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Once upon a time, DRTV companies discovered and developed their own hits…Well, I should clarify: They monitored live shopping to see what was selling. They monitored long-form and the general marketplace to see what higher-priced bestsellers they could provide at cheaper prices. And sometimes they also cut deals with inventors.
These days, the old ways don’t produce enough hits to sustain a company, which is why many names from yesteryear are gone or nearly forgotten. As for the survivors, an analysis I conducted last year showed that the number of homegrown hits they generate is surprisingly small—just one or two on average. And yet the No. 1 marketer from that analysis had nine hits on my last True Top Spenders list, and the No. 2 marketer had eight hits on the list. Obvious question: Where do the rest of their hits come from?
One answer is “follower” items, my preferred euphemism for what others call “knockoffs.” As I shared in my last post ("The 3 Big DR Trends that Will Shape 2015"), competition is fiercer than ever—to the point where every big hit (e.g., Tommie Copper, X-Hose, Jeaneez) has at least two followers. Another answer is brand/line extensions, which are becoming more common and are often supported with traditional ad budgeting (another trend). But there’s a third, a frequently hidden source of hits that continues to grow every year. I call them “feeders,” as they are typically small companies that “feed” tested winners to larger firms on a regular basis.
The business model of these companies is straightforward: Find great products, prove them out using Web testing and initial TV testing, and then “flip” the project for a royalty to a top firm with the financial resources and distribution strength to exploit the opportunity properly. A Harvard professor I know once described DR as a venture-capital model for products. Using that analogy, feeders are the founders and DRTV companies are the VC firms—with the wrinkle that the VCs completely take over so the founders can go back to creating the next opportunity.
So what do feeders look for in a partner? Three things, none of which should be very surprising. First, they want to be treated fairly. Second, they want to be treated kindly. And third, perhaps most important, they want their hits to be maximized as quickly as possible. There is nothing worse than having a project in purgatory because a partner isn’t prioritizing it. Feeders know which companies excel at these three qualities and which companies do not. They talk and compare notes. I know because, in the field, I am often involved in their conversations. As with many things, bad news travels quickly and has far greater potency than good news.
Image courtesy of basketman/FreeDigitalPhotos.net
Jordan Pine is a consultant specializing in short-form DRTV and the author of the industry blog The SciMark Report.