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'I'm Gonna Be on TV!'

Beware the lure of the direct-response companies that produce late-night TV ads--at your expense.

Opinions expressed by Entrepreneur contributors are their own.

Caller: "Hi, this is Jane Doe. I am a producer from XYZ .my research department told me you have a product that would be great to sell on television. I am putting together a new program for unique products that we buy wholesale. Who would I speak with about this?"

Inventor: "Uhhh, yes, I do!" thinking to self, "Holy cow!"

While the inventor is picking himself up off the floor, the caller begins to talk about which product(s) should be sold, how to get samples and begin ordering. I'm embarrassed to admit that when I first started out six years ago, I believed I was speaking to a producer from an actual television station. I let him keep me on the phone for nearly 45 minutes, thinking this might be a big opportunity to get on television.

If you've done anything to get the word out about your new product and you have a working telephone, you've either received or will receive a call or voicemail like this one.

So what are such callers proposing? If you've ever watched cable television late at night or early in the morning, you've seen these "ads." Favorites seem to be weight loss programs, exercise equipment, secret health cures and wealth-generating systems. However, I've seen everything from knife sets and car-cleaning cloths to tools.

Sometimes these programs use famous hosts to present the item. What differentiates these ads from standard TV ads is they provide a 1-800 number and website where you can order "right now."

I need to put a disclaimer here: Of course, not every direct response or infomercial company is misleading. During the past several years, the Federal Trade Commission and the Electronic Retailing Association--the industry association that represents direct response companies--have made great strides to protect end consumers from false or misleading claims.

There are undoubtedly cases where inventors have made a lot of money selling their products using direct-response television ads. The potential power of showing your product and its amazing features directly to a consumer without the bureaucracy of the retailer in between is compelling.

However, what I am concerned with is the susceptibility of inventors to sign up for these programs to market their products under false pretenses.

The direct response companies that have called my office always have made it difficult, if not impossible, to find out exactly what they were proposing--other than a chance to sell a lot of my product on TV.

After the initial interest-grabbing sentence, the callers are quite skilled at steering the conversation. The "producer" engages the inventor in discussion about how terrific his product is, expresses a need to do good "planning" in order to "purchase" sufficient inventory. The producer will also tout her experience and skill at producing winning TV ads and the ability to purchase cable advertising spots across the country at a significant discount.

One inventor sent me the direct response company's proposed agreement. Not only did it lack any meaningful protection for the inventor, the agreement itself required exclusivity.

When we ask these "producers," "Are you an infomercial company?" the answer has typically been an indignant, "No, we are a direct-response company."

The kicker is how long it takes the caller to get to the topic of the "production fee." When my callers finally get to it, it has ranged from $15,000 to $25,000--so much for the benefits of "selling my product wholesale."

Perhaps it's a matter of a few bad apples spoiling the bunch. Besides, I've been around enough by now to know that there can be a thin line between skillful sales and deceptiveness. Still, my experience with these calls has tilted too far toward deception.

My office recently spoke with Katy White at the Electronic Retailing Association . This is the trade association that direct-response and infomercial companies join if they want to attend tradeshows and receive other industry-related benefits. Like most national associations, this group is set up to support the industry in part by lobbying government on its behalf. Also central to its effort is to help member companies grow their businesses and to remain attuned to issues pertinent to their industry. ERA has instituted ethical guidelines for its members regarding representations made to consumers, but they are mainly focused on ensuring that the ads they create don't make misleading claims, the group doesn't have stated guidelines about the way services are presented to inventors. But ERA will accept and seriously follow up on complaints against its members. That's good news.

Direct response may be right for some products, but it isn't right for all of them. You have to make the judgment. But if you do hire a company for direct response , make sure you do so only after:

  • The offer has been represented honestly and you know exactly what you are buying.
  • You understand the deal terms and know the reputation of the company with whom you are dealing.

This is no time for a fast, impulse-driven decision. And my guess is that a reputable direct response company would agree. Here are five steps to help you avoid a costly mistake when considering direct response advertising:

  1. Ask who pays for the television production, you or the company. Note how difficult it is for you to get clear information about the company's terms. If you hang up and realize you don't really know what you'll be paying, that's a red flag.
  2. Insist on two inventor references: one that was successful and one that was not. Then speak with the references yourself.
  3. Examine any contract very carefully and be leery of exclusivity clauses, especially when you are footing the production bill.
  4. Ask if the organization is a member of the Electronic Retailing Association. You can look the company up online too:
  5. Contact ERA to confirm the company's membership and ask if there have been any complaints. And if you've had a negative experience, report your complaint to Katy White at the ERA at (703) 841-1751.

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