This article can be found in the March/April 1996 issue of Electronic Retailing Magazine
At first, it seems like a dream come true.
After months of hard work and several disappointing false starts, you secure the marketing rights for an amazing new exercise product that seems perfect for an infomercial -- in fact, you name it “The Perfect Exerciser.” You redesign it so it works even better, but is less expensive to manufacture, and you find a factory in the Far East that can deliver as many units as you want whenever you want them. You make a deal with an experienced and talented infomercial producer and sign up an attractive and articulate Olympic gold medallist to host the show. The testimonials who are asked to try your product love it, and their enthusiasm gives your infomercial a special quality that few shows have.
When you test your infomercial, the results are almost too good to be true -- your product is the proverbial “stick of dynamite.” You tell your media buyer to get busy, and place a huge order with your manufacturer. Sure, you stick your neck out to get the financing necessary to pay for everything, but this is a once-in-a-lifetime opportunity. Your product is going to be bigger than the AbFlex, bigger than the HealthRider, bigger than Soloflex . . .
But suddenly, your dreams turn into nightmares.
First, you get a letter from an attorney for the United States Olympic Committee. The montage that introduces the gold-medal winner who hosted your show includes not only slow-motion clips of Olympic competition but also some beautiful images of the interlocking Olympic rings and the Olympic torch, and that makes the USOC lawyer very unhappy. He points out that Congress has passed a special law giving the USOC absolute control over the use of the Olympic name and all Olympic symbols such as the five interlocking rings. You’re disappointed that you have to get rid of that great-looking montage, and it costs a nice piece of change to do the editing and send new dubs out.
But what happens next is much worse. Your infomercial contains a hard-hitting segment featuring an exercise physiologist who compares “The Perfect Exerciser” to some competitive products and concludes that yours is the best. The expert performed some scientific tests to support his conclusion -- the procedure is called “electromyography,” or “EMG” testing -- and the producer featured the EMG results prominently in the infomercial.
Your early success has not gone unnoticed by your competitors, and one of the biggest ones serves you with a federal district court complaint alleging false advertising and seeking a temporary restraining order and, ultimately, a permanent injunction and damages. The hearing on the TRO is scheduled for early the next week, which doesn’t leave much time for your attorney to prepare a defense. That turns out not to be a problem because you really don’t have much of a defense to prepare.
That’s because the “expert” who did the EMG testing may have made some mistakes. First, it turns out that some of the test subjects didn’t use the competitor’s machine exactly according to its directions. It’s not clear that the competitive product would have scored any better if the test subjects had followed the instructions precisely, but there’s no way for you to prove that your machine is superior without redoing the tests, and you don’t have the time to do that now. Second, your comparison segment features female models, but your expert tested only males; according to your competitor’s expert, differences in male/female musculoskeletal structure are such that EMG results might be different for men and women. So a study that did not include female test subjects might have overstated your product’s effectiveness.
Finally, your expert may not have equalized the resistance of all the machines he tested. If exercise products are tested at different resistance levels, you would expect the results to be different -- all else being equal, exercise at a higher resistance level will result in a higher EMG score -- so it’s unfair to test your machine at a higher resistance than your competitors’ products. Your expert assures you that he tried to equalize resistance levels, but given the different designs of the competitive machines, he can’t be sure that he was completely successful.
By the time your case goes to trial, you can find a better-known expert to redo the EMG testing and, hopefully, establish that your machine really is as good as you say it is. But you’ve got to defend your infomercial at the hearing on the temporary restraining order in just a few days, and your lawyer advises you that the other side has a much stronger case. You tell him to do the best he can, and you prepare for the worst by instructing your producer to start work on a revised version of the infomercial that does not contain any reference to the EMG testing and the competitive exercise device. He books an editing facility at a premium rate, but he’s not finished when the judge agrees with your competitor and orders you to pull your infomercial off the air immediately. You tell your media buyer to notify all the stations you’ve bought time from, but a few don’t get the word in time -- so your competitor runs back to court and asks the judge to hold you in contempt.
By the time your re-edited show is dubbed and overnighted to your stations, you’ve been off the air for almost two weeks. And the numbers are off a little when the new show does go up. But the worst news is yet to come.
A few weeks later, you find out that a company you’ve never heard of has applied for a patent on a key component of your product. The patent is expected to be issued soon, and once it does, you won’t be able to sell “The Perfect Exerciser” without the holder’s permission. You might be able to redesign your product so that it no longer infringes the patent and then shoot a new infomercial -- maybe you can call it “The Better Than Perfect Exerciser” -- but that will take time and money. And with a warehouse full of original “Perfect Exercisers” that you soon won’t be able to sell and ships full of more product on the water, time and money are in very, very short supply.
You sell as much product as you can before the patent is issued, ramping the infomercial up so hard that your ratio suffers dramatically, and then humbly approach the patent holder and negotiate a license. That license costs you an arm and a leg, but it’s better than eating all those “Perfect Exercisers.
Six months later, you’re back where you started. The deal that was going to make you rich ended up breaking even. You learned some lessons, however, and you vow not to make the same mistakes again as you start hitting the trade shows and calling your contacts, hoping to find another hot exercise product.
That’s when you get a letter from the Federal Trade Commission. They have some questions about your infomercial, especially the substantiation for the EMG claims -- maybe your competitor complained to them at the time they took you to court. If you’re lucky, you may be able to settle with the FTC by signing signing a consent agreement that does not require any monetary relief -- but you will be stuck with an order that hampers you any time you market a similar product in the future. A few weeks later, the Consumer Product Safety Commission gets in touch. It seems that they’ve heard reports of consumers being injured when the resistance bands on your product failed, so they want you to recall “The Perfect Exerciser.”
A lot of money has been made selling exercise and weight-loss products on television in recent years, but just as much as been lost. The story of “The Perfect Exerciser” is, strictly speaking, fiction -- but every problem faced by our imaginary advertiser is a problem that marketers of real-life exercise products are facing currently, or have had to face in the recent past. And this hypothetical story does not even touch on the many other legal problems that can blindside electronic retailers.
You may have your business lawyer review your contracts with suppliers and the other parties to your deal, and you may get those parties to agree to indemnify you. But that’s not necessarily going to protect you from a government inquiry about claim substantiation, or a trademark or patent problem, or a product safety issue. Do your homework and get competent advice from someone who has experience in those areas before a competitor or government agency attacks your product. Don’t let your “stick of dynamite” exercise product blow up in your face.