Home Shopping On Television

Tzu-hui Wu (Editor: Nancy Stubbs)

Modern communications equipment allows widespread electronic shopping for goods and services as more and more people shop from their homes. The notion of selling without stores is known as direct marketing. In the past, direct marketing was thought of as and used direct mail. Currently, direct marketing has been defined as an interactive system of marketing which uses one or more advertising media to effect a measurable response and transaction from any location. Television is a potent tool in direct marketing because it permits the advertiser to demonstrate the products in use.

TECHNOLOGY: ELECTRONIC MARKETING SYSTEMS IN TELE-SHOPPING

ONE-WAY MARKETING SYSTEM

One-way systems can be divided into two major categories. The first is 'printed video' made up of text only or text and graphics displays, without sound or moving video. Automatic origination services, classified ad channels and teletext all fit into this category. The second category is conventional television (moving video with sound), which is used to deliver direct response ads. This is the type of advertising that people are accustomed to watching, having been exposed to it for so many years on broadcast TV. However, cable offers new possibilities for advertisers. It does not labor under the rules that apply to broadcasting concerning the length, content and the amount of advertising that can be run. Furthermore, there are many channels that are available that can be filled with programming. Two forms of direct marketing that have already appeared on cable are direct response ads and cable shopping channels.

TWO-WAY ELECTRONIC MARKETING SYSTEMS: VIDEOTEXT

Videotext is a two-way communication system designed to be operated by practically anyone, using a television set, a telephone or cable connection, and a low-cost decoder. The ability to conduct transactions for products and services will be essential if videotext is to succeed. Early results have proved that information alone is not attractive to many consumers—unless they are using it for business or professional purposes. Videotext operators in the U.S. who are serious about penetrating the consumer market will have to include transactional services. Unfortunately, the procedures are costly and complex to set up and operate.

BUSINESS: DIRECT MARKETING TO TV HOME SHOPPING

Direct marketing is the direct sale of a products or services to customers or businesses. It started out in the 19^th century as direct mail used by retailers. With the number of television and cable channels increasing, and with new methods of electronic communications available, a new world of opportunity has opened for the direct marketers to present their products and services. In the TV home shopping industry, the direct marketers negotiate rates with broadcast TV networks and cable TV stations to buy scheduled time periods for their product commercials. Of utmost importance is the selection of where and when the commercials should be placed in order to maximize their chances of reaching their potential target customers. Although TV home shopping is still struggling to gain respectability and extend viewership, undoubtedly, it is potentially a very large market. During the 1993 fiscal year, the TV home shopping industry boasted revenues of $2-3 billion dollars. The revenues from the first quarter of 1994 increased from 10-14 per cent from the previous year. These figures are a dramatic change from the numbers that the TV home shopping industry generated in the 1980s, which was only $500 million in revenues.

APPLICATION: NON-ENTERTAINMENT SERVICES ON TV

TV has been always been regarded as an entertainment media, but with today’s technological advances, TV is now capable of providing a wide variety of non-entertainment applications. One of the biggest non-entertainment services TV provides is electronic marketing. In the early days, there was only one-way electronic marketing with TV commercials since immediate response was not possible. Now, in the age of two-way TV, home shopping is made possible when the TV is linked to the telephone, and direct response commercials are designed to elicit immediate inquiries or orders. Cable television and the telephone systems have become the backbone of the delivery system for such services, and have replaced traditional catalogue direct marketing.

DRIVING FORCES: TV HOME SHOPPING VS. SHOPPING MALLS

TV home shopping has many advantages over shopping malls.

· Traffic conditions make it more difficult to reach shopping malls.

· Parking space is becoming scarcer and more expensive.

· Energy costs inhibit trips to shopping malls.

· According to U.S. Census forecasts, in the next ten years the average age of the U.S. citizen

POLICY: NEGOTIATUNG RATES WITH THE MEDIA

For TV stations, the direct marketer is an expedient source for turning unsold time into immediate profit. In the game of profits, the station and the direct marketer become partners, however, to overcome the barriers to their mutual benefits, they have to negotiate rates. There are three methods for rating basis: PI method, cash library method and guarantee purchase method. Some TV stations don’t accept PIs. They believe that while the PI method guarantees the direct marketers a profit, the medium loses because it receives a less than normal rate. To respond to this anti-PI argument, the direct marketer can turn to cash libraries and guarantee methods.

OPPORTUNITIES, PROBLEMS AND PROSPECTS

Cable will open the airwaves to a new generation of entrepreneurs. Interactive TV holds virtually limitless possibilities for those willing to experiment. In the not-so-distant future, we can foresee each station will have specific types of subscribers. Some stations will feature bargains, and others will sell only the highest-quality merchandise. The discount cable outlets will be able to offer merchandise at lower prices than any store by eliminating the intermediary and such price-inflating costs as clerks, rent, pilferage, supervisors, and credit losses.

Previously, imitation goods that were of questionable quality characterized the television version of home shopping. This reputation is the reason that the big name stores have shied away from this medium. Ironically, home shopping has a second class reputation almost singly because there is no name brand recognition. This paradox is beginning to change because respected names, such as IBM, are dabbling in the medium. More companies are also entering because of the promise of interactive sales. The consumers have other problems, they cannot actually see what they are about to buy and if they do not like a particular color or if it is the wrong size, the consumer must spend more money to return the product. Further more, the consumer cannot do comparison-shopping. TV stations can only show one product at a time and they usually do not stock more than two products that compete.

Although there are problems existing in TV home shopping, the present channels are just the tip of the proverbial iceberg of future versions of interactive home shopping that will probably emerge as the primary way we buy things. Besides, TV home shopping is going to make a shift to the video world of interactive television once the new infrastructure emerges and smart TVs with microprocessors enter the home. To see the future of shopping, turn on your TV.

REFERENCES

Berry, J. (1993) ‘The TV-shopping future: it’s further than you think’, Brandweek, 4 October.

Diller, Barry (1993) ‘Shopping on the interactive highway’, transcript of an interview on The Larry King Live Show, Advertising Age, 17 May. Online. Available:

http://www.startribune.com/digage/homshop.html (18 February 1998).

Eicoff, A. (1995) Direct marketing through broadcast media: TV, radio, cable, infomercial, home shopping, and more, NTC Business Books.

Meyers, L. (1994) ‘Tele-shopping cable show takes viewers into local stores, offices’, Los Angeles Business Journal, 30 May.

Strauss, L. (1983) Electronic marketing: emerging TV and computer channels for interactive home shopping, Knowledge Industry Publications, Inc.

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