Is direct response marketing an “old school” trend? People in the e-commerce world have historically looked at direct response as outdated. Direct response has been around for so long because it has a track record for success and e-commerce marketers can actually learn a lot from the direct response marketing approach. Some marketing experts are now fusing the two into a cross-channel style of marketing.
Today’s guest, John Santilli, comes from more than twenty years in the direct response television world and is here to share his experiences in identifying a product's potential to sell across multiple distribution channels. John’s new marketing company, Star Logic, works with e-commerce firms to help them determine whether infomercials or other forms of direct marketing can create a lift in their online sales.
Episode Highlights:
- Insight into John’s background in sales and omnichannel marketing.
- How the previous norms of the non-online marketing ecosystem can work in conjunction with online.
- Ways John’s background helped him learn to fuse these systems of marketing and boost client’s online sales.
- We touch on the evolution of Amazon in the way products are marketed.
- The algorithm John uses to calculate the correlation between direct response marketing and the online environment.
- How his marketing company is able to run this algorithm in order to predict ways a product’s success could be boosted.
- Examples of success John has seen when applying multichannel marketing.
- The time it takes to see a sales boost with the direct tv model and the science behind pushing that “nag factor” to increase sales velocity.
- Benefits of omnichannel marketing as a selling point for businesses in the acquisition arena.
Transcription:
Joe: So Mark a couple of podcasts ago you used the term old school in terms of one of the … your podcast and what he does and you know when we started talking about this particular episode I am all in old school apparently because the old school direct response marketing is what I did. I came from the radio direct response marketing world and Walker is not the only producer here. I've produced two TV infomercials. They had many many spot ads and even hosted one. I just have to throw that in there because Walker is such a celebrity here at Quiet Light with a bestselling book and all that good stuff, Netflix, documentary and all that stuff. I didn’t make any money but … maybe a little bit but we're starting to see a trend of a little bit that old school direct response TV production and advertising combined with the e-commerce world where somebody has got an e-commerce product and they're driving traffic both to a call center which is what I did but now online to a website or to Amazon for the products as well. And you had somebody on the site … I'm sorry on the podcast that focuses specifically on that.
Mark: Yeah I know he comes from that direct response TV market world. That's his background and we were just talking about this Joe but it's kind of like these two types of business models in direct response grew up a little separately and kind of despised each other initially or looked at each other with skepticism. A lot of the guys in the direct response internet world looked at direct mail and infomercials as this outdated dinosaur sort of way of marketing. And the direct to TV market and direct mail market advertisers look at these new kids with their internet like it will never last and these are real businesses. Now what we're seeing is these guys are looking at each other and seeing maybe if we work together in this cross channel … now there's a buzz word for you, cross channel sort of marketing both in the offline and online world there is a lift that can happen in the online world. And so I talked to John Santilli really his whole specially is direct response TV infomercials. That's what he does. And now he's working with online firms to help them determine if we were to do a commercial … an infomercial and run this for three months, six months or what have you what's the lift going to be in the online world and does it make sense to do this. I love this idea here because when we look at an online business for sale one of the things I want to see, I want to see do they have this stability? This kind of multi-channel approach for attracting customers and if they do that's a good thing. And we often think multichannel … okay, I'll get my Facebook, I'll get my PPC, I'll setup a Shopify store but there's more than just the online channel. And when we start going into the offline channel there's a certain amount of brand that comes up with it that they can't build entirely online right? Like when you see something on TV it'll hold a little bit more weight than just something that you see online. So this whole conversation with John was how does he make these assessments? What's been the history of this direct response TV market and how can it help online sellers.
Joe: Yeah, it doesn't just build value in terms of more online revenue but its offline revenue as well with people ordering directly from TV. You can also look at products and putting them on HSN or QVC and things of that nature and what it does is you've got multiple channels of revenue. It's going to boost the value of your company not just because discretionary earnings are higher but if it's large enough a private equity firm is going to pay a much higher multiple for a multiple channel product line coming from different avenues. That was one of the presentations at the Prosper Show that mimics or mimicked almost everything we've been saying for the last six or seven years. So I think it's a great idea for those that currently own internet based businesses selling a physical product or those folks that are considering buying one and thinking okay this person bootstrapped it they've gotten to a certain point and they want to move on to their next adventure how can I take this to the next level and look at this TV advertising as well. And it's a great option. Let's go to it.
Mark: John thanks so much for joining me on the podcast. I appreciate you taking the time here. I know you and I have talked over the past few months about various Amazon opportunities and I asked you to come on the podcast mainly because your background in this direct response TV advertising and really omni-channel marketing, going outside of the Amazon and internet ecosystems into these more traditional mediums to really boost brands is pretty extensive. I would love for you to just give a quick background on yourself for our audience and your experience and what … kind of catch people up in our conversations for the past few months.
John: Sure. No problem. Thank you very much, Mark, again for having me on the podcast. Hopefully, your listeners will find some value in what we're talking about today certainly as we've been having our conversations and give them a little bit about my background first and then we could get more into that but my background basically I've been in sales and marketing for the last 20 years. I spent the majority of my career with two companies. Primarily those companies have all been marketing … both of these companies are marketing dependent companies offering budgets of I'm going to say 3.5 million up to 55 million dollars at some point in time and margins ranging from 20% all the way to 100% at some times. I touched almost every marketing means that there is whether that be from direct mail … direct response TV which we'll talk a lot about today and also within the digital side of things, generation side of things. As I've said direct mail I sent out about five a week this is a direct mail on a monthly basis at one point in time. I spent about 25 million dollars a year on TV. My last company I was the executive producer … in-house executive producer for the company. I produced over 120 TV commercials that 30 of them actually went to a retail rollout generating over 250 million dollars in business. With that company, I co-created an algorithm which really gave us the ability to identify under marketed products and new inventions that had the most unique attributes, had the most mass market appeal, and were suited really to go to retail. Our job was to really find, filter, quip products and what that really means is that be again we took products that were under marketed, new inventions, filter them through a proprietary algorithm that we designed and tested those products through that algorithm and then joint ventured with a partner and pushed that into retail. And that was really a direct response TV model. Much of you will actually recognize that as "As Seen On TV" products, those late night infomercials, those daytime commercials.
Mark: So you're the ones that if I'm at the gym in the middle of the day and I see something come up and it's that sort of infomercial type of commercial, you're the one that was putting those on?
John: Yes. Exactly. We're … I mean it's actually a very small market. You'd see a lot of commercials on TV but it is a very small market. Initially, it must be a profit channel in at itself. The direct response was the first news … it was the first area to market goods and services direct to the consumer bypassing retail. The goal of direct response really is to take a … to break even or take a small loss. It really has been to entice consumers to go to retail and to purchase at retail. It effectively became the focus of all DRTV campaigns was to air a lot of media, get people to walk inside the store and buy it.
Mark: Right. Now in our current economy especially the internet based economy we've completely bypassed a lot of these channels that were built up frankly over decades and we've had this whole ecosystem system kind of buildup of internet and we're seeing that direct to a direct response TV market as well as retail market. I'll try to scramble and catch up and see if they could also tap into the Internet market area as well. One thing I find fascinating, I went to Traffic and Conversion a few months ago or about a month ago … actually not even that long ago. It doesn't matter. Richard Branson was one of the keynote speakers and one of the things that struck me from that conversation that he had with all of us was the idea that … the idea of all marketing that used to be the norm, right? He did crazy stunts just to be able to get on the front page of the newspaper. And today I think a lot of us we look at our businesses and we think about it in terms of how can I manage my Amazon PPC account or how can … for a SaaS company how can I get the right onboarding process and find the right customer acquisition channels online and what you're talking about is let's look a little bit beyond that. There's this whole developed ecosystem of marketing that exists which can really work in conjunction with the online environment. With your previous experience did either of your companies get into that where you are using this omni-channel marketing outside of the internet to boost the online sales?
John: Absolutely. So that really is the evolution of the business at this point in time. I mean it's revolutionary where of course just like you mentioned and it's really … you know I have since left the last organization that I was with. I've founded a new company its Star Logic Marketing and the reason why I've called it what I call it because first of all everything out there right now is based off of reviews and star ratings that are out there. If you see something on TV today, okay the first thing you do is you pick up your phone and you take a look on Amazon. You see if it's on Amazon, you see the star ratings and reviews that are on it, you take a look at the price and then you act to buy. So it changed … definitely, the game has changed completely. Through our proprietary algorithm that I kind of mentioned to you the way that we filter products has been based through a survey process. We do a web test which really put the customer … put our product in front of the customer and position them to act on it here. Here's an offer out there we like to buy it. And the direct response model in the past when you had 10% of your orders going through direct marketing today that's up to 50, 60, 70% of your orders are going to order through the web. And whether that'd be through Amazon, whether that'd be through traditional e-com that's the way that people acted on it. So over time, you saw this evolution happening. It started impacting the way that we marketed products, the way that we looked at our marketing in general. We had to consider the fact that 20% of the people were actually going to go buy from Amazon versus going to your e-com site or picking up the phone and calling you. And again there is a higher number of people that were actually ordering off with their phones so you had to make sure that your mobile marketing was done properly. So this omni-channel marketing as you indicated is just so important today for every company whether you are holistically selling on FBA at this point in time and that's when you and I started having these conversations and really what got me excited about this whole thing which is that whether you're selling wholly on FBA and not taking advantage of the digital ecosystem out there, the direct response pieces that are out there, the Home Shopping Networks that are out there, international Amazon, and making sure that you also take a look at traditional retail as well as international retail, is really what I think is a great opportunity for our product and product businesses that—
Mark: Alright so what you're talking about here is you have basic infomercial or commercial and somebody is at home and they're up at one o'clock in the morning and watching reruns of I Love Lucy and something comes on they'll potentially see and so they end up typing it into their phone because everyone now watches TV with their phones as well right? And the product pops up and we can see this direct correlation now between direct response on TV leading and bleeding directly into the online environment. You've mentioned a couple of times that you guys have an algorithm that you run these opportunities through, can you talk a little bit more about that?
John: Sure absolutely. So it really is you have so many things at your fingertips these days. I mean first of all, you used to take catalogs from your house. You go into stores and you see products and stuff like that. There's products everywhere; all over the place. In the past you'd search for products through Google and we would just take a look at products in Google or a catalog and find some unique things and we said well how do we find out what works, what doesn't work, what's the best opportunity for retail whether it's traditional retail or online retail. They're two different things but they still have some unique drivers behind and that get people to buy it right? So they got to be unique. Alright, they have to be they feel like they haven't seen it somewhere before. They now have to be of great quality and they have to have the right price point to get people to impulsively buy it. So what we would do is we would go through a survey process first. My background and my disciplines in the direct mail business is in creative makes people buy but also there are consumer behaviors that made people buy it. So what we did is we asked a series of questions in a survey basis state consistent with those questions and over time became … it had benchmarks that said this product is unique, this product is an everyday product, this product appeals to a large percentage of the marketplace. And those were some of the main drivers that made us … that help us go to stage two which was web testing. So now in web testing, we would do a couple of different things. We would do a very small teaser video or a vlog tech video that demonstrated the product in a way that you quickly understood okay I need this. And we put a very quick order page together where it wasn't an elaborate brand type of web store or web page; it was an order taking page. It was built to just take orders. And we would have people go into these. We'd do an e-mail blast of let's say 300,000 people, 150,000 people, and sometimes even a million people and get benchmarks based off of conversions, click rates, click views, orders, average order amount, how many products did they actually order through that, and those benchmarks were also tied to our algorithm and they remain consistent and we try to make sure that we form long term benchmarks. Those filtering process is whether it was the way that the product has originally come to us and looked at by our view meeting which had people on there from a lot of Home Shopping Networks and people that have been in my industry for years but also the survey process, the web testing process, those benchmarks once they've qualified we would actually put a TV commercial together. And just put a little science next to the art of just putting something on TV. Instead of doing just a … what we refer to is or what I refer to as a spray and pray approach where you just spray your product everywhere and see if it works it add a little more science to it.
Mark: Sure. So now with the current marketing firm that you just recently founded that's doing this what your basic appeal for somebody that might be listening here is that you'd be able to take a look at that product if somebody has a private brand that they built and maybe are doing well with on Amazon, you'd be able to take that and run through this testing process to be able to see what the possible or potential impact on revenues and growth would be if they were to go to the direct response TV market. Am I understanding that right?
John: Absolutely. I mean you nailed it. I mean really what it comes down to is this is that through this process we feel like we can go into any retail store for example and if you have a product line and you say this is my entire product line we feel like we can go from A through Z process and say A has the best opportunity to succeed; Z, put it on the shelf. It'll still sell but put it on the shelf it's not going to be your most appealing product that's out there in your marketplace. And really that's what the system does, but in addition to that, it helps identify your best opportunity to go through TV and other channels because I think that all products have a home, right? It's just a matter of how big is that home. And then I think that's what the process is designed to do.
Mark: How long does it take you guys to figure out what that impact would be from a direct response campaign?
John: Great question. So the initial process that we're talking about from a survey, web testing type of a platform I mean that really could take one to two months depending upon what kind of assets that we have. Or it could take a little bit longer depending upon if we want to … if we get any data that says we need to tweak the product a little bit. So if we find out that people like your product through this process and they have an attraction to your product but there's a couple of different variables that they may want to see more, a couple of different features that they want more on a product a light for an example or something better of quality. This doesn’t look as quality … the quality that I want. We may take a step back [inaudible 00:09:04.2] but if you have the completed product that's ready to go if you wanted two months to do that initial survey web testing platform then you go into developing your TV commercial and maybe you're talking about another two to three months before you actually get on the air and test everything and really are good to go. One thing I just want to make sure that I'm clear with is I've said to you that every product has a home that [inaudible 00:19:30.1] that they should be in. Through this evolution and this process, we found that some products just belong on the digital atmosphere versus TV. So an example of that would be is that we actually have a product and tested at $10 price point on TV a few years ago and it did not meet the metrics to push that product into retail and do a large spend on TV. What we wound up doing with that product and we tested it on digital because the metrics weren’t making sense. We were getting false positives on our web platform seeing that people who are ordering this product through web but they weren’t ordering it through TV. So we started testing inside the digital ecosystem and the next thing you know a year and a half later that we've been marketing this product digitally at a $29 price point at a 19.99 price point and had major success just by utilizing the digital atmosphere.
Mark: Interesting. So you talked about gathering some data to be able understand do people want to buy this product, do they like the product, and maybe is there a product adjustment that needs to happen, can't we just look at how the product is succeeding on Amazon and look at the reviews to be able to gather most of that information? And could we maybe accelerate that two to three month process if we were to just look and say hey I have a product that's been on Amazon for three years saying I've got 2,000 reviews of it with all sorts of feedback on this? Is there other data outside of that that you need or is that a good starting point that would get you most of the way there to be able to identify a product that would succeed in that direct response TV market.
John: Yeah, that's a great question and it's a little bit of a complex answer. I'll try to simplify by basically saying to this I mean I think there's a lot of smart people listening so I won't insult your intelligence by basically saying that either people got their products on Amazon as an early adopter of Amazon or people put their products on Amazon and they wound up first in your category. So some of that behavior helped them get those reviews, helped them get that success early on. And that's my belief. Anyway that product is not necessarily unique and if you marketed that product on TV it would not have the same success as it would have on Amazon or digitally because for example marshmallow sticks, you hear all of the success of marshmallow sticks and the examples of marshmallow sticks and the success on Amazon I don't think you could put marshmallow sticks on a digital campaign or a TV campaign. Does that make sense?
Mark: Yeah, that makes sense. I wasn’t aware that marshmallow sticks were a big thing. Are they a big thing in Amazon?
John: I actually was just reading an article about how someone made a half million dollars in a short period of time by being one of the pioneers of marshmallow sticks on Amazon so it was a very interesting [inaudible 00:22:27.9] for me.
Mark: Now all of our listeners are going to go out and buy a few crates of marshmallow sticks and throw them up on Amazon and that entire market is going to be ruined.
John: Exactly. No I mean I think that in general, I would say to you this, what fascinated me Mark in our conversations and when we were going from in you know we sold in writing on a wall two years ago in the direct response business. And what I mean by that is that like I said we saw this quick evolution of all of a sudden 10% of the people that saw your commercial on TV bought from the web. All of a sudden it's a 50%, 60%. In addition to that, we saw 20% of your orders actually going to Amazon. So we saw it being very difficult, you go into a TV advertising campaign with the goal of breaking even but if you lost 20 cents on a dollar, 30 cents on a dollar you would know in the old world that you'd get that money back because you air a lot of TV and you actually would see a lot of people go to the retail store and you get an 8:1 ratio. So for every one person that brought on your TV ad and called in through the phone or jumped on the web, you would see eight people buy at retail. So those numbers started changing rapidly. And when you and I started talking it was when it clicked to me and said [inaudible 00:23:54.9] couple of things. One is that we had a couple of trial campaigns that we spent, we developed a lot of money … we'd spend a lot of money on Facebook trying to develop a campaign. We'd sold a hundred thousand units of one product on Facebook alone, okay? A lot of these people guide brand awareness very quickly of our product just on an online basis that does not necessarily translate to retail at all. What had happened was is that we saw that Amazon boarded it's like unwanted competition, you heard all about that, unwanted competition, you … traditional direct response TV and we spend a couple of million dollars in a very short period of time advertising for our product and then we'd be shipping in half a million units overseas. So now everybody overseas is getting alerts and anybody that tracks imports is getting alerts on what had … what products are being most successful? We're airing this stuff on TV, you have an international competition coming in and putting your product, your brand up on Amazon right away with lower prices. Maybe not the same quality and we saw a major impact happening to you know we weren't able to market the same way. So that 20% or that 10 cents lost, that 20 cents lost on the dollar started becoming 50 cent losses on a dollar and we had to figure out different ways to market our product. And you had to look at it more holistically. You had to look at Amazon, digital and really start playing a different game. And I think that when you and I started talking and I started seeing these [inaudible 00:25:37.5] Amazon centric companies when they were only living inside the Amazon atmosphere they're saying some of these products are awesome, some of these product lines are great why haven't they tested some of these other channels. I can see that maybe they tested a little bit of digital because once I've clicked on their web site they started following me around [inaudible 00:25:58.9] Facebook, Instagram, everywhere. They didn't really have any type of marketing dollars or marketing spent outside of the Amazon atmosphere. So the reality is that I just see this as a huge opportunity for any of the FBA type companies that are sitting out there to say hey what other channels can I market to really explode this business and really put my business on steroids. I think you know and I know and you know better than me for sure that those multiples that are being paid on these businesses when you put them up for sale I think that if they have more of an omni-channel approach towards things, if they have a good Facebook presence, if they have a lot of Facebook followers that are around there I think it just makes their platform that much stronger and that business much more saleable.
Mark: So anyways there hasn't been a whole lot of crossover between these silos in the past, right? We've really kind of stayed true to the one areas and part of this is just because of the opportunity that exists. And in talking to sellers and business owners who are working in the Amazon space their businesses are growing rapidly without having to go outside. But I do think that looking outside of Amazon whether it'd be through digital marketing and I know a lot of our clients are starting to do that but also into these more traditional areas is the way that we need to stay ahead of that curve right? We all know we have to say ahead of the competitive curve. What are some examples of lift that you've seen from applying this omni-channel focus and I apologize, I didn’t prep you for this question so if you don't have numbers off the top of your head that's fine but I just want to get a sense for what are we looking at here by exploring this option of omni-channel marketing and especially when we're looking at going outside of Amazon but even outside of the internet as well into more traditional forms of marketing.
John: It's an excellent question and although you did not prep me for it, it is something that we live in every single day. So I'm going to try to answer in a couple of different ways. First of all I would say to that if you are an Amazon centric company, we'll focus on that first, and you are not taking advantage of some of the digital or traditional DRTV, direct response TV channels I would say to you this; so the curve in the direct response TV industry is about 18 months. So in 18 months, that's kind of your life cycle. And traditionally it's been [inaudible 00:28:34.9] of a life cycle because get this grand awareness of this product, you're ahead of the competition and you try to outrun the competition by just flooding the market with a bunch of products. So some of our products in that 18 month life cycle yielded 6, 10, 15, 20 million dollars' worth of revenue during that short window of time. So if you have access to inventory, if you have access to the product if it is a DRTV type of a product I think an 18 month window and developing several million dollars' worths of revenue is very obtainable. The other piece of that is this for those products that did not work on direct response TV and really you test into the digital ecosystem, there's a lot of companies and I think everyone will agree that Facebook is your work force in that spectrum. However if you go about it in some of the more scientific ways and try to figure out where your audience is, whether you're doing some display banner type ads to learn where your audience is and where to target better, we've seen some of those companies that they may have been exploring to try and get into retail. They weren't there yet but they decided let me try to play holistically on the digital side first. We've seen some of those companies in a matter of three to six months generate quick huge revenues and be what we call a double return on your investment. I mean a double return on your investment on the marketing side of things; maybe a triple return on your investment and its either three to six months with a nice digital plan. The amount of traction that you wind up getting at retail if you're able to get into traditional retail we know how hard it is to get in traditional retail but the amount of lift that you get could be easily 50% lift at traditional retail when you're running some type of direct response maybe in combination with a little bit of digital TV figure campaign. Pretty good deal target right? We could figure out exactly where your products are being sold and deal target that as well. So does that answer your question?
Mark: Yeah, that definitely helps. I have one more question for you and I've played around with radio advertising for one of my other companies and the general rule that I keep hearing over and over with the radio ads was look you need to run it for three months. You need to have the right saturation and frequency in order for it to really take effect. Do you have that same effect with television ads? Does it take time before you start seeing that lift?
John: Absolutely. It's impressions. Everything's based off of impressions and you need a certain amount impressions across a broad audience and to a specific audience in order for you to get them to buy. So there is a science to that that our media buyers actually play with on a regular basis and they … you'll see … I mean a great example of that is kids items; children's items. We always call it the nag factor. So you really want to put those impressions inside of a child's head so they go to mom and dad and they basically say Mom I want that. Mom, I want that. A lot of our media for kid's items is 60 seconds spots, 30 seconds spots so you're just really driving everybody to impressions and driving them to retail. They’re also direct response type of ads but you're really trying to get the impressions in their head. Get the nag factor to go and really get them to buy.
Mark: That's fantastic. Alright if somebody wants to learn more about this where can they reach?
John: Star Logic Marketing is the name of my company. As I said I just started the company a couple of months ago. My phone number is 215-694-3118. You can look me up on LinkedIn. I have all of my LinkedIn information. The website is still being and would be finalized the next … hopefully, a couple of weeks here but Star Logic Marketing is the name of the company. We do think that this omni-channel type of approach is a way for you to really put your products and your product lines on steroids when you jump outside of just the Amazon ecosystem and really you take up the edge of the more omni-channel marketing opportunities.
Mark: I think there's all sorts of benefits for Amazon sellers and I think those that have been in the game for a while might be thinking in their heads of some of these things and think sales velocity for one. Being able to really power up the number of sales of launching new products as well would be another benefit that I definitely see with this and a really fascinating concept. And I think probably the way that we're going to see things go. I have a couple of additional questions for you but I think we're running out of time at this point so thank you so much for coming on the podcast. I do appreciate it and I hope to have you on again in the future.
John: Thanks, Mark I really hope it was of value to your audience. I do think that there is a great opportunity for the people that you're speaking with in a regular basis to really help improve the opportunity to sell their businesses by leveraging all of these [inaudible 00:33:41.9]. So thank you for having me on and I look forward to the next time we talk.
Mark: Thanks, John.
John: Take care.
Links and Resources:
https://www.linkedin.com/in/johnvsantilli
https://starlogicmarketing.com/ coming soon
Reach John @ 215-694-3118
