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April  9, 2021

The Future of DRTV Redefined Lead Generators!

by Brian Postma


A rule of thumb in the industry has been that for every sale that happens via a direct response ad  represents six more sales at retail points including online.  What about when no sales happen? What about lead generators where the conversion rate is dismal to none?   Should these broadcasts be stopped? Do they represent a waste of client budget?  In many cases, the answer is a resounding ''no.''  In this short article, we'll attempt to explain why.


We live in a rapidly changing world in which sales are generated in a way that increasingly does not correspond with past models.  While traditionally statistics have created a foundation which shifted in predictable moderate ways over time this is no longer the case.   The impact of new technology and even things like covid 19 represent much more major shifts in how consumers buy and how they react to marketing including direct response commercials.


We all know that the market for product based direct sales is diminishing.  Very few people today, even the elderly, are more likely to talk to telemarketers instead of ordering online.   This can't be compared to shoppers who call networks like QVC and HSN.  These networks have specially trained sales representatives who create an experience that traditional telemarketing used by direct response commercials is yet to reach.   So many sales based campaigns fail, especially for smaller to mid size stations that don't have the whopping viewer numbers needed to pull big sales. Many of these Stations won't accept PI placement and advertisers buy time knowing that they are paying far more then will be generated directly in sales.  Other stations will accept PI and the campaigns remain very much an afterthought for remnant time as the revenue generated may sometimes be substantial but pales in comparison to general advertisement placement.   Ultimately if a sales based campaign is not generating well or at all for a Station it will be cancelled.  This is a loss for the Advertiser who is benefitting in most cases from valuable free to next-to-free advertising.


Lead generators however are a different ball of wax altogether.   Some lead generators perform very well but have low conversion rates.  There can be many culprits for this; ''over-saturation' (put in quotes as there is really no such thing) which generates a higher lead response but of a client who is much less likely to buy right away especially in the cases of higher cost products,  loss to online purchasing,  or of course ineffective sales people.


If every sale generated by television generates six sales for the advertiser, how many sales does each lead, closed or unclosed represent?    There is no exact number.  It may be reasonable to assume that in an average case each closed lead represents exactly the same as each closed sale; about 6 sales per closed lead sale.   For each unclosed lead somewhere around 3 sales generated is a likely number.  Take the case of a member station that had high lead volume on spots but in some cases precious to little closes.  In more than one case the advertiser cancelled citing low lead conversion. Within months, they were back sometimes on a paid time basis.   The Station reached a targeted niche market and the advertisers noticed slumps in their sales after the campaigns, which the Station had been airing heavily stopped due to the cancellations.   In one case, a higher cost item had around to 10 to 15 leads per week.  The lead conversion rate in some months was zero and averaged around 2.  The Advertiser however had a loss of approximately 150 sales per month in which their campaign did not air.   Other advertisers did not provide statistics but noticed enough of a change to resume their broadcasts though direct lead closure remained and remains dismal. 


The simple truth of the matter is that viewers see ads that catch their interest, sometimes enough to call in and sometimes only enough to make a mental note.  Those that call in may be at the very early stages of considering a purchase and especially based on the effectiveness of the telephone sales team may take a month or more to make a decision. By that time, they may already not be tracked to the original telephone lead or may even purchase via a spouse or other family member distorting the actual connection to the lead.  Other times an interested viewer will never call in.  They'll remember the name of the Company and Google it later or look for it at a store, depending on the item.  


Advertisers and advertising agencies that represent them should appreciate this connection.  Advertisers should learn to look beyond lead conversion rates, often with the help of advertising agencies that place their spots. If valid leads are being generated enough for the Station to want to keep airing the spot than the Advertiser should, in most cases, be eager to keep broadcasting.   There are cases where lead payouts are nearly based on a sales commission and may have to be lowered but in most cases the Advertiser is getting a bargain.   Advertising agencies can look at the actual cost (i.e. rate card) to advertise on a station and compare it with the amount they are paying for leads. In most cases, the direct response ad is getting the same time as general advertisers at a much lower rate.  Like general advertisers they should recognize and value the impact of the airtime itself on ultimately generating sales rather then giving to much focus on statistics.  And, perhaps, they should look a little further into direct close strategy  to increase lead close rates.


The majority of television stations will increasingly find sales based PI less lucrative.  Lead based PI is the best way to create a future for the Stations and Advertisers alike.  To do so, a shift in the way Advertisers place value on the airtime they receive must take root.  If so advertisers, advertising agencies and stations will have a win-win scenario long into the future.

Brian Postma is a freelancer journalist who has contributed to DirectResponse.TV since 2017.  He loves looking at things from all angles and values independent, unbiased journalism above all else. Walter Cronkite is his personal role model. 

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