The lucrative secret behind infomercials

Too many goodies in this article:

Collectively, the U.S. market for infomercial products stood at $170 billion in 2009 and could exceed $250 billion by 2015. In fact, with the worth of the entire U.S. network and cable industry estimated at $97 billion as of 2013, DRTV is much bigger than TV itself.

Think a four-pack of ShamWows at $20 is the once-in-a-lifetime steal the pitchman says it is? Think again. You’re paying a 1,500 percent markup for some scraps of cast-off industrial rayon and polypropylene. The wholesale cost of a comparable product is about 1 to 30 cents apiece. But put some funky branding on them, give them a cool pitch, and those shammies soak up cash as easily as spills.

Producing a half-hour infomercial can cost anywhere from $25,000 to $250,000, depending on the production values and the host or talent involved in the shoot. For the sake of comparison: The average cost of producing a 30-second national TV commercial is about $350,000.

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An infomercial buyer can produce and air a small test campaign for about $100,000. Any sales generated by the infomercials in the testing phase are almost incidental. If the response rates are decent (and remember, the bar is set pretty low: about 1 percent on average), the campaign can recoup a small fraction of its investment while still running a modest loss.

via The lucrative secret behind infomercials – The Week.

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