“Whenever possible, one should focus on removing fragilizing interdependencies rather than imposing additional structure and activity that will only increase the fragility of the system as a whole.” -- Nassim Taleb, Rupert Read and Yaneer Bar-yam; from the paper, Precautionary Principle*
In my last article I outlined a few reasons the Direct Response TV industry was fragile. Chief amongst the reasons was the “drive to retail” mantra adopted in the industry. When DRTV products/campaigns become dependent on retail and retail dependent on TV campaigns, the industry is fragile as a whole precisely due to interdependent fragility.
When marketers reply on retail to make their profit, this is half of the fragile interdependency concept which authors Taleb, Read and Bar-yam wrote about. Sounds simple, right? I believe a robust marketer needs to travel a less fragile route. Rather than kick the can of profitability down the retail road**, the robust marketer imposes a discipline to make money with each of its market channels. The industry as a whole needs robust marketers.
Becoming a robust marketer requires one to open one’s eyes and admit to fragilities in the entire ecosystem, including retail. This becomes all the more urgent as retailers impose onerous, one-sided deals. When a retailer demands burdensome terms, one must consider carefully whether to take that order. Saying “no” becomes difficult with a business model that has delayed profitability until one gets to retail. But if all marketing channels were making money, marketers would not be slaves to an oppressive, single master. This of course includes TV campaigns.
This primarily requires a return on investment mindset in DR television campaigns. But it also means imposing ROI metrics on print, marketplace sales, online search, email and other marketing efforts. It is critical to changing one’s mindset from creating “fragilizing interdependencies” and making each channel an independent profit center.
Simply put, if you are not making money in any channel, stop what you are doing and cease mortgaging your future.
So you say this is easier said than done? Some diehard folks wedded to a fragile, dysfunctional mindset are rolling their eyes thinking some variation of, “you cannot become profitable by edict.” Becoming less fragile is about process. Fix your process and you will be surprised at how profits are fixed. If you are wedded to “scale” rather than profits, this is also part of the problem.
To become less fragile, remove fragile dependencies in your process. Let’s talk about telemarketing. The time for 800 numbers is drawing to a close. Telemarketing is also a fragile industry. How so? Moving calls offshore degraded quality and while lowering marginal costs for the service provider, everything did not quite work out for the marketer. Home agents are a disaster. Incentives for telemarketing are all screwed up. The worse they are, the more money they make. Why? Because you are charged by the second and the longer they keep someone on the phone, the more money they make and the more money comes out of your pocket. And what about IVR? A nice innovation in the cost equation, but it has not helped marketers obtain an ROI.
The time is now to lower order transactional processing costs to near zero by moving exclusively to a direct-to-web platform. The sooner marketers pledge themselves to eliminating ordering by phone, the more consumers will get the drill. We train consumers for good things as well as bad. The lower transactional costs will pay dividends sooner than you think.
The most important road to becoming a less fragile marketer is restoring more rational ROI metrics to media performance. Every media buy for a direct marketer should live or die on whether it earns ROI. We all need to be mindful that there has been an exponential increase in available media in the past 10 years. Just as consumers have a multitude of media choices, so do marketers. Here is a little known fact; there are approximately 10 trillion monthly online page views in the US alone. And this is doubling every 18 months. There’s gold in them thar hills. We only need to start mining. There is no shortage of media to replace overinflated television rates.
Also, if you have DirecTV, take a look at how many 24-hour shopping channels there are between Channel 0 and 350. At last count, there were 51. Marginal distribution costs of media have overwhelmingly declined over the past 20 years. But rates charged to marketers have not kept pace with the decline in marginal costs to media owners. In fact, they have gone in the opposite direction.
As long as DRTV marketers are married to the process of forgetting about ROI metrics, rates will not be rational and the industry will continue to be fragile because marketers cannot make the numbers work. Lest any subtlety remain, a return to real DR metrics delivering ROI will automatically drive media rates down. High media rates remain the No. 1 stumbling block to profitable television campaigns.
So we have looked at removing “interdependent fragile” relationships and alluded to a treasure trove of media supplies. But wait … there’s more. The email addresses collected in the ordering process can actually become a tremendous source of income. By ditching 800 numbers and having all orders processed online, there will be a huge increase in email addresses collected. This allows you to send future offers for practically free.
Marketers should be licensing this data as well as marketing to their buyers via email. The benefit of creating additional revenue streams from this media asset is only now becoming apparent to them. Every order confirmation email can also be revenue stream. Every confirmation page after online orders is also a money making opportunity. Every ship confirmation email is yet another revenue generator. Each touch point in the ordering process should be monetized, including when consumers visit order tracking pages.
At PulseTV we discovered that over 70% of purchasers click to track their orders and we actually make money putting our deal-of-the-day offer on our tracking page. Discovering previously unmonetized “touch points” (think of every potential communication with a buyer as a “touch point”) and turning those into money are all revenue streams that carry zero risk. This mindset begins to make us less dependent on retail and is manifestly liberating. It begins when you stop kicking profitability down the long and winding road.
* Much of the ideas expressed here have been more thoroughly articulated in Nassim Taleb’s books, The Black Swan, Fooled by Randomness and Antifragile – Things That Gain From Disorder.
** I am not suggesting retail is a waste of time, just that being dependent on a fragile sector is not a great business model for direct marketers.
The opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaVillage management or associated bloggers.