Ad Age - March 23, 2009

J&J, Church & Dwight, SC Johnson embrace the model

BY JACK NEFF jneff@adage.com

TO FIND THE HEART OF the DRTV industry—at least of the $19.95-and- under crowd that increasingly have seared themselves into the collective consciousness in the recession—look no further than New Jersey. There, three of the industry’s biggest players, the Procter & Gambles and Unilevers of direct response, make their home.

Once considered the laughing stock of marketing, DRTV is having the last chuckle. In these days of softening demand for media time, the industry collectively outspends both P&G and Unilever combined, in terms of TNS-measured U.S. TV spending of $4.5 billion. And assuming an industry guideline that one of every three sales dollars is spent on marketing, that could push total sales for the short-form DRTV marketers north of $13 billion.

Two of the biggest players— TeleBrands and Ontel—are run by brothers A.J. and Chuck Khubani, respectively. TeleBrands, which went through bankruptcy in 2000 when times were relatively good and TV rates were high as a result, has made the family particularly proud during the recessionary

year of 2008, more than doubling DRTV spending as measured by TNS Media Intelligence last year, to $53.9 million, behind such hits as the PedEgg.

Similarly, IdeaVillage, Wayne, N.J., more than tripled spending to $43.9 million last year behind such products as Smooth Away depilatories. A state away in Hawthorne, New York, sits All-Star Marketing Group, marketer of the Snuggie and the Topsy Turvy Tomato Planter, which also tripled spending last year to $137.8 million.

Sales for each of these marketers likely reach into hundreds of millions annually each. Guthy-Renker, the marketer of ProActiv is believed to be the single-biggest marketer in DRTV with sales estimated by Hoovers at $1.8 billion in 2007. And 2008 appears to have been a very good year for the industry, with 2009 looking promising, too.

Only a couple of years ago, some direct-response marketers were having to pull out or pull back because media rates were higher and big brand advertisers were crowding into the space, tagging ads with coupon offers to qualify for DRTV discounts. Now, the market is back to

where it was four to five years ago in terms of price for short-form ads, said Scott Boilen, president of All-Star, but the market isn’t quite the paradise some believe. “There’s a misconception out there that the rates have all of a sudden plummeted,” he said. “It’s not that so much as there’s more availability.”

To be sure, there’s room for TNS data to be questioned in a market known for its hard bargaining. But at least in the case of one of the publicly held marketers—NutriSystem—it appears to be well in the ballpark, showing $138.5 million in DRTV spending, compared to reported all-in marketing spending by NutriSystem of $175 million. While TNS shows an 8.5% increase in DRTV

SMOOTH MOVE:

Idea Village spent nearly $44 million to market its Smooth Away depilatories, and the brand has been a rousing success.

spending, its annual report shows a 2% decline in all marketing outlays.

It seems only logical that more will embrace the DRTV model. Johnson & Johnson, for example, spent $22 million on its DRTV launch of Neutrogena SkinID last year, and managed to cut into more than 30% of Proactiv’s web traffic. J&J’s success raises the question of whether more package-goods players will crowd into DRTV as they did during the last recession in 2001—only this time fully embracing the model by selling product, too, rather than just as a media-buying strategy.

OxiClean marketer Church & Dwight has tried selling other brands via DRTV, spending $13.8 million last year on brands ranging from Arm & Hammer to Trojan. SC Johnson also has used DRTV its Ziploc and Oust brands, spending $21.7 million last year in all.

The idea, as with the more conventional DRTV players, need not be making money directly off DRTV, but using product sales to help subsidize media, thereby allowing major marketers to spend more while finding what media buys work best in the process.