For Infomercial Titan Guthy-Renker, Product Is King

 

Guthy-Renker Corp. lends marketing credibility to infomercials and home shopping.

 

Infomercials are often referred to as the “Rodney Dangerfield of television advertising." Their somewhat seedy reputation – one that’s proved hard to shake since the low-quality infomercials of the early '80s promised quick riches, quick fixes and quick cures – has stuck with a vengeance. And while this sector’s reputation gradually improves as an increasing number of quality commercials are produced.

 

Regardless of what some may think of infomercials and home shopping, television advertising is an effective way to sell a good product. And, with the advent of the Internet, direct response television advertising (DRTV) offers an alternate way to drive traffic to a Web site (a URL posted on the bottom of the screen serves to attract the consumer who wants more information before buying) and to build brand awareness.

 

And no one knows this better than Palm Desert, Calif.-based Guthy-Renker Corp. The infomercial and home shopping marketer has made a name for itself by taking “good products” from concept to completion, namely in the health and beauty, fitness and self-improvement categories. 

 

Twelve Years of Progress

The roots of Guthy-Renker were planted in 1981 with a serendipitous friendship between audiotape duplicator Bill Guthy and real estate marketer Greg Renker. Five years later, with a $100,000 private investment and a stack of research on the nascent infomercial industry, they joined forces to launch their first product, a self-help book titled, “Think and Grow Rich,” by Napoleon Hill. Acquiring the rights to the book and the author's lectures for an audiotape series, they hired football star Fran Tarkenton as their first pitchman. “Think and Grow Rich” grossed nearly $10 million, leading Guthy and Renker to their next project with motivational speaker and best-selling author Tony Robbins.

 

“Bill and Greg licensed the rights to sell this because they loved the book and because it had really helped them to become personally empowered,” says Eytan Urbas, Guthy-Renker’s spokesperson. “Their initial $100,000 investment yielded $10 million in sales. The lesson in that is a valuable one: The product is always king. All the fancy marketing in the world is wasted on an inferior product. Since inception, we’ve had a strong commitment to selling superior products that will truly benefit the customer. Our entire success is rooted in making sure the product remains king.”

    

During the 1988 production of Robbins’ “Personal Power” infomercial Guthy-Renker was officially established in Palm Desert, with an additional office added later in Santa Monica. Following early successes, including “Principal Secret,” a skin-care program hosted by partner Victoria Principal, Guthy-Renker produced such popular programs as the PowerTrainer exercise machine with Bruce and Kris Jenner; Perfect Smile, a teeth-whitening system with Vanna White; Proactiv Solution acne treatment with Judith Light; and the Power Rider exerciser with Fran Tarkenton.

 

Eleven years after its inception, Guthy-Renker is now one of the world's largest television response-driven companies with annual sales in excess of $350 million. The company, which employs a staff of 200 and serves a worldwide market, was originally launched as an infomercial production studio by co-CEOs Guthy and Renker. The independently owned, vertically-integrated company has since broadened its focus into every area of electronic retailing, making quality products available to U.S. and international consumers through broadcast television, cable and satellite, as well as telemarketing, direct mail, retail channels and Internet.

 

Streamlining for Efficiency

Viewing the large international consumer goods companies as "the Spanish Armada" and Guthy-Renker as "the nimble little speedboat that can beat them," Guthy and Renker continue to oversee the company that derives its momentum from a slim, yet efficient, workforce. Occupying the firm’s executive offices are Guthy, Renker, Ben Van de Bunt (executive vice president of new business development), Kevin Knee (executive vice president, chief operating officer and chief financial officer) and Jeff Engler (executive vice president of product and program development). Among the firm’s in-house capabilities and services are product and show development, fulfillment management, accounting, legal, marketing and purchasing – a combination that makes Guthy-Renker a completely vertically integrated firm.

 

“We invest very heavily in research and development for new products, and we’re very careful to market products that have a real benefit,” says Urbas. “We also have very strong proprietary marketing models, which help us manage the business profitably – perhaps more so than our competition. We are the leader in our category, in terms of our size, profitability and success. We do outsource some production, but it’s for our own products, not someone else’s [many DRTV marketers work with inventors of products, helping them take their products into the DRTV arena].”

 

Product Sourcing

Since its inception, the team at Guthy-Renker has prided itself in a deep commitment to high-quality products, superior infomercial productions and unparalleled service. According to Urbas, the firm utilizes a four-step process that guides them from product development through final sale. Those steps include:

 

(1)  Acquiring the rights to only the most beneficial and legitimate products that can prove their claims and have been verified as safe and efficient, and that are consistent with the professional image of Guthy-Renker; 

 

(2)  Choosing a program format (e.g., interview, audience participation) appropriate to the product;

 

(3)  Obtaining testimonials from actual product users – testimonial participants are not paid under any circumstances [an important feature, since many infomercial producers hire actors to appear in their spots]; and

 

(4)  Offering all products with an unconditional, money-back guarantee.

    

The fact that Guthy-Renker is armed with effective marketing models notwithstanding, Urbas says the company still faces considerable challenges. He says the biggest hurdle that the team at Guthy-Renker has faced, and continues to face, is the rising cost of media. In fact, the firm spent more than $100 million on airtime in 1998 alone.

 

“Media is our biggest expense, and media is very expensive,” says Urbas. “To keep costs down, we’ve tried to control our own distribution and content, and have bought large amounts of media in an effort to tie up key blocks of airtime. We also created our own cable distribution company.”

 

In addition to forking over millions of dollars for prime airtime, Guthy-Renker has another ongoing hurdle: trying to ignore the fact that the majority of infomercials fail. “To overcome this, we funnel a lot of money into market research and test marketing and various types of testing procedures – from consumer research and media testing to product testing and basically more research than we’re required to do by law or industry standards. A combination of all of these efforts helps us anticipate and avoid failure wherever possible. We spend more up front to make sure that we’re on target.”

 

Bring on the Celebs

As one of the first infomercial companies to utilize both film and videotape, Urbas says Guthy-Renker strives to ensure production values consistent with the quality of network television. “Whether shooting locally in Southern California or traveling to exotic settings, such as Hawaii or Fiji, we set a high industry standard with production budgets ranging between $250,000 and $750,000 for each infomercial,” says Urbas, adding that celebrities also play a significant role in the positioning of products and the development of sustainable brands. “Since hiring football legend Fran Tarkenton to host our first program,

we’ve sought other credible, well-liked celebrities from the worlds of entertainment, business and sports to launch new products and to sustain momentum for well-known brands.”

 

According to Urbas, Guthy-Renker chooses only those celebrities with a passion for and clear connection to a product. Among its best spokespeople are Tony Robbins, Leeza

Gibbons and Casey Kasem (Personal Power), Victoria Principal, Lynda Carter, Mel Harris and Chuck Woolery (Principal Secret), Vanna White (Perfect Smile), Judith Light (Proactiv Solution) and Bruce Jenner (PowerTrainer).

    

Distribution Channels

In the course of business, Guthy-Renker distributes programs both on a local and regional basis. Half-hour infomercials are the usual conduit for products, but the company also reaches consumers by producing and distributing traditional 60- and 120-second commercials. With the goal of creating brands that inspire customer loyalty, Urbas says Guthy-Renker uses television as its primary launching pad for front-end sales, further shepherding brands to the consumer through other channels, such as continuity programs (which follow a sale with an offer to automatically bill the customer's credit card and ship the latest installment of a product), and back-end sales (telemarketing, direct mail, placement in retail chains, etc.). The company's Guthy-Renker Online division also markets all of the company's products, as well as creates Internet marketing programs for third parties.

    

In testing and marketing its products, some of which are more appropriate to a live format, Guthy-Renker also enjoys a symbiotic relationship with the established home-shopping channels. While the company first tested the viability of Principal Secret on QVC before producing an infomercial, for example, Proactiv Solution first saw life as an infomercial before crossing into the home-shopping domain.

        

Staying in the Limelight

Recognized by Entrepreneur Magazine for having “revolutionized the ad industry,” Guthy-Renker is also credited as “a pioneer in infomercials” by Fortune, which also included Guthy and Renker on its list of “America's Smartest Young Entrepreneurs.” The duo was also recently honored as two of Inc.'s Entrepreneurs of the Year.

 

In the infomercial industry, accolades abound for Guthy-Renker, thanks to the quality of its shows and products, as well as Renker’s position as chairman emeritus of the ERA (Electronic Retailing Association). According to Urbas, the company has walked away from the annual ERA Awards with more nominations and prizes than any other direct response company and has nabbed the coveted Infomercial of the Year award in four of the last six years.

 

To sustain its continued growth, and to keep those awards and accolades coming, Guthy-Renker is continually integrating its operations and seeking opportunities to sell great products via television and the Web. Recently, the company formed an e-commerce partnership with San Francisco-based Web directory Looksmart. As part of the deal, Looksmart acquired a selection of Guthy-Renker' s e-commerce assets [namely, the firm’s Internet shopping mall, according to Urbas], and Guthy-Renker took an equity position in Looksmart. 

 

Unlike many Internet-based retailers, to promote its site, Guthy-Renker has the luxury of “tossing” in a 15-second commercial for its site at the end of its televised infomercial programs. According to Urbas, the firm plans to use that medium to promote Looksmart, as well as tout the directory through its informercials. Guthy-Renker also plans to pitch Looksmart to its 8 million direct response customers.

 

According to Urbas, the Internet is anything but new terrain for Guthy-Renker, which he says has been selling product on the Internet for several years. “While our Internet sales remain comparatively small when compared to our television sales, they’re our fastest growing segment, posting significant increases each month,” he says. “We have a strong relationship with Looksmart, but we also will continue to sell all of our products on the Internet – through our own site –  which is a great complement to TV selling.”

 

Focusing on What They Do Best

Urbas expected 1999 to be a banner year for Guthy-Renker. In fact, the DRTV and home-shopping marketer expects this to be the best year ever for the company in terms of profits. The reasoning is simple, according to Urbas: Focusing on core competencies will lead to bigger profits. “We’re trying to focus on what we do best,” he explains. “In the last few years, we built several subsidiary companies (Guthy-Renker Internet, GRTV [the company’s cable distribution business] and a telemarketing business), and right now, they’re all very successful and profitable. As a result, we’re now looking to sell them in order to increasingly focus on our core business, and to continue improving the very direct marketing models on which the company has been based.”

 

Company Snapshot

Company:      Guthy-Renker

URL:               www.guthy-renker.com

Founders:       Bill Guthy and Greg Renker

Industry:          Direct response television

Location:        Palm Desert, Calif.

Employees:    200

Revenues:    $350 million

 

For additional reading on this topic, don't miss Create a Promotional Package and Creating Buzz About Your Company.

 

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