charged like .28 cents for each transaction plus 2% to 3% of the transaction for processing the order. So for a $19.95 order with $5.95 shipping you are looking at .80 cents to $1.00 for each order you run through. You will have to learn to process the orders that the answering service passes you on a daily basis. Then you will actually fill the orders yourself and walk down to UPS or the post office to mail them. If your product weighs 2 lbs or less you want to ship them USPS priority mail via Stamps.com, if it weighs 3 lbs or more you want to ship it UPS Ground. You will also handle the customer service issues that come in. Again you could hire people to do all these things if you have cash to burn. If you are just starting out you want to take baby steps and make sure you have a winner before you take it to the next level.

Next, you need a script for the operators to read. It is literally everything they need to know about the product plus important sales features to make you more money. You’ll find a sample script at the end of the article. But jot down what you want the operator to say on the phone – that’s good start. “Hello, thank you for calling Wonderful Widgets how can I help you?” “Okay I can help you place an order, let’s start with your zip code.” And so it goes and you have to pencil in the other options – like the customer has questions and is not ready to order. In this case the operator has what is called an information box – it has the price of the product and a description and when it will be delivered – it covers the most obvious questions. If she can’t answer the question she gives them a number for customer service – and that would be your phone number.

Okay so, say the customer does purchase then you want to offer him or her and an upsell. This is additional product they can get at a reduced price. This is your chance to make a profit so make a good pitch. A typical upsell is “And today we are offering a second Wonderful Widget at half price, that’s just $9.95, it makes a great gift for a friend or family member, would you like to add that to your order? Another upsell would be the option to add rush delivery “We also offering express shipping, for another $5 we can have your package delivered in just 3 business days, would you like to do that?” Make sure whatever you charge covers shipping and then $1.50 more for you. Also – if the upsell you pencil in is not one you yourself would take then pick something else. If you offer the customer a compelling package they will take it. You want 25% of the customers to say yes to this upsell. If only 5% of the people do it, it’s a bust. You are paying the operators to read this extra pitch to each caller, you need to have a high enough conversion rate (conversion rate is the percentage of people that take the upsell) to make it worthwhile. The last upsell you want to consider – this won’t be until you step up to a big telemarketing center – is a pitch that offers a free magazine trial or something like that. You get a commission for each customer that says yes to that upsell. Now only about 20% of the people will but you get $15 or so for each one so overall that adds $3 of profit per order to your bottom line. So if you make it to the big telemarketers ask about their “backend clubs.” The idea is to try and make the backend clubs cover your telemarketing bills.

Now, if you get this far and you are ready to test, it is now time to troubleshoot things.
Send a sample of your product to the answering service so the operators can play with it – this will help them on the phone calls. Then, call the 800# you have set up and place an actual order. This allows you to test the answering service to make sure they have everything ready and it allows you to test the credit card processing on your merchant account to make sure you are ready.

To test your 60s spot I’d recommend taking it to Sudden Link in Texas (to test a 120s or infomercial you’ll need to contact a media agency). You can place a 2 week test buy for $4500 that will reach 14 states and 2.1 million viewers. But even more important is that this is a mainstream test. PIs have to work anytime anywhere because they get placed wherever stations have an available slot. So this test will ROS (rotate on schedule – that’s sort of a blanket approach, running some daytimes, some night, some overnights, a good mix). If this test works you have a winner. If it doesn’t your product may still work but it needs niche placement or the commercial needs reworking. Perhaps it won’t work everywhere but needs to run on the History Channel or on the Home and Gardening Channel. Also, please keep in mind that the purpose of a test is to see how the offer performs, does it make you money. You will likely lose money on this test, but you will know how your spot stacks up. For instance, if your spot generates 300 orders total, you multiply that by $10 or whatever your media cost figure is – in this case that would be $3000. That would put you right on the line. If you have 70 orders, you definitely flopped.

These are direct response agencies in our industry that do a good job at what they do. You want to meet them and make sure you are comfortable with them and that you just plain like them – you can do that at the Response Expo convention which is typically in San Diego or you can check on their website www.responseexpo.com.

Venture Partners: (outfits that will take over your idea and give you a commission, you don’t make nearly as much money but you also aren’t carrying any risk) Thane, Tristar Products and Incredible Discoveries.

Fulfillment: Moulton and FPV Services.

Telemarketing: LiveOps (Live & IVR), Convergys, Evolve (Live), West Teleservices (Live & IVR), Teleperformance Interactive (IVR) and Advanced Interactive Sciences (IVR).

You would only call these people after you have tested the commercial. They don’t want to help shoestring budget people because they know that only 1 in 40 is going to make it. However, if you are the one in the 20 and you’ve proven that with a test then they will help you take it to the next step. The other people you should call are the home shopping channels. HSN and QVC – at least submit your product for consideration, you never know what they’ll take. They don’t take much in the way of kid products because that’s not a strong area for them – to get a better feel for what they want to see I suggest you watch the channel. Shop At Home is another shopping channel but they want jewelry and sport memorabilia – they have a more focused niche. Again you can find these companies/people through Response TV Magazine (they have a glossary of companies that advertise in the back of each issue).

And – don’t forget catalogs. This is the most common error. When your commercial is being filmed and they are taking beauty shots of the product make sure you get some still shots taken. I don’t care if it’s your Minolta or what you use. Find a camera that takes a good close – up, digital cameras with megapixels of 6 or more can also be used. We usually have 2 people with cameras and they each take 3 shots of the same thing because you have to get this picture right. Setting up the shots is a lot of work. It is far more efficient to get these shots done on the same day that you are filming the spot. Then you take those pictures and have a graphic designer make you a nice 1 page full color glossy. You have to figure out the layout and the verbiage and everything. Then you have a bunch printed and you mail them to the catalogs you want to pitch. Make sure the glossy references the cost of the item and the suggested retail. And make sure it says what is included. You can contact the catalogs directly. Or you can talk to Catalog Solutions.

Catalogs don’t care about retail packaging so they are cheaper to make product for but if your offer hits well they can and will order 10,000 plus units so make sure you have a plan to cover that just in case. You do have 30 days to provide the 10,000 units which make them much easier to deal with than retail stores which want it yesterday. You can find the catalogs on line, email or call and ask where you would send a product that you wanted to submit to a buyer for consideration. You may have to explain yourself; the operators don’t get a lot of calls like this. Ask for the address, the name of the buyer (you have to tell them which buyer you want – the holiday buyer, the children’s toys buyer) and ask for the phone number so you can follow up on your sample. Mail it, make sure it looks nice and presentable, call afterwards to confirm it arrived and then say “I know you guys must get a lot of samples, can you give me any idea when I should call back to see if you liked the product?” And then they should tell you “oh sure, call me in 3 or 4 weeks.” If they turn the product down tell them you are new to this sort of thing and if they could give you any feedback on why the product wasn’t right for them that might help you do a better job the next time around. Every time you get turned down don’t look at it as a rejection, it’s a chance for pointers so you get it right next time.

Now, let me recap some facts and add some more terms. There should be a 1 to 5 ratio between the cost of your product and the retail. A $19.95 product would cost $4; a $14.95 product would cost $3. When you place a buy you want to figure out your cost per order. So if a test buy costs you $2500 and you pulled 200 orders your cost per order would be $12.50 – that is not what each order cost you in total, it’s the media cost. How much money did you spend on television time to get that order? So on a $19.95 offer you want to see a $10 cost per order, if you don’t you try and tweak the offer or add better upsells on the backend to make up the difference. Only a few offers in the history of Direct Response Advertising have seen a consistent cost per order of less than $8. They are all products you’ve seen: memo mate (it lets you record a message), bacon wave (cooking bacon in the microwave), super slicer (to slice and dice veggies), dental white (teeth whitener), liquid leather (repairs tear in leather), and stick it (roller device to pick up dry spills like flour, it also got lint off clothes and pet hair off the couch).

In infomercials they will use a CPO or cost per order as well as the media ratio. You determine the media ratio by taking the total order dollars and dividing it by what you spent to buy the time. So if I spent $100 to buy a ½ hour slot on a TV station and I generated $200 in orders (you don’t put the shipping dollars in here) then the media ratio would be a 2.0 – that’s the minimum you can generate and pursue a placement. A 3.0 is great and a 4.0 comes around once a year and you should do the dollar dance.

A continuity offer is where the customer buys the first item for $9.95 and then they get another item in the series every 6 weeks or so and their credit card gets charged each time.

Color Bars are the bright colored bars on the front of a television commercial – they run for at least 30 seconds and they help the television station to adjust their settings to coordinate with your spot.

Inbound Center is another name for the telemarketing firm that takes the calls on your 800#.

Last, please remember that 90% of the people that bring an offer to television will lose money and 10% will make money. No one becomes a millionaire based on their television offer. If television works it simply builds your base and you use that to generate retail orders. Now if you have a lead generator product the odds change dramatically. You can make money offering a service. So if you have a travel agency and you want to offer timeshare packages or a cruise package then you have a good shot at making it. Those generate huge numbers of calls and the key to making them work is having a good inbound phone room that can convert those calls to orders. The television end of things will be a snap for you – the tough part will come on the backend.