Sustainable Profits
The challenges of a waste-recycling business.
TerraCycle has always had an unusual relationship with marketing. We have essentially never spent money on advertising, and we have a big aversion to doing so in the future. Instead, we have tried to leverage the publicity we are able to generate about our unusual business model, and we have taken that one step further to develop what we call negative-cost marketing.
Back when there were just a few folks at TerraCycle, we generated awareness by going to the media and attempting to drum up publicity. On average, in 2003, there was one article written about TerraCycle in a publication somewhere every week. Today, we average 17 articles a day, including weekends. This publicity does have a cost: our media department has an annual budget of around $500,000 per year. But we believe this is by far the most cost-effective way to generate awareness, highly credible awareness. It is the cheapest paid marketing that I know of. But negative-cost marketing is even cheaper. The goal of this idea is to to create marketing content that promotes the company brand while also generating a direct payment that more than covers its cost.
For example, imagine if you made an usual fabric, like Gortex. What if you developed a do-it-yourself book explaining how to use the fabric to make a rain jacket and 99 other cool things at home? The content would be useful, which is why a publishing house might publish it and consumers might buy it. And it would deliver negative-cost marketing because you would be making money off the book while promoting your fabric.
At TerraCycle, we’ve done similar things. My book, Revolution in a Bottle, about the company’s early days, generated almost six figures in income for the company, while also getting out the word about our products. I’m in the process of writing a second book, and our design team is working on one, too. We’re also producing a magazine that will discuss the science of garbage and suggest crafts projects that make use of garbage (and when readers are done, they will have instructions on how to turn the magazine into a fruit bowl). We are partnering on the magazine project with a publishing house. We oversee production of the content, and the publisher finds the advertisers. Of course, we get a cut of the advertising revenue.
We also recently introduced a Facebook game called Trash Tycoon. The idea is that a game player lands in a city covered in garbage and wins points for cleaning it up. The player can then build recycling facilities, trash cans, and other things that help clean up the city faster. After just one month, Trash Tycoon already has 360,000 active users. The game, which promotes the TerraCycle brand, was developed by Guerilla Apps at no cost to us. We are partners on all of the advertising revenue.
Of course, the ultimate in negative-cost marketing would be to get someone to produce a television show about TerraCycle. We’ve had some experience with this, and we’re trying to do it again. As you might guess, the economics are encouraging. A major network might spend from $250,000 to $1 million per one-hour episode, and if the show is about your company, you, as the “talent,” get to keep somewhere around 5 percent to 10 percent of that. Best of all, the show that is produced is effectively a commercial for your business. Consider what Discovery Channel has done for the boys of Orange County Choppers.
Our own efforts on this front started five years ago. Because we have long thought that TerraCycle’s mission to turn the world’s waste into useful products would make for a great reality show, we went to Los Angeles where we met with agents and ended up signing with a major agency that isn’t around anymore. The agency connected us with a number of production companies, and we chose one that proceeded to create a demo that highlighted the characters and the arc of the show. Our concept was basically a docudrama about life at TerraCycle with each episode focusing on our efforts to find a productive use for a particular waste stream. We subsequently met with 15 networks and were quickly rejected by all of them.
A few years later, a production company came to our offices to film a piece for a Discovery Channel show (the result of our efforts to generate publicity). After we wrapped up, I started chatting with the producer. I asked him to be our production company partner, and he said he was interested. So we shot another demo — the same concept as before, but since several years had passed, we were much better this time around.
The demo got picked up by The National Geographic Channel, which bought a one-hour pilot. It took a full year to go from that initial “yes” to the airing of the first episode of “Garbage Moguls.” And another year passed before the next three episodes were aired. The pilot was about finding a use for cookie wrappers (we turned them into kites that sold at Wal-Mart). The second episode was about finding a use for pet-food bags (the show’s highlight came when we actually suspended a car on the strength of one bag). The third episode focused on how we turned chip bags into trash cans sold at Home Depot. And the final episode showed us opening our own retail store in Princeton, N.J., as well as helping Target find a way to re-use plastic bags.
Of course, the world of TV can get strange. The episodes on the National Geographic Channel had their premiere back-to-back on a slow night in August last yea, between marathons of big-game fishing shows. And that is where it ended. For our efforts, we had succeeded in producing a “mini-series,” which is a nice term for four one-hour episodes of a canceled TV show. Still, they have been aired many times, they have popped up in international markets, and they generated more than $60,000 in direct income for TerraCycle.
Now you’ll probably ask: how do you know these negative-cost marketing initiatives actually work. Have you done Neilson studies to prove their efficacy versus traditional advertising? The honest answer is that I have not. What I do know is that we got paid to make them, and they generated major awareness. I’ve been stopped many times in random countries by people who have said they saw our show or read my book. We also find that our Web site traffic increases a lot every time we introduce a new initiative. By contrast, traditional advertising is extremely expensive.
To me, it comes down to a simple question: Would you rather be the commercial that airs during a TV show, or would you rather be the TV show itself? That is why we recently signed new agents, William Morris Endeavour, and we are back in the hunt again. Stay tuned.
Tom Szaky is the chief executive of TerraCycle, which is based in Trenton.
Article source: http://feeds.nytimes.com/click.phdo?i=b61135abc44d1001ee59f877a84f2beb
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