The Challenge. You’re a manufacturing company looking to make headway in a market saturated with established brands. Like you, your competitors operate cost-efficient manufacturing facilities in China, so competing on price is not an option. What’s more, several peer brands are owned by the very retail channels you’re hoping to sell through—fiercely territorial players unlikely to give prime shelf space to new competition.
The Context. Based in Suzhou, China, $350 million Positec Tool was once primarily a contract manufacturer, making private label tools for home improvement chains like Home Depot and Lowe’s, as well as brands like Black & Decker. In 2004, after some of its clients began looking to do their own manufacturing, the company’s founder, Don Gao, decided to build his own brand, Worx. But after developing a lightweight electric lawn clipper with market-making potential, Positec ran into a hitch—retailers wanted the product, but not the brand. “They said, ‘We love the product but we want our own brand on it,’” recounts Tom Duncan, the former Robert Bosch Tool Corporation executive Gao recruited to serve as CEO of Positec’s U.S. division. “It quickly became clear that if we were going to launch this brand, we needed to figure out another way to do it.”
The Resolution. Looking to bypass the hurdle, Positec opted to go direct. “We came up with the idea of producing long-form infomercials and selling directly to the public,” says Duncan. “We tried one and the very first year it did more than $50 million.” Sales rolled in, and along with them came a side benefit—discovering that 60 percent of buyers were women. “That prompted follow- up research about what they liked, which turned out to be that a) there was no gas and b) the trimmer weighed less than a gallon of milk,” reports Duncan. Armed with that information, Positec reworked its campaign, adding more women and seniors to the infomercial, which prompted even more consumer interest. That success, in turn, unlocked the retail doors upon which the company had been fruitlessly pounding.
“What happens with infomercials and the direct business in general is that for every one purchaser there are four or five who are interested but won’t pick up the phone or go to the Web,” explains Duncan. “But if they see it in a store, they’ll buy it.” Within two years, Positec’s trimmer was flying off the shelves at Lowe’s and Home Depot.
The Endgame. Today, the company’s share of the battery- operated trimmer market is estimated at 19 percent, and approximately 75 percent of its sales are from its own brands. Positec’s Worx brand now encompasses a wide range of products, from the JawSaw (marketed as a safer alternative to a chainsaw) to the Intellicut Mower (a cordless, lightweight electric mower). It has also introduced a line of premium-priced tools marketed under the Positec-owned Rockwell brand. The company continues to leverage infomercials and is currently running infomercial campaigns on seven different products. “Last year we spent about $25 million on advertising—which is a lot for a company our size,” declares Duncan, who says the U.S. market accounts for approximately 65 percent of sales. “Our direct model is more cost heavy, but it drives awareness and demand.”
The Lesson. Once the exclusive domain of celebrity-endorsed launches like the George Foreman Grill and Suzanne Somers’ ThighMaster, infomercials have gone mainstream. In fact, many retail chains now have prominent “as-seen-on-TV” sections showcasing the most popular infomercial products. In short, the infomercial can be a fast track to prime retail shelf space. “This model can be replicated for any product that has a unique value proposition that the consumer can understand,” says Duncan, who points out that many innovative products die due to lack of retail support. “Some great new products don’t sell simply because people get lost in the sea of choices on retail shelves or because they were put on a low shelf and not displayed properly.” In other cases, consumers need to be educated about a product in order to see its appeal or to pony up a higher price. “Infomercials give you the time to go into all the features and benefits and to demonstrate the product,” sums up Duncan, who also cautions that they are not right for everyone. “It won’t work for a commodity. You need a high degree of innovation.”