Money Report #6 by Jay Abraham Copyright 1996 by Venture Marketing Society, L.C. All rights reserved. Reproduction or copying of this report is not permitted without written conscat of the publisher. "This report is intended to outline a business concept that the Society believes is potentially profitable and ‘worth further investigation, but its profitability cannot be guaranteed. Readers are hereby cautioned that any business, especially a small or new business, involves a significant risk of failure. This is not a business plan, Itis the opinion of the publisher that the information contained herein is not sulficient to start a business and it will be necessary for the readet to do further rescarch om the opportunity described, ‘Venture Marketing Society, L.C. isan information provider only. It does not provide any training, back- up or personal consultation on the implementation or execution of this or any other idea The information provided is believed to be accurate, but its accuracy cannot be guarantced, In some instances the Society ‘may have relied on information provided by third partes and the Society may not have tested the concept in practice, Finally, while the report may speak of investing capital, the concepts describod are not passive investments, They require active mangement, Name of Concept Funding infomercials for local merchants and professionals. Type of Concept A unique twist on the national infommercial rage. Overview of Concept Few people realize that with the advent of cable systems you can now purchase Jong version “advertorials” or “informmercials” on local cable TV for what amounts to a very modest cash outlay. A number of people are using, 5-minute, 15-minute and 30- minute infomercials, run in very tight targeted communities through cable networks to build massively prosperous businesses and practices. The kinds of companies that are doing this tend to be cosmetic surgeons, dentists, automobile dealers, chiropractors, furniture dealers and anyone else that has high-ticket or high-ticket, high repeat-purchase products or services. ‘They are either producing their own infomercials or they are doing it through third parties. 1 know one individual named Nick Delgado in Orange County, California who specializes in this. His numbers are 1-800-631-0232 or 1-714-218-8841, Heproduces infommercials and buys time on cable networks at very advantageous rates. There are others but I either don’t have their names or I have not been able to confirm with them that it’s OK for Venture Marketing Society members to call. Talso suggest you call the Infomercial Marketing Report. Their phone number is (310) 472-5253. Ask for Steve Dworman. He is a colleague of mine. He is a specialist in infomercials. He has a number of video and audio tapes of various infommercial symposiums and conferences he has held. He will sell those tapes reasonably. You should be able to buy a set, listen to them and learn the foundation fundamentals on how to produce a good infommercial — one that would sell well for a local merchant. ‘That doesn’t mean you should produce it yourself. What it means is you should know the key components before you ever pay anyone else to do it for you. If you pay anyone else, convert whatever they want for a fee into two segments: one as an advance payment, and the other as a performance payment. If they want $10,000, don’t do it. Negotiate $3,000 for producing it and $7,000 if, when and after it works. You and you alone define and get them to approve what “working” or “succeeding” means. A little bit of research in most large urban areas will also turn up TV producers. If you go this route you should query them carefully about their specific experience in producing infommercials -- not regular TV commercials -- and about their price, because that can vary all over the lot from a few thousand to hundreds of thousands. Obviously, you want to avoid expensive producers. You can ask them for videocassettes of their ‘work and references from their previous customers. You want infomercials that ‘worked, not ones that were clever or arty, ‘The key concept is that you can buy time in the local market, You don’t have to buy time on the whole USA or TNT network. You can buy one city or one market and. advertise local merchants or professionals. There are many local cable systems where you can buy 15-minute or half hour infommercials for as little $100. I've seen chiropractors spend $3,000 a month to generate $150,000 in new patients. This is an exception but it is doable. Multiples of ten times are actually achievable because you can buy TV time so efficiently. How do you do it? By going to a city like Los Angeles, finding a chiropractor who only caters to Brentwood or Santa Monica, going to the cable system that has the cable service installed in those areas, buying 15-minute ot 30-minute informercials on that system, getting the infommercials produced very economically (you should be able to get one produced for $2-3,000), making a deal with the chiropractor where you fund the infommercial creation and alt of the time-buying, meaning you pay for the cost of running. that infornmercial on “local avails” (time set aside for local programming or commercials) ‘on USA network, Lifetime, TNT, ESPN, ete, You get from the chiropractor first monies back to reimburse you for your investment plus so much per customer once you've recovered your costs,Some professions may not be legally permitted to share revenues, or they may be bound by codes of professional ethics which don’t have the force of law but which most reputable professionals honor. Consult an attorney and check the various rules and regulations for what is or is not acceptable in each given state, municipality and profession. Can they pay a percentage of the gross or net, and if not, can they pay a flat referral fee? ‘The upside and downside dynamics in this kind of proposition are quite exciting. But there is a danger and even though this is a very exciting concept, you should know that the regular infommercial industry is starting to get mature. It is very hard to buy an infomercial carried all over the country on a national cable network and make any money because most of the people running national infommercials are selling cosmetics, exercise devices, or other gadgets, and those are hard to make any money with up front ‘They depend on repeat sales -- as with a cosmetics program ~ or upsells of more expensive products. They are building a list of people they know will repeat-buy, and they have deep pockets and can afford to wait to recoup their money. Not so at the local level with high-priced professional products or services or high ticket items like automobiles or furniture, You don’t need many respondents per thousand viewers to make good-to-great money with this concept. Now that itis possible to buy only the viewers in a company’s tight and specific marketing territory, the long-form or infommercial type of advertisement can really make sense. It takes skill to make a good infommercial. It has to have credibility, good information that the viewer wants. It has to really sell My recommendation is that you call both of the people I recommend, Also call representatives of five or 10 cable systems around the country in broad and random areas and ask to pick their minds. Tell them you have clients you want to run on their localized cable, Tell them you want to produce the infommercial. Ask them not only what they would charge but what lessons they have learned and if they have a format for doing it. See if they can introduce you to five or 10 people who are successful in doing it in other fields so you can pick their minds. Get videocassette copies of the infommercials they are running so you can model them. While you sleep, you can record commercials all night -- when most infommercials, run -- with your VCR at slow speed. Video record any good long-form infomercials that run for maybe a month. If somebody runs something for more than a month, odds are good that it is working. Ifit’s working, learn as much as you can from studying what they are doing, If their product or service does not compete with the kinds of products or services you want to fund infomercials for, go to the company that is running the infornmercial you like on local cable and ask for a meeting with the owner of that company. Pay them, if you must, Tell them you want to get into the business. Ask them if you could fund their commercial for a similar arrangement to the one I’ve been talking about. But ask them what they have leamed about infomercials and what makes theirs work‘There are a number of chiropractors, physicians, cosmetic surgeons, dentists, car dealers, furniture dealers, specialty merchants and professionals who would gladly pay reimbursement of your real costs out of the first proceeds to come in, against 25-50% of the profit or a lesser amount of the revenue for all customers resulting from your infommercial for life. This is a hot concept you can develop and I strongly urge you to explore it, but you have to do due diligence and move gingerly, methodically and gain an education before you spend money.