Gateway Educational Products is not only Hooked on Phonics--some would say it's hooked on advertising.
In 1991, Gateway spent a whopping $43.9 million of its total $50 million in revenue on advertising, most of it touting the company's most successful product, Hooked on Phonics, a tape-based reading program. The catchy product name and its homespun advertisements, which feature testimonials from people who learned to read with the program, quickly became well-known across America.
"I choose the name because hooked was always associated with a negative, like hooked on drugs, and I wanted to change it into a positive concept, like hooked on reading," said John Shanahan, company founder and a former music jingle writer.
Last year, Gateway shelled out a greatly reduced $15.4 million on various types of advertising, ranging from 30-second radio testimonials to 30-minute television infomercials, according to Leading National Advertisers, a New York firm that tracks such data. That same year company revenue was $98 million.
Shanahan said these days the company's products sell by word of mouth, so it does not need to spend as much on commercials. While Gateway purchased lots of advertising to get started, it expects to spend less and less as it becomes better known.
"You can advertise a product into a national position, but you can't keep it there. We've changed people's lives," Shanahan said.
Although there are several private reading programs marketed to educators, Hooked on Phonics is advertised directly to consumers. The company's latest ads place a heavy emphasis on believable testimonials. Some feature teachers in classrooms, while another includes a nun who couldn't read and used Hooked on Phonics to become literate.
The emphasis is no accident. In 1991, the company was reprimanded for a commercial depicting an unidentified man who claimed: "For 46 lonely years, I had a secret: I could not read. But then I ordered the reading cassettes Hooked on Phonics and taught myself how to read without any help or embarrassment. If fact, after learning one 18-minute cassette, I was able to read a 120-page book."
After complaints from consumers, the Council of Better Business Bureaus' national advertising division found that the 120-page book was a workbook consisting of unconnected words. The council also discovered three unsubstantiated claims made by the company: that the program is all a non-reader needs to learn to read, that a child or illiterate adult may successfully use the program without additional help from a tutor and the program works with any type of reading disability.
Gateway agreed to address the concerns in its subsequent advertising and since then the council has not taken any action.