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JOINT-VENTURE PROJECTS and *Financing is a common roadblock for most start-up businesses, particularly *if the business involves direct response television, which people outside *the industry often perceive as an extremely high risk. and *Infomercials, a relatively new form of marketing, have their share of critics *who consider their stability to be suspect. Because of this - and the general *volatility of television - conventional financing is often out of the question. and *Start-up businesses and individual entrepreneurs often seek friends and *family members to provide seed captial for infomercial production and test *marketing. and *A simple infomercial with no celebrities, elaborate props, or post-production *effects may cost anywhere from $10,000 to $15,000 to shoot and edit in 3/4 *inch U-Matic format. and *Add to this another $10,000 to $15,000 for TV airtime, and you are looking at *a minimum of $20,000 to reasonable launch an infomercial campaign on your own. and and *INFOMERCIAL MARKETING COMPANIES (IMCs) and *IMCs are among the best sources for financing for two primary reasons: (1) *they are familiar with the industry and have available funds, and (2) their *hands-on involvement with your campaign provides helpful expertise. and *AIRTIME INVENTORY. The strength of IMCs lies in their huge inventory of *excellent TV airtime available for half-hour paid programs. Most of these *companies buy huge blocks of strategic (early evenings and weekends) airtime *from most major cable networks. and *QUALITY PRODUCTION. Most IMCs have their own production facilities. Those *that don't, usually have access to the best production houses in the country. *These production capabilities are usually combined with talent agencies that *enable them to negotiate the best rates for celebrities. and *MANAGEMENT. The third benefit to usingan IMC is its experience in managing *informercial campaigns. If a major IMC takes on your product, your campaign *is likely be handled by a team of experienced managers. and and
*Two major constraints are normally imposed by IMCs. One has to do with your *product - IMCs do not take on every product that comes their way. and *Presenting your product to an IMC is like an author selling his manuscript *to a major publishing firm. Your product must pass a set of litmus tests *before the IMC will consider risking their dollars on your product. and *If you have only a prototype of your product, it may be more difficult to *sell to an IMC. If the IMC does buy it, they usually want to get involved *with the actual manufacturing of your product. and *Conversely, if your product has been successfully sold in some other form *of direct response marketing, or if you have already produced and test *marketed some version of your infomercial and have impressive sales *performance numbers, IMCs will be more receptive. Furthermore, having *numbers to substantiate your offer will give you negotiating leverage. and and
*Some entrepreneurs hesitate to deal with an IMC because ofthe control factor *both financial and creative. Without any numbers to bakc your projections, *your figures are mere speculation. and *As a newcomer to the business, you will not have the leverage to dictate *financial terms nor will you have a free hand in determining how you *product should be presented. and *As with most other businesses, the leverage goes to the party with the *most to offer. if you are new in the business and have an unproven product, *you do not have the luxury of shopping aroung for the best offer. On the *other hand, if you have a proven product, particularly one that has been *test marketed via an infomercial, you can compare offers and negotiate the *best terms. and
*There is no set structure for financial terms between entrepreneurs and *IMCs. Each company has a formula for structuring a deal, which may vary *from one product to the next. and *You will be better off focusing your evaluation on two factors: (1) How *much money you stand to make based on their projections; (2) How much time *it will take for you to make your first dollar. and *Needless to say, where profit projections are concerned, IMCs tend to be *conservative. When your objective is to convince them that your product will *make them a lot of money, the IMC will naturally argue the opposite. There- *fore, when evaluating an offer, consider your own projections objectively *while viewing the IMC's figures as being pessimistic. and and
*To provide leverage for dealing with major IMCs, entrepreneurs commonly *launch their own small scale infomercial campaigns to produce performance *figures favorable for negotiation. and *The strategy usually follows this sequence: (1) You produce a simple *infomercial to test market your product; (2) You buy airtime in a number *of secondary markets and track the results; (3) You present your product *and your test market numbers to an IMC. and *A MAJOR INFOMERCIAL COMPANY CAN REV UP YOUR SALES AT AN ACCELERATED PACE *YOU MAY NOT BE ABLE TO AFFORD ON YOUR OWN. and *With a heftier production budget and a huge inventory of prime infomercial *airtime, an IMC can do wonders for your campaign. You can reshoot your basic *infomercial to feature celebrities and give your new infomercial a glossy look. *And with the expanded access to better TV airtime, your sales can soar at a *rate you may not have been able to produce on your own. and and and |
