Infomercial Scams Exposed

A Disturbing Report on How Infomercial Companies Really Get Paid

by Justin Leonard

Published January 13, 2002

Copyright © 2006 Leonard Fitness, Inc.

 

Much of the information you are about to read is shocking but true. Please use the information outlined in this report as a tool to educate yourself and others. I'll begin by giving you some background information on how an infomercial is produced and the costs involved.

Background Info

From start to finish an infomercial must have sufficient profit margins, wide appeal, and must be easy to demonstrate on television. Products that sell for $19.95 or less will do better with a shorter infomercial. A product that sells for more than $19.95 will do better with a longer infomercial.

Production Costs

A two-minute infomercial can cost upwards of $50,000. It mainly depends on the quality and creative approach of the infomercial. Longer, high quality infomercials can cost several hundred thousand dollars. Very poor quality infomercials are in the low hundred thousands. These costs are for the production of the infomercial, not the actual television marketing.

In addition to quality, there are several factors that affect what drives the cost of an infomercial, including the use of celebrity or non-celebrity talent, a custom built set or existing location, testimonials (paid), lighting, music, and graphics to name a few.

Going Live

Once the production of an infomercial has been completed, a media test is used to determine a television marketing strategy. Usually, a test is done in about 10 major cities, and may sometimes appear on national cable channels. The cost for testing an infomercial is approximately $20,000 - $30,000. After the preliminary tests are completed, marketers can determine if the infomercial product is a hit or not based on sales during the testing period. If the product is successful, a major advertising campaign will generally be planned shortly thereafter.

As you can see, there are a lot of people that have to get paid before an infomercial gets aired on TV. It is very expensive, and most infomercial companies won't accept a product unless there is a huge profit margin. In other words, a product that is sold on TV for $19.95 should only cost about $4.00 or less to make.

"But wait, there's more!"

"Results guaranteed!"

"Buy within the next 5 minutes and..."

You've heard them before... infomercial catch phases that draw your attention. But what's the truth behind the claims? Do the products actually work? Well, some products are legitimate and some are flat out scams. The following is a list of the most common scams:

Free Products

You may see an infomercial that offers so-called free products. Supposedly, all you have to do is call a toll free number and they'll ship you free products. According to the TV offer, no additional purchases are necessary. The only thing you have to pay for is the shipping charge, which is usually reasonable. So what's the catch?

Here is a true story:

I had a lady email me explaining how she saw an infomercial that offered 12 bottles of fat burners at absolutely no cost. All she had to do was pay for shipping and handling. The shipping was to be billed on her credit card when she called in. She ordered and received her fat burners weeks later as promised. She also received a surprise when she got her credit card statement... $110 in shipping charges. The story doesn't end there. To make things worse, the infomercial company automatically signed her up for a "frequent shoppers" plan in which she was billed an additional recurring fee of $30 a month!

Bait and Switch

Though some infomercial product concepts may be good, the products on TV may not be what you’ll get delivered to your door. For example, some infomercials may showcase a product that is made of a durable metal frame. But when you actually receive the product, you may find that the material is flimsy and made of plastic instead of metal. Remember the profit margin I spoke of earlier? If a product is made to stand the test of time, the margin wouldn't be as high. So it's more appealing for the manufacturer to sell the low quality version.

Recently, I was contacted by a television news program. They wanted to interview me regarding an infomercial product, which at the time was very popular. They told me that they had spoken with a representative from the company who makes the product that was to be discussed. They also mentioned that they would be getting a free complimentary version of the product which was to be used for testing in the news airing.

From what I had seen, and in addition to a myriad of negative consumer reviews, the product was supposed to have cheaply constructed plastic wheels and plastic handles. The product that the news producer received had durable rubber wheels and solid metal handles. Essentially, the company had been peddling a cheap product to consumers, while pushing a much more durable product to the media.

Refunds

If you buy an infomercial product from the manufacturer, your chances of getting a refund are near impossible. Most companies offer a 30-day money back guarantee. But here is the problem: First, the countdown begins when you initially call to place your order, not when your order arrives. Thus, you can subtract 2 - 4 weeks up front because that is the amount of time (if you're lucky) that it takes to receive your product. Upon receipt, you test it out and find that you don't like it so you send it back. Meanwhile, your 30-day return window has run out.

Suppose you were able to return the product before the 30-day deadline. A few weeks pass and you wonder why a refund has not been credited to your account. So you call to check the status of the return. The infomercial company will more than likely give you the runaround. They may even say that they will give you a refund, but never do it. Or they may say that they didn't receive the product in time. If this happens, how can you prove your case?

Corporate Set-ups

Some infomercial companies are large and some are small. It's usually the smaller ones that have the worst infrastructures or none at all when they begin selling their products to the public. They may air an infomercial without actually having the product in stock. They may not even have the manpower to handle fulfillment of the product they are promoting.

In general, most infomercial companies are decent businesses. However, if they get caught defrauding consumers, they may resort to hiding from the law to continue their illegal operations. Here is how this scam works:

After a government organization or consumer watchdog goes after an infomercial company for bad business practices, the accused may change the name of the company, phone numbers, doing business as (DBA) names, corporate locations, fulfillment house locations, etc. It is hard to shut these companies down completely because they can later reappear under a different name. Also, the fines and levies issued by federal agencies (e.g. FTC) may not be much of a deterrent when compared to the revenues they'll bring in prior to getting banned.

Customer Service

In this scam, customer service is impossible to contact via phone or email. For ordering purposes, the phones work great. If you ask for a refund, they will emphasize that the line is for ordering only. An alternate phone number is used for refunds. The number will usually lead to a voice messaging system that is either 1) never answered, or 2) a dead phone line.

The same strategy can also be seen on the internet. Often times, it is very easy to order. But if you need support or want a refund, good luck. The company's email address may not work, or there may be no response. Sometimes they may intentionally delay the response so that the 30-day refund window runs out.

Nonshipment of Items

What if you order a product, get billed for it, and never receive it? If you call in to check the status of your order, the company may swear up and down that they sent the product. How can you prove that they didn't send the product?

Used/Refurbished Products

In this scam, a consumer buys an infomercial product only to find that the gadget they paid full price for was previously opened or even used. If this happens, getting a new product or a refund is extremely difficult.

Bonus Items

We have all seen the infomercials that promise bonus or free items if you call within an allotted timeframe. In a perfect world, if you call to order the product per the offer, you should receive a bonus item. Instead, they may say that you missed the window of opportunity and that the offer is no longer valid.

Offers & Discounts

When you call to order an infomercial product, a customer representative may try to get you to sign up for an exclusive, members only discount club. Let's say you bought a weight loss kit on TV.  The customer service rep may try to offer you further savings discounts on fat burners. All you have to do is pay a small monthly charge to be in this exclusive savings club. The deal [which can cost hundreds] is supposed to save you money in the long run. Now suppose you turn the offer down. What do you do if the infomercial company decides to be nice and automatically sign you up for the discount club without your permission? You clearly stated that you did not want the membership, but your credit card is getting billed on a monthly basis.

No Return Info

Suppose you purchased an infomercial product and didn't like it. You would call for a refund right? Well, we know how hard it is to get through to customer service. Why not just look on the original packaging for an address or phone number? This would seem like the logical thing to do, but some companies don't give you that information. This practice is used to cut down on having to communicate with customers or issue refunds. By the time you find out who sold you the product and where they are physically located, your 30-day money back guarantee window is up.

Payment Installments

Usually, infomercial products that retail for hundreds of dollars can be financed. We know that financing is appealing to most consumers because smaller payments can be made on a monthly basis. For this example, let's assume that a product costs exactly $100, and the consumer is allowed to pay for the product in four installments over a 4-month time span. The scam is when the consumer gets billed in four installments of $25... all at once.

How pervasive are infomercial scams?

The following is an unedited email message from a whistleblower who works for an infomercial company. It was received July 6, 2002. Of course he chose to remain anonymous. He left no email address and called himself Mr. X.

"I work for the company who sells ALL the products on t.v. infomercials. They are the biggest telemarkting co. in America. Hundreds of companies have there calls sent to there call center. What your site said about how they scam people is 100% true!!! And thats just the beggining!!! Once they get your credit card, watch out. If you get offered a "free 30 membership" its not free!!! Most are about $10. a month billed in advance annually. Thats not all, tell keep going and going and going like vultures. The average call is about $500.00 worth of credit cards charges coming from all different directions for a product that is "just $19.95"

Here is yet another unedited email from an infomercial company employee. Her name is Lisa and she actually left us her real email address along with the following message:

"Buyers beware!! I work for the telemarketing service that sells the Fast Abs, and believe me, this product is a rip off. The product is cheaply made, takes forever to arrive and most of the time, does not even work once you recieve it. If you are lucky enough to recieve the product, you are even luckier to get the entire product that you ordered. It is impossible to get through on Customer Service. Our supervisors literaly tell us to give the fast abs customers the run-around about the customer service number. All the number are not working numbers at all. BUYERS BEWARE!!"

How to Avoid Rip-offs

1. Do research.

Some infomercial products live up to their claims and some don't. All infomercial products appear to work when they are displayed on TV. Infomercial ratings and reviews will ultimately save you time and money.

2. Don't touch that dial.

Avoid using the 1-800 number or website mentioned on an infomercial. Usually, the numbers and websites that you see on TV are contracted out to telemarketing firms and distribution companies who may not have the consumer's best interest in mind. Again, you may or may not be buying from the people you think you're buying from. Instead, try to purchase the product from a reputable third party distributor.

3. Use a credit card.

Only use a credit card to pay for infomercial products, especially if you decide to buy from a television advertisement. If you run into a problem with a product or company, you can dispute a credit card charge and have your money back within a week. Simply call the 1-800 number on the back of your credit card and speak to any customer service representative about your problem. Also, you do not need fraud protection on your credit card to get a refund. All credit card companies have fraud divisions that can help.

If a payment is made by check, debit card, or by bank account (routing number), you will more than likely have to close the account and reopen a new one. This will surely stop any unauthorized payments.

- END

 
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