CHALLENGE

Two years ago, direct response TV expert Tim O'Leary
convinced US entertainment icon Johnny Carson to let him test
selling videotapes of Tonight Show archive material.

O'Leary put together an entertaining 30 minute infomercial in the
form of a highlights show featuring advertisements for the Carson
Collection video set. The first weekend of tests saw each $1 of
media spend generate $5 sales through the in-bound call center.

O'Leary quickly expanded media buys to generate up to
$1,000,000 in tape sales per week.

With people wanting to buy additional material, and with DRTV
limited in terms of how many products could be promoted, O'Leary
decided to use the web to take sales further. JohnnyCarson.com,
a co-venture between Carson and O'Leary's Respond2 Entertainment,
was launched in April, 2001.

However, Carson, who retains complete creative control, was clear
that he did not want the website to be just a video sales outlet.

He charged O'Leary with producing what was effectively an online
home for the Carson brand, with an emphasis on entertainment,
information, and service, rather than sales alone.

O'Leary explains, "He doesn't want to be seen as a guy hawking
tapes."

Somehow O'Leary had to maximize revenues without using many of
the tactics typically available to standalone e-commerce sites.

CAMPAIGN

O'Leary combined his direct response and e-commerce
experience to develop five specific tactics for the website:

-> Tactic #1: Using entertainment content to drive sales

The site has a host of entertainment features, including e-cards,
video clips, jokes from Carnac the Magnificent, a trivia quiz,
show history, show biographies, guest profiles, press cuttings, a
bimonthly newsletter and fan comments.

The core feature is a database of all existing Tonight Show
episodes, searchable by guest name or show date, with information
on monologue content, guests and topics for each show.

Unlike most e-commerce sites, though, these entertainment pages
are not filled with overt banners or links pushing products.

Says O'Leary, "if you go to the website it's not like we're
smacking you over the head with 'BUY ME NOW!' things. If it was
another person only interested in making money the site would be
designed differently. The offer would be much more forefront."

The site does not just rely on a natural tendency for some
browsers to seek out and use the shopping pages.

Example 1:
If you search the site's database for a particular guest
(e.g. Steve Martin), you are presented with a list of
the dates they appeared on the show. Each date is a hotlink
leading to that show's description.

If an appearance is featured on one of the video or DVD
products, then the title of that product appears next to that
date as a hotlink clicking through to the sales page.

Once you have found a show, you can also custom order the
entire episode through an online form. A one-off copy is then
made from the Master Library, stored half a mile underground
in a Kansas salt mine (!).

Example 2:
The free bimonthly newsletter (the Carson Chronicles) is
entertainment-oriented but also promotes new or discounted
products using Carson's comic sleazy pitch man creation, Art
Fern (see sample link below).

O'Leary: "There'll always be a thing, 'hey folks, Art Fern
here with my sleazy pitch of the month,' and you can make fun
of the fact that we're hawking something. But it fits the
brand."


-> Tactic #2: Offer a wider product choice

While the infomercial focuses on items like the Carson
Collection, which currently retails for $49.99, the website
features a wider range of products and prices.

The cheapest product available is a video tribute to Jimmy
Stewart (hosted by Carson) for $2.99 (sale price), the most
expensive a 6-DVD Tonight Show clips collection for $119. The
wider choice means it is more likely that visitors are going to
find something to match their needs or budget.


-> Tactic #3: Sell video subscriptions and minimize
cancellations

One issue O'Leary faced was the high cost of producing clip
collections. A proposed 12-video collection would have cost
almost $500,000 in upfront royalty fees alone.

He split the collection into six shipments for sale on a
subscription basis as "the Carson Club," to better gauge demand
and win time on producing future shipments (the editing work
alone on each shipment's tapes takes 4 weeks). Each six-weekly
shipment consists of two videos, or a single DVD, featuring
Tonight Show highlights.

O'Leary observed that most people canceling their subscription
did so after either the first or second shipment. He responded by
moving retention offers to early in the subscription cycle.

Typically, the first shipment now comes with a thank you note,
bonus themed merchandise (such as the double-eraser pencil used
on the original show and pre-printed autographed pictures), and
the promise that the next shipment comes with a coupon offering
$20 off a $40 purchase.

The second shipment contains the coupon, plus a free tape or more
themed merchandise. There was a huge demand for coffee cups and
other merchandise; Carson will not sell such items, but they can be
used as bonus gifts.


-> Tactic #4: "Telemarketing-Style" shopping cart approach

The site uses shopping cart technology custom built to mirror the
telemarketing approach for direct response selling.

Says O'Leary, "The aim is to replicate the way a great
telemarketer would handle you - to seamlessly take you through
upsells, without confusion, and basically get you to spend more
money. And be happy that you're doing it."

When customers place an item in their shopping cart, the initial
cart page they see displays shipping options and costs, and total
billable amounts.

If they want to checkout, a second click takes the purchaser to
the account set-up page, where they enter address details and can
subscribe to the Carson Chronicles.

A third click moves the purchaser to the payment page, where they
enter credit card details.

A final click allows the purchaser to review shipping and billing
information and make any changes before confirming the order.

Combination discounts are offered throughout the shopping pages.
For example, buying the main Carson Collection video set allows
you to purchase many single video products at around a third off
their normal price.

Upsell offers also appear after putting something in the shopping
cart, depending on the product purchased.

Example Upsell 1:
When you view the shopping cart, a once-only pop-up activates
and invites you to purchase another product currently "on
sale." A single click adds it to the cart; the cart page
refreshes to display the updated order information and the
pop-up closes or changes to a second offer.

Example Upsell 2:
Offers appear on the cart page itself, below the order
information. Hitting a "buy now" button refreshes the page to
present the new cart contents, also removing the purchased
upsell from the list of offers presented. If one of these
cart page offers is purchased through the pop-up, it also
disappears along with the pop-up offer when the cart page
refreshes after the upsell purchase.

-> Tactic #5: Optimize the media mix and upsell patterns

O'Leary conducted extensive testing using custom URLs with
different media venues to determine the right solution for the
site.

Although he can not talk too much about media outlets and results,
he says "I might test National Cable against Region against Day
Part, trying to figure out what's happening, and then A/B split
my upsells on each of these to see what's selling."

Media buys and upsell placement at the site are based on the
results (which vary by season).



RESULTS

Since its launch, the website has made $6,000,000
in sales, with an average order size of $76. The latter
figure is about the same for infomercial-driven telephone sales.
O'Leary says the similarity is because although the website
features more products and upsell possibilities, it also lets
people buy cheaper products.

O'Leary: "There are now about 20 to 30 different DVDs, videos and
configurations, and there's no way we can talk about all that in
commercials. So we tell people, hey, go to the website."

The website now accounts for between 35% and 40% of the venture's
total sales, about double the expected figure for a DRTV product.
O'Leary attributes the higher figure to the fun nature of the
website, which attracts visitors independent of the infomercial, and the expanded product range.

For history buffs, he notes, "I started launching websites on
direct response campaigns in 1995, and at that point the figure
would be 1-2%."

More Metrics:

- Even the relatively cumbersome custom-video offer is
generating 100 sales a month at around $100 a piece.

"A lot of celebrities will call up and order every appearance. Or
you get cult collectors that like certain celebrities; we had one
guy who ordered 70 episodes."

- Around 30,000 customers have signed up to the Carson Club.
Initial drop-off rates were 20-25% after each of the first two
shipments. The retention tactics have reduced these figures to
17% after shipment 1 and 15% after shipment 2. Drop off rates
after shipment 3 are negligible.

"Our average number of shipments per subscription is 4, which in
this industry is terrific anyway, but particularly when you think
that we only have 6 shipments - most people getting a 3 or 4
shipment average are doing so because they have 12 shipments."

- Visitor-to-buyer conversion rates are difficult to assess for
the site, because visitors are coming for so many different
reasons. Although many are driven by the infomercial, others are
coming for the entertainment or for information on the show,
Johnny Carson or one of the guests.

A "good day" brings 15-20,000 visitors, but the site can get that
in 40 minutes if a Carson-related newspiece hits the airwaves or
papers. O'Leary puts base conversion rates (after removing media
driven traffic spikes from the calculation) at 5-7%.

This he attributes to product quality and the shopping cart
approach used. "I'm one of these guys that does 80% of my
shopping on the web. Most of the shopping carts I encounter are
terrible. We're not perfect but we're getting better all the
time."

- The newsletter has around 50,000 subscribers and produces an
average 2% conversion rate on each mailout (number of orders
generated as a percentage of total emails sent). "Sometimes it's
4%, sometimes it's 1.5%, but it's never less."

"You want a friendly opt-in process so people want to hear from
you. You don't want to smack your list around too much. Make it
interesting to hear from you. Give them some entertainment value
so it's fun to read it and they think, "boy this is something
new, that was a nice experience, I think I'll go ahead and buy
this."

- Upsell rates from the shopping cart page are between 50% and
55%. This beats the figure from telephone sales, reflecting the
success of the shopping cart upsell tactics, but also the lower
priced products available at the site.

"You can come into the website and buy a $10 video and we'll hit
you with a $3 upsell, which you're probably going to take."

- The site only has an average 2% bad debt and return rate,
which compares to a DRTV industry average of around 9%. O'Leary
puts that down to excellent customer service and a quality, fun
product.

"Videos and DVDs make for wonderful direct response products
because if you're successful, you're not depending on some
offshore factory to manufacture them in bulk, with possible
quality control problems. The other thing is, if a customer has a
problem we just take care of it right away."

- For those of you with a DRTV bent, O'Leary says the
original infomercial is now running into its third year, and
still drawing around $3 in sales for each $1 of media spend.

"We've edited some new versions but none of them have done as
well as the original, to have the same show for 3 years is
unheard of. We're going to do up to $2 million in sales this
month (November). That's as much as I did last year. It defies
everything we know about direct response. Usually you get 6
months to a year out of a campaign and that's it."

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