Infomercials—those 30 minute informational "shows" that sell everything from no money down real estate systems to the George Forman grill. We’ve all seen them, on late night or weekend morning TV. Many are quite entertaining. Some are downright cheesy. But Americans love them, and spend billions of dollars per year on the products or services they sell, including weight loss products and programs.

Multi-level marketing (MLM) and direct-to-consumer advertising (via infomercials, telemarketing) is becoming more and more popular as a sales method to sell a variety of personal care products in the United States today. By all indications, based on 1990s trends from the Direct Selling Association, the market is growing 12% annually.

Infomercials are big business—an estimated $2.3 billion sold last year in 2003. On a historical note, Forbes magazine reported that TOTAL sales of ALL goods sold via infomercials back in 1988 were worth only $350 million. Infomercial sales were stuck at the $1 billion level for 1994, 1995 and reached $1.14 billion in 1996. However, media billings data from Response magazine points to major growth since 1996—in fact a doubling of infomercial sales, to $2.11 billion in 1998.

Producing an infomercial does not come cheaply—at least $250,000 for a 30 minute show. However, this is just the tip of the iceberg. Most of the investment comes from airing the show repeatedly on TV, which can run into millions. But, payoffs can be huge if the product is a hit. If you make the top 10 list, you’ve generated retail sales of at least $30 million. Typically, Richard Simmons makes it to the top 10 list every year, assuring him gross sales of at least $30 million.

In certain years, popular diet infomercials by well-known weight loss "gurus" can generate huge sales. Prime examples are Richard Simmons’ "Get Down The Pounds" and Thane International’s "BioSlim" weight loss programs – each estimated to have generated at least $30 million in 1998. Richard Simmons "Deal-A-Meal" show has been airing on and off for more than a decade--a show featuring interviews with overweight people sharing their emotional eating stories, mixed in with sales pitches for Richard's motivational diet tips, exercise videos, cassettes, guides, CDs and other materials that make up his food exchange package.

 Enforma’s dubious "Fat Trapper" and "Exercise in a Bottle" diet pills are estimated to have taken in $70 million in 2000.

Consumers should be aware that some companies selling weight loss programs or diet products via infomercials (basically via mail order) may not be the most reputable companies around, and have limited track records and limited or no scientific basis for their claims. Some, like Enforma, have been fined by the FTC and were forced to stop selling their product. Reputable weight loss companies such as Weight Watchers, Jenny Craig, and others may run infomercials from time to time as well. In the future, we wouldn't be surprised to see diet infomercials touting the Atkins diet, the Zone diet, or the South Beach diet. It's a given that we will see new weight loss gadgets and over-the-counter diet pills or dietary supplements containing newly discovered ingredients from the far reaches of the world, every year. BestDietForMe.com/Marketdata is not concerned with companies like Jenny Craig and Weight Watchers running infomercials, since they have proven reputations and are legitimate. It’s the "fly-by-night" companies out to make a quick weight loss buck that consumers should be wary of.

The magic selling price for most infomercials is $19.95, or several "easy payments" of $19.95 each. Many desperate dieters will spend $20 or so in a gamble that they’ll find the magic weight loss system or non-prescription diet supplement that will finally work for them. Most are disappointed in the long run. That’s the strategy behind many diet products sold this way. Some companies selling them bank on human nature, confident that most people won’t bother to file a complaint or seek a refund if they only spent $20-30 and the product didn’t work.

Regulatory Actions Against Infomercials

TV Infomercials for Fat Trapper and Exercise in a Bottle diet pills aired at least 30,000 times from late 1998 through late 1999. On April 26, 2000, the Federal Trade Commission said it had seen enough. The agency announced a $10 million settlement with the California company that marketed the diet pills through infomericals featuring former baseball player Steve Garvey.

In a complaint filed in U.S. District Court in Los Angeles, the FTC said the ads by Enforma Natural Products Inc. made false and unsubstantiated claims. Enforma agreed to pay $10 million to the FTC, the largest settlement the commission has entered involving misrep-resentations of weight loss products. The FTC said that if possible, the money would be refunded to consumers who purchased the "Enforma System."

Enforma had sold the two products, which together cost $70 for a two month supply, "to more than 1 million customers", and of those 400,000 had ordered more than once. (If 1 million people purchased this product at $70 each, that means the company took in about $70 million. They paid a fine of $10 million, leaving $60 million to cover their production and other costs—not bad. Apparently, fraud DOES pay.)

Fat Trapper and Exercise in a Bottle contained ingredients that are increasingly popular in weight loss products. Fat Trapper was based on chiotsan, which Enforma claimed helps prevent the absorption of dietary fat. Exercise in a Bottle contained pyruvate, which Enforma said increases the body’s capacity to burn fat.

We’re sure there are many others, smaller companies that come and go, some reputable, some despicable. Most of the fly-by-night firms, like "boiler room" operations, disappear when local authorities put pressure on them, but since their magic pills and potions usually cost less than $40 and many gullible consumers don’t pursue legal action or request refunds, they usually get away with it. The supermarket tabloids are filled with their ads every week, something the FTC can’t seem to put a stop to or police adequately.

The Nature of Infomercials

A Response TV magazine editor said that there have been more than 450 products on the air via infomercials since 1990, and the two biggest categories are usually weight loss programs and health & fitness (exercise machines). The most common price for products sold is $29.95.

Upscale productions, celebrity hosts, wider exposure in more markets, and more favorable time slots have made diet infomercials capable of receiving strong ratings. The cost of a 30-minute program is now competitive with that charged for a traditional 30-second ad. Such programming tends to attract a young, well-educated and high income audience. Infomercials as a sales and advertising medium are inching toward respectability, and they offer marketers a way to measure results.

Buyers of products via infomercials are overwhelmingly female - 69%. Similar to the mail order business, rather than relying on the "front end" customer, most infomercials try to cultivate satisfied first-time buyers and to develop add-on sales and repeat business. Motivational speakers such as Tony Robbins use this strategy. When you buy his $29 audio/video package in a bookstore, the video acts as a sales pitch to also buy his more expensive 30-day "Personal Power" program.

About 80% of the TV stations in the U.S.--network, cable, and independent, accept infomercials, which are usually run on cable TV and independents.

People are looking for value and a comfort level with a product, which makes familiar name brands a natural for infomercial advertising. Insiders say that we’re going to see more higher-priced items being marketed this way. Advertisers broadcast new infomercials in different cities at different times, offering different price points before making the decision to roll them out nationally. Once relegated to late night time slots, infomercials are now seen more frequently on weekend mornings and afternoons, especially on local independent stations. A few even run in prime time.

Weight Loss Infomercial Sales

The Electronic Retailing Assn. (formerly NIMA) used to report quarterly media billings, but no longer. Now, it refers people to Response Magazine, which does track billings, for all infomercials in total and by category or topic.

The ERA informed BestDietForMe.com/Marketdata that to arrive at an estimate for actual infomercial SALES, multiply media billings by 2.5. Doing the math, this means that infomercial sales in 2002 were estimated at $2.17 billion. Based on 2003 media billings, the full-year 2003 sales figure is an estimated $2.27 billion. Thus, the infomercial market grew an estimated 4-5% during 2003.

Multiplying the media billings figures, by category, by 2.5, BestDietForMe.com/Marketdata estimates below the following values of infomercial sales for weight loss programs for 1999-2003.

Source: BestDietForMe.com/Marketdata estimates, based on Response Magazine data.

Source: Jordan Whitney

Source: Jordan Whitney, Inc., "The Greensheet Annual Review"

Note: The above rankings do not represent sales. Rather, rankings are based on how often the infomercials are aired during the year, number of media buys and frequency.

To make it onto the Response magazine top 10 list a show generally has to generate $30 million in yearly retail sales. It’s probably a safe bet that the top 10 on the Jordan Whitney’s list achieved that level of sales.