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.
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.
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].”
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.”
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).
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.
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.”
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: 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
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