I’m a big believer in knowing the enemy. It’s the only way to mount a proper challenge when conflict arises. So one of my favorite guilty pleasures is to meander through the world of those who conspire to take our money. There’s no better place to meander than late-night TV.
By now, you should all know that you are a data point in someone’s spreadsheet; a lab rat to be poked, prodded, and tested, reduced to behavioral responses. Somewhere deep in your brain, you suspect you are being manipulated, but it’s often hard to use that knowledge. After all, knowing that you are hungry doesn’t make you less hungry.
And so in that spirit, I watch infomercials. In fact, I love watching infomercials. I suppose it’s a little like a magician watching another magician’s performance. I love seeing the tricks, watching for the slight of hand, predicting the moment of the Sting. I am proud to say I have never bought anything from an infomercial.
Alas, I am not as smart as I thought (who is?). As this incredible essay on infomercials explains, impulse orders are only a part of the massive infomercial industry. How massive? Well, $250 billion massive by 2015. And commercials are often merely subsidized, incredibly efficient market tests for new products that end up in stores with “As Seen on TV” tags.
The essay unpacks the economics of infomercials with rapier skill. For example:
“Think a four-pack of ShamWows at $20 ($5 apiece) is the once-in-a-lifetime steal the pitchman says it is? Think again. You’re paying a 1,500% markup for some scraps of cast-off industrial rayon and polypropylene. (And even more if you buy them at retail.) Some brief digging on Chinese e-commerce portal Alibaba reveals that the wholesale cost of a comparable product is about 1 to 30 cents apiece. But put some funky branding on them, give them a cool pitch, and those shammies soak up cash as easily as spills.”
“Entrepreneur estimates that producing a half-hour infomercial can cost anywhere from $25,000 to $250,000, depending on the production values and the host or talent involved in the shoot. For the sake of comparison: The average cost of producing a 30 second national TV commercial is about$350,000.
That means a national spot costs about $11,000-12,000 per second in production costs (not including the media buy, which costs millions more). By contrast, a $25,000 infomercial at 30 minutes in length runs $13.89 per second. The higher end of the spectrum is still quite a bargain at $138.89 per second. “
Do yourself a favor and spent 10 minutes understanding the way marketing really works in our time at Priceonomics.