There is a legacy in direct marketing born of exclusive TV offers, As Seen On TV products, and direct-to-consumer offers where the price of entry for a buyer involves little to no financial risk. Consequently, many products are sold for $29.95, $19.95, and $9.95, or based upon risk-free trials, buy-one-get-one-free come-ons (BOGOs), and other lowest common denominator schemes. But in today’s omnichannel marketplace, where customers make less and less distinction between products sold on a direct basis versus traditional brick-and-mortar retail, it is time for the industry to reevaluate this low- to no-price approach.
Part of the problem with relying on these low cost pricing strategies is that they put tremendous pressure on the marketer. For one thing, the cost of goods relative to retail price must be low, which makes delivering a quality product challenging. We live in a time where the virtues of every product are scrutinized on the Internet, so any marketer who does not live up to expectations runs the risk of having their reputation damaged online. To compensate for a low retail price on the front end, direct marketers will then sometimes rely on tactics that the public clearly doesn’t like. These may include auto-ship programs, high shipping prices to make up margins, or, in the case of BOGOs, so-called “processing fees.” The marketer may have a very good product, but these sorts of business practices turn a lot of people off—people who could become loyal, long-term customers.
The bottom line is that there is too much focus on price, and not enough on value. Apple, the world’s most valuable company, doesn’t discount its prices—it charges a premium. The company can do it because it makes a compelling case for why its products are superior. And the reality is that with the right focus, there is absolutely no reason why direct marketers cannot do the same thing. While it is true that today’s proactive consumers are always searching for a great deal, they will also pay more for something if they feel it is worth the financial risk. On the other hand, if something is given a low price or the cost of entry is entirely risk-free, it will likely be regarded as “less than” and not have the same perceived value as something that requires an investment. To illustrate the point, let’s take a look at water. According to Business Insider, bottled water costs 2000x more than tap. In 2012, the latest data available from the Beverage Marketing Corporation indicated that Americans spent $11.8 billion on bottled water—and the number is growing. The average cost of domestic non-sparkling water was $1.20 in 2014, but Fiji water is $1.98—at Walmart. That’s a 60 percent premium because of the perception created by the name and packaging that connotes superiority.
If marketers of water can successfully enjoy such margins, why can’t direct marketers of far more unique and innovative products do the same? Perhaps singer and author Sonya Teclai said it best when she stated, “Life is all about perception. Positive versus negative. Whichever you choose will affect and more than likely will reflect your outcomes.” Direct response television and online marketers have the advantage of more time and real estate with which to create product differentiation to support a value proposition and justify a higher front-end price. Isn’t it time for the direct marketing community to stop conditioning consumers to expect everything for nothing and to make the case for value? What lie in the balance are the balance sheet and, perhaps, the future health of our industry.
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Peter Koeppel is Founder and President of Koeppel Direct, an influential direct response media firm focused on direct response television (DRTV), online, print and radio media buying, marketing and campaign management. He can be reached at 972-732-6110 or online at email@example.com or twitter.com/DRTVBUYER.