The Life Cycle of a Direct Response Advertisement:From Idea to Execution

A service of the advertising industry and Council of Better Business Bureaus

Peter Marinello – Director, ERSP; VP, CBBBJeff Tuller – Co-founder & President, SavvierEdward F. Glynn, Jr. – Manatt, Phelps & Phillips, LLPVic Golio – Executive Vice President, Chief Media

A service of the advertising industry and Council of Better Business Bureaus

Self-Regulatory Goals1. Enhance consumer confidence in electronic retailing.

2. Provide an efficient mechanism for reviewing direct response advertising campaigns.

3. Effectuating the discontinuance of direct response advertising that contains egregious, unsupported efficacy and/or performance claims.

4. Demonstrate to the regulatory agencies the direct response industry’s commitment to meaningful self-regulation and compliance with legal requirements.

A service of the advertising industry and Council of Better Business Bureaus

ERSP Policy & Procedures• Direct response

advertising• 60 calendar days• Primary and core claims• Anonymous challenges• Determination as to

whether substantiation appears reasonable on its face

A service of the advertising industry and Council of Better Business Bureaus

Are we ready to market the product?

• Is the price right?

• Will the product sell?

• Is there a niche?

• Does the product create a solution?

• Is the product worth it?

A service of the advertising industry and Council of Better Business Bureaus

Life Cycle of a Direct Response Advertising Campaign

1. Idea

2. Legal

3. Analytics/Performance

Direct Response TV Products

Jeff Tuller

Product Patentable? File Patents

Patent Infringement Review (product does not infringe others) Product rights secured (licensed and/or protected) Product rights & patent match product to be marketed Evaluate Product Trademarks

File Trademarks Review internet urls

Register urls Initial Cost of Goods Satisfactory Manufacturing supply secured

Manufacturing agreements Cost of Goods / Volume pricing secured Back-up manufacturing for critical components

Product Materials and Testing Review materials for safety

Lead screening pass California prop 65 clearance FDA regulated materials review EPA regulated materials review DOT regulated materials review

Review product safety destruction tests (if applicable) fatigue failure tests (if applicable) max loading / severe use tests (if applicable) allergy / sensitivity tests (if applicable) stability / degradation tests (if applicable) electrical (UL tests and approval if applicable) OTC, medical product or new drug (determine category to determine tests)

Product Packaging, Labeling, and Instructions Labeling complies with applicable regulations (i.e. FDA) Intended use instructions clear Warnings and precautions identified, prominent and clear Claims made on packaging/instructions matches substantiation Manufacturer / distributor properly identified on packaging Trademarks properly used and marked Patent status properly used and marked Copyrights filed on packaging, printed and video materialsClaims and performance substantiation Evaluate / create file of existing substantiation

Determine level of substantiation needed

Food, nutritional supplement, drug - 2 independent studies OTC monograph product - use monograph claims General performance claims with numbers - 1 product specific study Comparison / superiority claims - 1 product specific comparative study Self evident claims (i.e. product is red) - must be factually correct

Conduct product specific substantiation tests (if applicable) Agreements with independent testers Tests achieve satisfactory outcome

Expert reviews and opinions (i.e. summarize findings) Review body of evidence and finalize marketing claims

Production Releases/ Agreements Production Agreements Testimonial Releases On-Air Talent agreements VO Releases DP & Videography releases Photography releases Location releases Music licensesFinal Show Review Testimonial claims all factually correct Testimonial claims match substantiation VO script and talent segments match substantiation Review trademark infringement of slogans, unique phrases, and key terms All endorsements secured releases (including use of others' trademarks and celeb,

publication or organization names) Copyright filed on final showOperations Inbound scripts

Inbound teleservices set-up (and contract agreement in place if applicable) All relevant terms of product offers, upsells and guarantees disclosed Continuity / neg. option offers have appropriate verification captures All claims made in script match substantiation Data encrypted, tested and transfers work via secure systems

Website Web hosting services set-up (and contract agreement in place if applicable) All relevant terms of product offers, upsells and guarantees disclosed Trademarks properly used and marked Patent status properly used and marked Copyrights filed on website pages Data encrypted, tested and transfers work via secure systems Privacy policy posted on site Guarantee and other terms and conditions posted on site Customer service and contact information posted on site Children’s policy posted on site

Fulfillment Fulfillment services set-up (and contract agreement in place if applicable) Pick and Pack instructions established Packing slip content determined and reviewed for clarity/completeness Product return / guarantee information included with product

Customer Service Customer Service set-up (and contract agreement in place if applicable) Product return rules and customer service scripts/rules established Customer data files accessible real time for customer service reps Sensitive customer data within secure encrypted system / limited access

Merchant Account Services Merchant account services set-up (and agreement in place if applicable)

LEGAL ISSUES TO CHECK WITH A MARKETER

Edward F. Glynn, Jr.

Manatt, Phelps, & Phillips, LLP

13

| Manatt, Phelps & Phillips, LLP

A. Background Check on Products Like This

1. Prior enforcement action against products like this?a. By the FTC?b. By the FDA?c. By State Attorneys General?d. By NAD or ERSP?e. Class Actions?

2. Is it a drug or medical device under the FDA? a. If so, pre-market approval received?b. Covered by a Monograph?c. Covered by an ANDA?

14

| Manatt, Phelps & Phillips, LLP

B. Intellectual Property Rights

Are there rights in the product and if so:

1. Is this product covered by a patent?

2. Have there been searches done to ensure that the product does not infringe patents of existing products.

3. Has the name of the product been checked for trademark compliance? Copyright, if it applies?

15

| Manatt, Phelps & Phillips, LLP

C. If any safety issues are presented by the product, has a search been done to determine:

1. Whether the CPSC has expressed concern about comparable products?

2. Whether class actions have been filed against comparable products?

3. Whether if some risk of danger has been detected, have studies been done regarding the extent of that danger?

4. If possible danger to consumers is presented, has adequate insurance been obtained?

5. Possible claims under California Prop. 65 or other state statutes?

6. If it’s an ingestible or topical does the product actually contain the listed ingredients?

16

| Manatt, Phelps & Phillips, LLP

D. Substantiation of claims for FTC, NAD and ERSP

1. What kinds of claims are being made, or would the marketer like to make, for the product?

2. If the marketer is relying on substantiation from articles in medical journals or the like, what confidence is there that the article being sold is the same as the article that is being discussed in the scientific journals? Additional ingredients?

3. If relying on an FDA Monograph or an ANDA, confident that the claims for the product are not going outside the scope of the Monograph or the ANDA and that the product is not being combined with other products that would destroy the right to rely on the Monograph or the ANDA. To the extent that the marketer is relying on clinical tests, are such tests well-controlled, double-blinded tests or do they reflect a lesser standard?

4. If a weight loss product, does any study that has been conducted contain a sufficient number of subjects, is it blinded, is it placebo-controlled and do the results between the placebo and active group represent sufficient “power”?

5. On file releases and affidavits from every individual who will be used as an endorser or testimonial in the program?

6. Testimonial statements made about the product as sold or an analogous product? Do they continue to endorse the product? Connections to seller disclosed?

17

| Manatt, Phelps & Phillips, LLP

E. Miscellaneous

1. Are all demonstrations fair and non-deceptive?

2. Marketer avoiding any express or implied claims to children?

3. Is the advertisement of warranties compliant with FTC regulations? Warranties properly drafted?

4. Are any disclaimers clear and conspicuous?

5. On continuity programs, is the existence of continuity sufficiently described and is it clear how the customer can get out of the program?

18

| Manatt, Phelps & Phillips, LLP

F. Competitors

1. If referring to competitive products, have adequately ensured that consumers understand that those products are not ours?

2. If any claims about competitor products, ensure that such claims are fair and justifiable?

3. Clear in the show that the use of the competitor’s name is protected by a trademark disclosure?

4. Competitors been sued by a government agency or class action for making the same kinds of claims that marketer wants to make?

19

| Manatt, Phelps & Phillips, LLP

G. Lawyer at the shoot?

1. No Script

2. Extemporaneous chit-chat?

3. Celebrity Host? Guest?

Overview of A Direct Response Agency’s Campaign

Creating a Direct Response Campaign – Chief Media

Chief evaluates

clients financials

and goals to establish DR

or Retail metrics

Client/Chief selects

production company

Chief recommends and begins set up with

vendors

Chief sets client up

client with Continuum

Chief’s traffic dept sends

out tapes and substantiation

for station approval

Chief’s traffic dept acquires unique 800#’s

from call center to

designate by station

Media Plan presented and

executed

Reports provided on

results

Media Plans(4 General Types)1. True DR (Usually :60s and :120s)

2. Retail Push or “Hybrid” (Usually :15s and :30s)

3. Local Broadcast (Can be True DR or Retail Push. Length depends on type of campaign.)

4. Longform (30 min spots. Can include national cable, regional cable, and local broadcast.)

1. True DR Plan Usually :60s and :120s – It’s assumed you need at least

:60 to :120 seconds to describe your product and convince someone to buy.

Spot has a specific “call to action”.

Stations/rotations/rates used are cost efficient and known to produce results.

2. Retail Push or “Hybrid” Plan Consists of :15s and/or :30s only.

There is no call to action.

Possible website and/or retail tags on spot.

Plan is made up of the most effective CPPs and/or CPMs per rotation, per station based on the product’s main demo.

3. Local Broadcast Plan Can be any length – Retail :15s/:30s or DR :60s/:120s.

Markets are usually provided by client and are based on retail sales analysis, location of client, demo of product, etc.

4. Longform 30 Min Show.

Stations are chosen based on product demo and our historical results.

Can be cable/regional cable/local broadcast.

Proprietary Reporting and Tracking Technology

Proprietary Tracking Technology

Continuum:The Continuum system is designed to position Chief Media’s clients at the forefront of the competitive landscape in Direct Response and Direct-to-Retail advertising. With a determined focus on client return on investment (ROI), Continuum will leverage Chief Media’s expertise, legacy systems, and historical data along with new backend transaction data sources and cutting edge technologies to provide a more profitable strategic solution and the most detailed and thorough look at your lifetime value per consumer. Continuum allows visibility down to the media airing level for:

• Returns/Declines• Trial Offer Stick Rates• Continuity Retention• Re-marketing/Cross-Sell Initiatives and more

Chief Media’s Continuum Add Web -

based Revenue

and Statistics

THE NEW WAY…CONTINUUM

The new, better way shows the whole picture:

THE NEW WAY…TMO

With Online allocation, Cancellations, Declines, Returns, Continuity, Additional Sales, Cross-Sells and Re-Marketing.

CONTINUUM…TOMORROW’S TECHNOLOGY TODAY, SHOWS THE WHOLE PICTURE

Continuum

Questions?

Peter Marinello – Director, ERSP; VP, CBBBJeff Tuller – Co-founder & President, SavvierEdward F. Glynn, Jr. – Manatt, Phelps & Phillips, LLPVic Golio – Executive Vice President, Chief Media

A service of the advertising industry and Council of Better Business Bureaus