PIONEERS OF A NEW WAY TO SELL These partners make TV infomercials -- but they've never sold a slicer-dicer and likely never will. Their ambitions are far greater.

(FORTUNE Magazine) – Infomercials -- those omnipresent half-hour TV ads hosted by hyperthyroid "sellevangelists" -- may seem mere pixilated proof of the adage that no one ever went broke underestimating the intelligence of the American public. But before zapping the next one you see, check to see if Guthy-Renker produced it (a fact that is announced at the beginning). If so, you're watching the work of a company that aims to be nothing less than one of America's top developers and marketers of brand-name consumer goods. While the outfit isn't there yet, the audacious goal of founders Bill Guthy, 39, and Greg Renker, 37, is no joke. The strategy of their six-year-old partnership, based in Palm Desert, California, offers insights to managers in any fast-changing young industry on how a small company can play up its competitive advantages to keep growing and crack markets dominated by giants. Guthy and Renker broke into infomercials largely by serendipity. In 1984, while running an audiocassette duplicating company he had founded, Bill Guthy received a call from a California real estate promoter. Could Guthy's firm turn out several hundred thousand copies of a cassette? Guthy's bid clinched the contract, but what, he wondered, was a guy he'd never heard of doing with so many tapes? When Guthy discovered he was selling them via TV advertising as a real estate investment course, he was intrigued. He talked it over with his neighbor and golfing buddy Greg Renker, then working for a family-owned tennis resort business, and the pair decided to investigate the infant infomercial industry. But what to sell? Both men were devoted readers of personal success books, and they shared a passion for Napoleon Hill's Think and Grow Rich (first published in 1937). Deciding to back a product they believed in, the partners scraped together $100,000 and bought the rights to sell the book and audiotapes of Hill lecturing. They hired ex-footballer Fran Tarkenton to endorse the product and bought TV time on six small-market stations to advertise it. The infomercial was an instant hit, grossing nearly $10 million by 1988. The partners decided early that to succeed in a business dominated by slicer-dicer artists, they would make higher-quality productions and keep their claims honest. By taking the high-quality road, Guthy-Renker ran up an impressive string of successes through the early Nineties selling cosmetics, weight-loss programs, and personal-motivation courses. Former Chrysler CEO Lee Iacocca recently agreed to create a series of videotapes on how to succeed in business and to host the infomercials to sell them. This year Guthy-Renker's gross revenues will top $100 million. The success of the infomercial pioneers has attracted the attention of such large consumer goods companies and retailers as Avon, Black & Decker, and Sears. Traditional advertising agencies are also setting up infomercial production divisions. Guthy-Renker is counterattacking by moving beyond infomercials and using them in new ways. Example: It can pilot-test a new product idea on viewers in a few weeks for as little as $50,000, vs. the millions traditional consumer product developers may spend over years. The company may then reach buyers through direct mail and telemarketing using the vast database of information it collects from infomercial respondents. It may also feature proven products on home shopping networks or roll them out into retail chains. To provide capital to back more infomercial tests, the partners last year sold a 37% stake in their company to wannabe media mogul Ronald Perelman for $25 million. They will get preferential access to air time on Perelman's television stations, which reach 14% of all U.S. households. And they plan to develop infomercials for Revlon, owned by Perelman's holding company.

AS THEY EXTEND their reach, Guthy and Renker are determined to preserve the advantages of being small and focused. Each partner has refined his role. Casting against type, the fast-talking, New York born Guthy is the inside manager, overseeing operations. The laid-back, cerebral Renker is the dealmaker who schmoozes with the talent. The company has just 42 employees and taps the expertise of major vendors -- from media buyers and talent agencies to telemarketing outfits and credit card fulfillment houses -- to help develop new product ideas quickly. Says Guthy: "We see the big consumer goods companies as the Spanish Armada, and we're the nimble little speedboat that can beat them."