Screen Test

DRTV advertisers’ negotiating power has led to an uneasy relationship with media owners. But attitudes are changing.

Heard of the Abdominizer? The stomach-muscle exercise device is probably the best-known directly sold brand in the UK for a simple reason – wherever low-cost airtime is to be found on TV, its commercials are run. A log of its spots could almost serve as a history of the growth of British direct response TV advertising.

When ITV found demand from its traditional, brand advertiser base was slack in the early Nineties, it began to pursue response ads. Channel 4 took over the job in 1993 (although both have tended to back away from DRTV now rates for even the quieter day-parts have started to firm up again).

Satellite and cable are heavily in thrall to response clients, since those stations have a supply of airtime well in excess of demand. The lower cost – one estimate is that non-terrestrial is selling at a discount of about 28 per cent compared with ITV – combined with reasonably sized, but clearly defined audiences is exactly what direct marketers are looking for. The relationship between TV stations and DRTV advertisers can best be described as uneasy. Media owners know that clients running responsive ads will be among the first to test a new channel.

As Ken Mansfield, managing director of Mansfield Lang Direct Media, says: “When something new comes along, we have to test it or there is no way forward. Most conventional ad agencies will come up with the story that there are no viewing figures they can use and be comfortable with, so they can’t advise their clients until the situation changes. That gives us the opportunity to get in early, test, and make a statement.”

It is the nature of that statement which TV channels are uneasy about. DRTV campaigns will not only give an indication of the size of the audiences being reached, they also reveal the true demographics of viewers. That gives them a powerful negotiating tool when arguing about price, usually wielded to keep costs down. Given the traditional power balance, this is an uncomfortable position for TV sales houses.

Mansfield adds: “The sector found them. They now know the value of DRTV, but more to the point, we know. Agencies and media buyers developed it, media owners did very little other than to say there is a channel here. They didn’t take us to the US to show us what they are doing – we found the commercials to watch and learn.”

While ITV may be better placed to resist the pressures of DRTV, other channels cannot be so confident. As new ones continue to emerge – Channel 5 and Granada Sky Broadcasting among them – there are signs that a new attitude is also forming. Instead of seeing response ads as an uncomfortable but necessary stage in developing a revenue base, media owners now appear to be actively courting them.

Nick Milligan, sales director of C5, is reported to have welcomed the interest of DRTV advertisers during a meeting at the Incorporated Society of British Advertisers (ISBA).

Although declining to comment for this article, it is evident that C5 sees a real commercial opportunity in working closely with response advertisers. Despite the efforts made by other terrestrial contractors, few believe they have a long-term commitment to the sector. C5 is the last commercial terrestrial channel to launch and will be competing for revenue from a lower level of reach and penetration than ITV or C4.

This is exactly the sort of broadcast profile DRTV wants. As one source notes, “C5 is looking to develop new sources of revenue and DRTV is one which others turn their noses up at”.

Increasing acknowledgement of the role of response ads can be detected elsewhere. C4 has been giving high-profile support to the sector for some years, leading to its most recent initiative, 4-Link. This provides accurate confirmation of spot times to telephone response handling houses. While not an obvious benefit to advertisers, seen from a conventional media perspective, it does answer one of the major bug-bears of those running responsive ads.

“It allows us to get direct access to the finalised spot times for our particular clients’ campaigns. Its launch was driven by our demands as a group after TV companies changed spots without informing the call-handling bureau,” says Tony Moss, marketing director of IMS. “That has massive implications for operations if two spots coincide.”

It has been one of the hardest lessons for TV sales houses to learn, that DRTV cannot be pre-empted or sold on the spot market like brand commercials. The re-quirement for call-handling is central to the planning of a campaign and needs considerable advance notice. The disappointment for Moss is that, of all the companies involved in response handling, only four have initially signed up for the service.

If the opportunities to exploit TV airtime are growing for direct advertisers, then the “back-end” of this activity will also have to develop. While brand ads can go on air as soon as the commercial is in the can, DRTV ads need as much post-transmission resource, in the form of a telemarketing bureau, as is applied pre-transmission. Whatever the arguments put forward by media buyers and media owners, it could be on this side of the equation that the real challenges lie.

The operational side of the business is not expanding as fast as the broadcast element, nor are telemarketers being involved in the process as early as they would like.

One consultant who works closely with DRTV clients on aligning call-handling with response volumes says: “If you want a bureau to do outbound phone work, you have over 100 to choose from, of which I would trust 20 to 25. For inbound, you have less choice, but there are still probably six to ten. On DRTV with live operators, you have two, both owned by the same company.”

Not surprisingly, this restricted capacity is driving a growing number of clients towards automated call-handling, which is not only cheaper, it is also higher volume. But given that some consumers dislike this form of phone handling, it needs careful consideration early on.

“Everyone in the industry is becoming more aware that telemarketing agencies are able to play a more valuable role in developing campaigns,” says Robin Worboys, telemedia consultant at The Decisions Group. “The focus is on maximising the return on investment for the client – and that is something not owned by any one discipline. Everyone needs to find a way to make it work.”

However, the telemarketing side of DRTV is coming under as much price pressure as broadcasters are. Stephen Jacobs, managing director of the Telebusiness Consultancy, says: “Call-handling costs are relatively fixed. The cost for the first call is the same as the cost for the thousandth, once you take into account set-up fees. There is not a lot you can do.”

It is this aspect of DRTV which is only just starting to emerge, and which may limit the speed at which the sector expands. However broad the range of channels available and whatever reductions are made in airtime costs, budgets still have to take account of handling response. Higher volumes equal higher costs, however efficiently each element works. What really counts is how much business is generated.

“If you are looking for a cost per response of 1, the question is how do you get that out of a 100,000 budget. You must strike a balance between expenditure on media and telemarketing. Traditionally, advertisers spend 90,000 on media and 10,000 on telephone. You need to turn that on its head because it is not just about leads, it is also the outbound follow-up to prospects,” says Natalie Calvert, managing director of Calcom.

Advertisers simply cannot run more spots because they are available at a good price, they have to be able to meet cost per sale targets within fixed budgets.

Ultimately, this may affect the way spots are bought and sold within this sector. According to Anthony Darell-Brown, account director at TV sales house Laser: “It is up to broadcasters to create audiences of particular value that are interesting to direct marketers.

“What is likely to happen is that the cost of reaching any audience will decline. So people who watch TV a lot will continue to do so and be less valuable to advertisers because they can be easily reached with a broad range of media. The wider the choice, the lower the cost.”

Taken to its logical conclusion, this effectively stands on its head the process which is driving DRTV’s current growth. As the size of the mass audience which TV can deliver declines, brand advertisers become less prepared to pay premium prices.

Certain day-parts cease to be of any value to them, opening the way for DRTV advertisers which want low-cost, efficient airtime. If media owners consciously exploit the interest in smaller, tightly targeted audiences – Granada Sky Broadcasting’s Men and Motoring channel is a prime example – they may be able to command premium prices again.

The question is whether direct advertisers can reach the levels of conversion to sale within this cost equation which will make that airtime worth buying. No doubt one of the first to know the answer will be the Abdominizer.

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