TEMECULA, CA— This has been an historic year for the As Seen On TV industry as reflected in the category’s soaring television advertising spend during the COVID-19 pandemic, according to Joseph Gray, CEO of DRMetrix, a leading direct-to-consumer TV research company.
DRMetrix, based here, recently released a completed study of the top 25 As Seen On TV advertisers and top 100 As Seen On TV products as measured by advertising expenditure. DRMetrix uses automated content recognition technology to track television ads airing across 130 national networks.
During the COVID-19 national quarantine lockdown, the top As Seen On TV advertisers increased their television media expenditures by 376% compared to the prior year period, according to the DRMetrix study. As Seen On TV ad expenditures in the post-quarantine period continue to be ahead of last year’s spending by 200%, Gray said.
Given unprecedented levels of As Seen On TV spend to date in 2020, Gray said the study’s results are an indicator of a booming As Seen On TV business at retail this year, adding there should be significant pent up consumer demand for these extensively advertised products.
In the following exclusive interview with HomeWorld Business Editor-in-Chief Peter Giannetti, DRMetrix’s Gray outlines how a television advertising media marketplace suddenly and dramatically reset by the COVID-19 lockdown became a huge growth opportunity for As Seen On TV marketers and retailers that should continue into 2021.
HomeWorld Business: How, if you can estimate, do DRTV media spending levels typically correlate to retail sales?
Joseph Gray: I’ve been in the DRTV space for over 30 years. I have heard it said many times that only 1 in 10 sales for As Seen On TV products result from the TV ads themselves. Nine out of every 10 sales are thought to take place in retail.
That said, the direct sales that take place via the TV commercials are what allow the TV marketers to support the TV spend. When testing a new product campaign, if enough consumers call in to order, then the marketer may achieve an acceptable Media Efficiency Ratio (MER). One divides total TV sales by TV media costs to calculate MER. Unless an acceptable MER is achieved during the initial testing and rollout of a new As Seen On TV product, the result will be insufficient TV exposure/spend.
DRMetrix tracks new As Seen On TV products being tested all the time that are quickly pulled off the air because not enough consumers responded resulting in an unacceptable MER. MER is increased as more consumers vote with their wallets by responding and purchasing. This is what ultimately drives higher levels of TV spend and ultimately retail success.
If retail buyers have accurate TV spend data, and unfortunately most do not, then TV spend and retail sales levels should correlate. DRMetrix has been monitoring over 130 networks and providing complimentary data for As Seen On TV products to brick and mortar retailers since 2015. That said, the retail industry has been shy about sharing retail sales data. The fact that some of the largest U.S. retailers continue to reference our data and say positive things suggests they are finding a correlation and that our data is helping them be more successful in the As Seen On TV category.
HWB: What details about DR media spending on a given product do retailers need to understand?
JG: There have been some classic mistakes made by TV research companies over the years which have resulted in unreliable As Seen On TV expenditure data. Some of these shortcomings have allowed unscrupulous marketers to manipulate TV research data and make it appear as though they are spending thousands of times more than they really are. Unbeknownst to retailers, consumers in the top 100 TV markets, where the vast majority of retail store sales come from, may have never even seen certain As Seen On TV products on TV.
HWB: How was the As Seen On TV business performing pre-COVID-19 as reflected by data on the segment’s DR media spend?
JG: Things were very different for the As Seen On TV category prior to COVID-19. Competition for TV media has been growing in recent years driven by private-equity funded dot.com and mobile app companies. Often referred to as direct-to-consumer (DTC), this category has exploded. In 2015, DRMetrix initially measured $2.24 billion in spend from DTC web/mobile advertisers, which has increased an average of 26% year-over-year. By 2019, the category had grown to $3.67 billion in TV spend.
Many of these DTC campaigns purchase the same type of inventory that As Seen On TV advertisers rely upon. With media costs rising, the As Seen On TV category understandably struggled, and we saw an initial 9.56% decrease in 2018 for national As Seen On TV ad spending and a larger decline of 26.35% in 2019.
HWB: Discuss the impact of the pandemic on media availability and rates as the pandemic has progressed from its early stages to where things stand today… and how the As Seen On TV segment has capitalized.
JG: When COVID-19 hit, everything changed for the As Seen On TV
Unlike their more branded DTC counterparts, As Seen On TV campaigns are able to measure consumer response using different 1-800 numbers and calculate their MER down to the network, daypart and creative level. So, while many DTC campaigns pulled off the air due to uncertainty, As Seen On TV advertisers began testing the waters. The dynamic was unprecedented, during the national quarantine, TV viewership was increasing while media rates were moving in the opposite direction.
As a result, As Seen On TV companies began buying TV time like we’ve never seen before. Some were up 1,000% in media buying during the quarantine period when compared to the same period in 2019. Even in more recent weeks, post quarantine, the top As Seen On TV companies continue to spend an average of 200%-plus over their 2019 expenditure levels.
The whole category has exploded, making 2020 an historic year for As Seen On TV and one that will drive retail sales like never before.
HWB: How has the national election advertising cycle factored into As Seen On TV media availability and rates?
JG: The As Seen On TV industry continues to purchase media at historic levels each month despite the impact of political advertising. The peak (As Seen On TV ad) buying months were April and May during the actual pandemic shut-down where the entire category was hovering around $100 million a month in spend. Buying pared down a little in June-August, averaging $60 million a month. Buying in September declined to $42 million. To put that in context, September of 2019 the (As Seen On TV media) expenditure number was $26 million. So the category is still up substantially year-over-year even, despite the political advertising headwinds.
HWB: What is your outlook on the ASOTV media spend— and by extension its potential retail performance— during the holidays and into 2021?
JG: The latest data shows an estimated $34.8 million in October spend through 10/14 which is pacing well ahead of September. The second half of October may tighten up due to political, but when we get past November 3rd, we’re going to see another wave of unprecedented As Seen On TV media buying through Q1 of 2021, if not substantially longer.
We’ll just have to wait and see how quickly the economy recovers and whether or not more branded and DTC advertisers return to normal levels of spend. In the interim, 2020 is already an historic year with As Seen On TV expenditures at a whopping $606.2 million compared to the same time period in 2019 at $270 million.
Q1 in 2021 will likely be one of the most significant quarters of media investment ever recorded for the As Seen On TV industry. In a normal year, Q1 is always the highest quarter for As Seen On TV spend. But in a COVID-19 Q1, with softer than normal media rates and political ads behind us, we will likely see a return to pandemic levels of As Seen On TV spend. If consumer retail buying behavior recovers in the first half of 2021, the As Seen On TV industry will be poised for one of its best retail years ever driven by 12-plus months of historic spend levels.