We have all seen them: Those late at night half-hour infomercials that try to sell us on crappy products, seemingly invented by some dude with lice and a mullet in his garage while he was experimenting with his meth recipe. They’re cheaply produced half-hour commercials that air in the graveyard shift, and yet, we’re fascinated by them as a society. Hell, some of us have watched several of them, in their entirety, and maybe even contemplated making a purchase. But as cheap as those infomercials — and the informercial products — may appear, it’s a very, very big business. In fact, it’s much larger than probably most of us could have possibly imagined.
I stumbled across a brilliant article called The Economics of Infomercials today. It’s very long, and fairly interesting if you’re into the history of infomercials, how they are produced, and the strategies they employ. For the TL;DR crowd, however, I’ve taken the liberty of teasing out the 10 most interesting facts from the article.
1. In 2009, the market for infomercial products was $170 BILLION, and that number is expected to be $250 billion in 2015, or 1 percent of the United States’ entire GDP. The entire television and cable company itself only earns around $97 billion a year, which means infomercial products are far more lucrative than television itself.
2. Here’s how much several of the more popular informercial products earn in revenue:
— ProActiv makes $1.7 billion a year
— The PedEgg, which scrapes calluses from your heel, has earned $450 million since it was introduced
— Telebrands, the company behind the PedEgg, Slice-O-Matic, the Pocket Hose, and the Hurricane Spin Mop, earns around $500 million a year.
3. The goal of informercials is not really to entice people to purchase the products immediately, but to test new products and create a market for them in retail stores. That’s where the money is. For instance, 90 percent of Telebrands products are purchased from store shelves.
4. Infomercial products make a profit with incredibly high markup costs (typically, of around 400 percent). That packet of four Shamwows that people pay $20 for? It costs around 10-30 cents a piece to make a Shamwow (representing a 1500 percent markup). Everything you buy on an infomercial is a rip-off.
5. The production costs behind a regular national commercial is around $11 – $12,000 per second. The production costs for an infomercial $138 per second.
6. George Foreman did not invent, nor did he initially want anything to do with the Foreman grill. However, he has since earned approximately $200 million on the product.
7. Despite the lucrative informercial product market, around 90 percent of infomercial products fail.
8. For half the cost of one 30 second commercial on national television (or about $50,000), informercial product companies can buy TEN 30-minute spots.
9. Not that most people with common sense wouldn’t know this, but the “limited time only” pitches — where an informercial provider might say, “If you order know, you can get this $50 product for $15″ — is complete horse sh*t. Infomercials are pre-taped. That “limited time” usually lasts as long as the infomercial is airing.
10. The very first infomercial ever was for the Vitamix blender in 1949. It managed to parlay that infomercial into huge success. In fact, it’s still a very profitable company; they supply blenders to Starbucks and Jamba Juice now.
Source: The Economics of Infomercials