Top 5 Secrets of the As Seen On TV Industry
As Seen on TV infomercials have long been a favorite of Americans in need of entertaining. With exaggerated problems ("Are you tired of fussing with pasta pots, timers, stirring, and testing just for a plate of pasta?") and kitschy solutions ("Pasta boat: the perfect 5-in-1 pasta cooker that serves perfect pasta without the hassle!") it’s easy to mistake the industry for just that, cheap amusement.
But it’s not.
Thomas Haire, editor-in-chief of Response Magazine, estimates that As Seen on TV is a $400 billion industry. Haire says that Allstar Product Group, the company that has created products like The Snuggie, Bump It, and Forever Lazy, pulls in as much as $500 million a year.
The Daily Ticker sat down with As Seen on TV industry veteran Scott Boilen to bring you five fascinating secrets about how the business works.
Related: The Secret to Snuggie’s Success Revealed
1. $19.95 is the magic price
$19.95 has been the sweet spot for As Seen on TV Products for years. “$19.95 has been our magic price-point unfortunately for 20 years as costs have gone up and everything has gone up. When you go above [$19.95] you just don't get a sale,” says Scott Boilen, CEO of Allstar Products Group.
So why those four magic numbers? Boilen has a simple theory: “There's no $30 bill,” he says. The psychological effect of breaking two bills would drive away sales, so the products must remain under $20.
2. As Seen on TV Is Not a Brand
The As Seen on TV logo doesn’t belong to any one brand -- it’s an open source logo that anyone can use. “It’s become a powerful sales tool,” says Haire.
“The industry as a whole was smart enough to open source that logo and let everybody use it, and the power of that now," he explains.
The As Seen on TV umbrella limits competition between companies. While they all hope for a winning product they don’t mind if another company has one. “As the business grows we all grow,” says Boilen.
3. It’s All About Retail
As Seen on TV infomercials do not bring in a lot of business. 95% of sales for As Seen on TV companies are now made in-store. “Our advertising is basically to just build retail demand,” says Boilen.
Stores like Wal-Mart (WMT), Walgreen (WAG), and Bed Bath & Beyond (BBBY) now have large As Seen on TV sections.
These companies “know they’re going to make $10 off of retail for every dollar they make off of a direct sale,” says Haire.
4. There’s no formula for success
It’s difficult to say what products will be successful and what products will fail. Even Boilen, who has been producing As Seen on TV products for nearly 15 years, is at a loss. “I would have passed up the shake weight,” he tells The Daily Ticker.
For every Snuggie, there are 19 products that didn’t make it, says Haire.
“If you meet a marketer that tells you he knows what his next big hit is going to be, he’s probably only going to be right about 30%-50% of the time,” he explains.
5. The industry is recession-proof
The Snuggie, a $500 million product, debuted in 2008 right when the recession hit.
“There’s been this idea for many years that the As Seen on TV industry was recession-proof. And 2008 was a great year even though the economy took a downturn,” says Haire.
“The recession has impacted our business in a very positive way,” confirms Boilen.
Maybe it’s that magic $19.95 price-point.
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