Thane International, Inc.

views updated

Thane International, Inc.

78-140 Tampico
La Quinta, California 92253
U.S.A.
Telephone: (760) 777-0217
Fax: (760) 777-0214
Web site: http://www.thane.com

Private Company
Incorporated: 1990 as Thane Marketing Inc.
Employees: Not Available
Sales: $159.2 million (2005)
NAIC: 325620 Toilet Preparation Manufacturing

Thane International, Inc., is a direct response marketing company that sells fitness, housewares, health and beauty, and other products through a variety of channels around the world, including direct response television (infomercials), the Internet, home shopping channels (both in the United States and abroad), catalogs, and telemarketing.

Thane products are also sold by more than 50 traditional retailers, such as Target, Kmart, Sam's Club, Costco, Best Buy, Eckerds, and Walgreens. Fitness products include the Orbitrek cardiovascular machine and the AB swing. Thane houseware products range from portable grills and kitchen aids to a five-in-one sofa bed and Pest Magic, a non-chemical system to rid homes of insects and mice. Thane health and beauty products include the Klear Action Whitening Light, California Beauty Cosmetics, Youth Cocktail to boost energy levels, and California Beauty Sudden Lift, a way to temporarily lift and firm up wrinkles to achieve a more youthful appearance.

Thane also markets some miscellaneous products: a digital camera (the Thane Breeze Cam); the Do It All Disc, a grinding and cutting disco for home use; and The Overnight Music Series, instructional programs on how to play the piano, guitar, and harmonica. Thane is headed by chairman William F. Hay and his wife, Denise Dauber-Hay, who serves as vice-chairman. In addition to its La Quinta, California, headquarters, Thane maintains offices around the world, including Toronto, London, Frankfurt, and Sydney, Australia.

COMPANY FOUNDED: 1990

The Hayses founded Thane International in 1990. William handled the business end, while Denise focused on the creative aspects of the company. Born in Texas in 1956, Denise Dauber came to Hollywood in the 1970s as an aspiring actress. She enjoyed some success in the 1970s and 1980s, appearing in a number of television programs, including Baa Baa Black Sheep, Chips, The Love Boat, Charlie's Angels, and Trapper John, and such films as Being There and Monster in the Closet. After a decade of working in film and television, Dauber was familiar with all aspects of the industry. In 1987 she put that knowledge to use in producing a video on how to play the piano. She then convinced the product owner to allow her to make an infomercial to market the "Play the Piano Overnight" video. However, Dauber had to raise the production and marketing funds herself. She took the gamble and succeeded. The "Play the Piano Overnight" video proved extremely successful, selling hundreds of thousands of copies—and later formed the basis for Thane's Overnight Music series.

Direct response television was hardly a new field when Dauber produced her first infomercial. The use of demonstration television advertising dated to the rise of television as a mass medium in the 1940s and 1950s, and like much of television it was an outgrowth of work being done on radio. In the early 1940s Alvin Eicoff, just out of college, began pitching Flypel insect repellent and d-Com rodent exterminator through long-form radio advertising. Later in the decade he turned his attention to television, creating the infomercial to hawk a variety of gizmos and nostrums on late-night television, including Hair Wiz and Tarn-X silver polish. His signature phrase was "or your money back," as he closed his product demonstration.

Other pioneers in the field included Arnold Morris, credited with introducing the 30-minute demonstration infomercial to sell the Kitchen Gourmet, and Lou Wunderman of the many Time-Life offerings successfully pitched to television viewers. Infomercials became so prevalent that they became the subject matter for such popular television comedies as The Honeymooners and I Love Lucy. By the late 1950s infomercials also became notorious, abused by hucksters, and the Federal Trade Commission put an end to their use.

Direct response television marketing continued in the 1970s but in a short format, and with the introduction of toll-free telephone numbers it thrived. The long format returned in the early 1980s, part of a greater effort to deregulate business conducted by the Reagan Administration. The Federal Communications Commission lifted restrictions on the number and length of commercials that could be aired in a given hour, thus opening the way for broadcast stations and cable networks to sell blocks of unsold airtime. As a result, both television shopping channels and infomercials rose in prominence.

Dauber met Hay on a blind date; they got married, and became business partners. Born in Ontario, Canada, he was an engineer by training, receiving an undergraduate degree from Queens University. Later he earned a master of business administration from the same school. In 1977 he went to work for Korn Ferry International, a broadcast and entertainment recruiting company, and then in 1981 struck out on his own, forming a media and entertainment recruiting company under the William F. Hay and Co. name. He remained the head of that business until teaming up with his wife to form Thane Marketing in La Quinta, California.

Thane was built on the success of the "Play the Piano Overnight" video. Hay focused on the administrative aspects of the venture while Dauber, serving as chief creative officer, concentrated on finding new products to sell, developing the marketing message, and producing the infomercials. Her personal interests dictated the type of products Thane marketed. As an actress she knew well the importance of keeping fit, leading to the introduction of the Orbitrek elliptical trainer. A key to taking on a product was Dauber's use of a product. If she did not personally like a product, the company would not take it on. As a result the company grew slowly. "Originally the business was like a child. In the early years, it needed a nurturing mother," Hay told Public Record. He also noted that in the early years, "We engineered our products based on what didn't work for others and cherrypicked the ideal." Dauber's love of exercise also led to the development of a hip-hop workout video, "Street Heat." She came across the exercise program at the Canyon Ranch Spa in Tucson, Arizona, and worked with the instructor to transfer the workout to video.

WEB SITE LAUNCHED: 1996

Thane remained a small company until the mid-1990s when it began branching out in a number of directions. In addition to selling products through infomercials, it made them available to shopping channels and distributed them through retailers. In 1996 it became one of the first companies to embrace the Internet and launched a retail web site. In addition to web sales, Thane began to use email to market products. As more people bought personal computers and acquired Internet access, the greater the role the online aspect of the business played, until it became an essential part of any marketing effort at Thane.

COMPANY PERSPECTIVES

Thane's vision is to be the leading marketer of innovative consumer products launched through direct response television and sold through multiple distribution channels worldwide.

As Infomercials grew in the 1990s they became an important tool for retailers as well as direct response marketers, counted on to create a buzz about a product and drive traffic. The impact of infomercials became especially apparent in 1998 when few infomercials stood out and the industry suffered a 20 percent decrease in sales. Thane was one of the few in the industry to score a hit, grossing $80 million for the BioSlim diet product, good enough to make it the champion infomercial product of the year. Nevertheless, BioSlim fell $15 million shy of the previous year's top seller, the Total Gym, promoted by Chuck Norris and Christie Brinkley.

The conditions of 1998 were not an aberration, however. Several factors combined to make the infomercial business more difficult. For one, it became very expensive to operate. In the early 1990s as infomercials blossomed, the price of an off-hour 30-minute program was competitive to that of a traditional 30-second spot. Moreover, consumers became more wary of aggressive television sales pitches. When infomercials were less common, people had been more persuadable, willing to suspend their skepticism. Now they became more discerning—and many were simply jaded. Thane's response, to remain selective and only promote products the company felt strongly about, served to keep it among the most successful direct response firms.

Aside from consumer skepticism, Thane and other direct response companies were adversely impacted by a downturn in the economy in the early 2000s. Gone were the days when a large portion of the population had money to spend on an impulse while watching an infomercial. Consumers may have been become more discriminating, but opportunities remained. The bursting of the Internet bubble benefited Thane and other survivors, which had a less crowded space online to market their products. The sale of fitness products did especially well on the Internet, and Thane enjoyed success promoting the AB-Doer, a failed product that Thane took on and was able to establish, and the Orbitrek did especially well in international markets. International sales had become increasingly important to Thane's ability to maintain growth, and by the early 2000s Thane was doing business in 80 countries around the world.

GROWTH THROUGH ACQUISITIONS

To stimulate growth Thane looked to possible mergers and acquisitions, an area spearheaded by Hay. In 2002 the company completed a pair of acquisitions. In March 2002 it picked up Krane Products, Inc., a Boca Raton, Florida-based direct marketer of repetitive-use home maintenance products, sold mostly to small town and rural consumers, an attractive demographic because it comprised almost one-quarter of the population of the United States, people who lacked a wide number of shopping alternatives. All told, Krane had about 1.5 million customer profiles on file. The addition of Krane also expanded Thane beyond fitness and health and beauty products. Two months later, in May 2002, Thane diversified further by acquiring Reliant Interactive Media Corporation, a Tampa, Florida-based company that primarily sold kitchen gadgets and computer-related products through infomercials and secondary sources: the Internet and the QVC cable shopping channel. It boasted about $100 million in annual sales, compared to Thane's $200 million. Reliant was also a public company, its stock trading over the counter. As a result of the acquisition, Thane indicated it would seek a listing on the NASDAQ.

Reliant was headed by three men well schooled in the direct response television business. The designated pitchman was Mel Arthur who had honed his trade during an eight-year tenure at Home Shopping Network, becoming one of the channel's top earners. He teamed up with brothers Kevin and Timothy Harrington shortly after they formed Reliant in 1998, initially as the host for some shows but quickly proving himself so valuable that he became a partner. The Harrington brothers had been in the infomercial field since 1985, shortly after the FCC rule changes that smoothed the way for a comeback for the long-format infomercial. Their company, Quantum International, was highly successful and in 1991 they sold it to National Media Corporation. They stayed on to run Quantum for three years, and then left to form a joint venture with Home Shopping Network, HSN Direct International, to market Home Shopping Network products around the world.

In 2002 Thane took advantage of the global contacts the Harrington brothers had made and bolstered its foreign sales by launching a 24-hour home shopping channel in the United Kingdom called Thane Direct Shop Around the Clock. Later in the year Shop around the Clock channels were successfully launched in the Middle East. Business in this part of the world was then supplemented by taking a daily 12-hour block of time on the Arab News Network to sell Thane products. In addition it contracted for ten short-form spots each day.

KEY DATES

1990:: Thane Marketing is formed.
1996:: Internet site launched.
2002:: Krane Products and Reliant Interactive Media Corporation acquired.
2005:: Company is repositioned as global enterprise.

However, Thane did not fare well following the acquisition of Krane and Reliant, suffering a serious erosion in sales, which management attributed to the weak economy. As a result of the downturn in its fortunes, Thane scrapped its plans to seek a NASDAQ listing. Instead, in 2004 the Hays and other shareholders formed Direct Marketing Holdings Inc. to acquire Thane and take it private. Some Reliant shareholders objected to the move and filed a law suit against Thane, alleging it reneged on a promise to seek a NASDAQ listing. In June 2005 the matter was settled, a U.S. District judge ruling that Thane had not made such a promise as a condition of the Reliant acquisition.

In the spring of 2005, Thane was restructured as a global enterprise. Tabbed to serve as chief executive officer was a Bosnian-born Canadian named Amir Tukulj, a direct-marketing veteran who began partnering with Thane. The company's founders assumed the roles of chairman and vice-chairman. The changes were made in order to prepare Thane for the next step in its evolution, the goal to become a global powerhouse in the direct response marketing field.

Ed Dinger