Nautilus 2002 Annual Report Download - page 9

on results to our spot commercials and marketing efforts, we may produce additional spot commercials and, if appropriate for the product, an
infomercial. Production costs for infomercials can range from $150,000 to $500,000. Generally, we attempt to film multiple infomercial and
commercial concepts at the same time in order to maximize production efficiencies. From this footage we can then develop several varieties of
spot commercials and infomercials and introduce and refine them over time. We typically generate our own scripts for spot commercials and
utilize outside writers to assist with infomercial scripts on an as-needed basis. Typically, we contract with outside production companies to
produce our spot commercials and infomercials.
We test spot commercials and infomercials on a variety of cable television networks that have a history of generating favorable responses for
our existing products. Our initial objective is to determine the product's marketing appeal and evaluate creative or product modifications that
may be appropriate. If these initial tests are successful, we then air the spot commercials and infomercials on an accelerating schedule of
additional cable networks.
MEDIA BUYING. An important component of our direct marketing success is our ability to purchase quality media time at an affordable price.
The cost of airing spot commercials and infomercials varies significantly, depending on the network, time slot and, for spot commercials,
programming. Each spot commercial currently costs between $25 and $25,000 to air, and each infomercial currently costs between $600 and
$55,000 to air. We currently purchase the majority of our media time on cable networks, through which we estimate to reach more than 70
million homes.
We book most of our spot commercial and infomercial time on a monthly or quarterly basis, as networks make time available. Networks
typically allow us to cancel booked time with two weeks advance notice, which enables us to adjust our advertising schedule if our statistical
tracking indicates that a particular network or time slot is no longer cost effective. In limited situations, we book contracts with time horizons of
up to one year for infomercial time in order to secure time slots that we feel are likely to generate the greatest number of potential customer
inquiries, and that are also in demand from other advertisers. Once we acquire this advertising time, we can benefit by rotating our products into
these time slots that demonstrate a history of success.
INTERNET. We expect the Internet to continue as an important part of our direct-marketing strategy. We consistently promote our web sites in
television, print and direct mail marketing efforts to encourage online product inquiries and eCommerce transactions. We have also expanded
our use of online advertising on third party sites and paid search engine placement to drive Web browsers to our sites to request additional
information, learn more about our products, or purchase immediately. Our sites are loaded with informative content including customer
testimonials, online videos, and detailed product information. In 2002, we operated two direct marketing-oriented web sites: (1)
www.bowflex.com that focuses on our Bowflex line of home exercise equipment and (2) www.nautilussleepsystems.com that focuses on our
Nautilus Sleep Systems line of luxury air beds.
OPTIMAL USE OF DIRECT MARKETING DATABASE
Since 1994, when we initially started testing our target markets, we have consistently invested significant resources in order to build a
comprehensive direct marketing database. Our database has allowed us to monitor customer responses and effectively utilize information to
adapt our marketing strategy to better target such customers with existing and future direct products. We believe the database creates a
competitive advantage for our future direct product introductions by providing a rich pool of customers that have a proven relationship with the
Company.
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2003. EDGAR Online, Inc.