It is 6:45 p.m. You enter the house juggling bags of groceries, briefcase and mail. As you try to open the door with your one free finger, you hear the telephone ring. Instinctively, you drop everything and lunge for it. After you say “hello,” there are a couple of seconds of silence, then the pitch begins with the hesitant mispronunciation of your name.
Sound familiar? Telemarketers! They call at the wrong time, want to sell you things you don’t want to buy, and disrupt your privacy. Consumers have voiced their discontent — not just to the unfortunate persons at the other end of the line, but also to their political leaders. And the politicians have heard. Many states have already created “do-not-call” lists that limit the way telemarketers operate in their states. The Federal Trade Commission (FTC) began the process of setting up a national do-not-call list as an amendment to the Telephone Sales Rule (TSR) this spring. The Federal Communications Commission (FCC) announced in late June that it was updating its rules under the Telephone Consumer Protection Act of 1991 (TCPA) and coordinating with the FTC in creating a national do-not-call list that would regulate the industries under its jurisdiction as well. By the fall of 2003, most telemarketers will be required to subscribe to the list and honor it.
For many people this requirement will be seen as a blessing, but if your business uses telemarketing–-or has considered using it–to reach customers, you need to be aware of the new regulations and how they will impact your marketing efforts.
Why Is Any Business Willing to Make So Many People Mad?
Most people claim to detest telemarketers. A widely cited poll by Time magazine found that telemarketing ranked number four on the list of the worst ideas of the 20th century. Many people now screen their calls with their answering machines or caller id before answering at all. There are Web sites that provide information on how to avoid, defeat, humiliate, and otherwise annoy telemarketers. Some, such as the National Consumers League, provide relatively straightforward information. Others, such as http://www.do-not-call.com/ or Junkbusters (hyperlink no longer accessible), have a bit more “attitude.” Even the industry journal Telemarketing Magazine, (since renamed Call Center Solutions) reported that 70% of residents polled in a national survey “considered telemarketing to be an invasion of privacy.”
The industry, however, argues that people really don’t mind telemarketing as much as they say they do because they do buy things from telemarketers. In 2001, 185 million people spent more than $275 billion on purchases from outbound telemarketers, according to the American Teleservices Association (That number is questioned by others since it works out to an average of approximately $2,800 per household in the United States in 2001, a figure that skeptics find unlikely.) Whatever the actual number, telemarketing has proven to be an effective form of obtaining new customers.
How Does Telemarketing Work?
Telemarketing is a form of direct marketing. It has existed since the telephone became a common household appliance. Marketers are consistently trying to access new prospects to purchase their goods and services. Direct marketing, especially communicating to prospects on a one-to-one basis, is an effective way of obtaining customers. In the consumer market, telemarketing is primarily used in the service industry with the goal of getting the consumer to try, often for free, unsought goods such as time-shares, insurance, credit services, and subscriptions, or to get people to change providers of particular services (e.g., long-distance telephone service). Telemarketing is a live medium where a two-way conversation can be conducted. Objections can be voiced by the customer and rectified on the spot just as in a face-to-face selling situation. However, the costs for telemarketing are much lower than for face-to-face selling. Telemarketing is a numbers game. Even when only a small percentage of those called actually purchase something, the benefits to sellers outweigh the costs, so companies continue to pursue this marketing tactic.
Telemarketing is not a new phenomenon, but it has changed significantly since the introduction of predictive dialer technology. In earlier times, the salesperson had to manually dial a number obtained from a directory or list, not always with positive results. With today’s technology, it is possible for predictive dialers using numerous telephone lines to dial several phones at the same time, thereby increasing the likelihood that there will be a live person on the line as soon as the salesperson finishes the previous call. That also means, of course, that some people’s phones will still be ringing after someone else has already answered, leaving these people “abandoned” with no one on the line if they answer. Call center operators argue that this is necessary in order to make the process efficient enough to be economically feasible and that abandoned calls are not that much of a problem. Not everyone agrees with the latter point. The new FCC regulations require that predictive dialers abandon no more than three percent of all calls placed and answered by a person. California law is even more restrictive, requiring telemarketers to have a 1% or lower abandonment rate in California as of April, 2003.
The battle between telemarketers and those who wish to be left alone has also spawned a battle of the technologies. Consumers have tried to thwart the telemarketers with products ranging from caller-id’s to telezappers. On the other side, newer predictive dialing technologies have been developed to detect such barriers and find ways around them. In fact, one telemarketing proponent argues that closing down telemarketing would cut off a major source of technological innovation in the country!
Those who want to continue to use telemarketing will soon need another new technology to prevent telemarketing calls to cell phones. Federal law already bans most commercial calls to wireless phones. However, it is becoming harder to distinguish wireless numbers from their land-based counterparts. In November, 2003, consumers will be allowed to transfer landline numbers to wireless phones – a “portability” initiative designed to increase competition among phone companies, but one that will further complicate the situation for telemarketers.
The Public Response—The Do-Not-Call List
State Do-Not-Call Lists
Instead of relying on these options, however, people have been talking with their political representatives about statewide and national do-not-call lists, and the idea has found a receptive audience. At the time of publication, 28 states had established do-not-call lists for their citizens. These laws allow individuals to register their phone numbers with a state agency that will in turn require all telemarketers who want to do business in their state to purchase the list and avoid calling the listed numbers for most, although not all, purposes. The chairman of the Federal Trade Commission estimates that it would cost a national telemarketing firm more than $10,000 per year just to purchase the existing state lists, let alone to pay for the technology that would screen those numbers and remove them from call lists and for the personnel to do all of this. Other states are also considering such laws, although some are waiting to see how the Federal Trade Commission (FTC) and the Federal Communications Commission (FCC) do-not-call lists work at the national level before proceeding further.
FTC Do-Not-Call List
President Bush signed legislation in March that authorized the spending of funds by the FTC to establish a national do-not-call list for those industries under its jurisdiction that engage in interstate telemarketing. The FCC, which has jurisdiction over telecommunications companies, banking, and some insurance companies, began holding hearings about the possibility of establishing a coordinated list that would apply to those industries as well.
The FTC adopted a Telephone Sales Rule (TSR) in 1995 which defines and prohibits various deceptive telemarketing practices and limits the times when telemarketers can call (not before 8 a.m. or after 9 p.m. local time for the consumer). It also mandates the company-specific do-not-call provision that prohibits calls to consumers who request that company not to call. (Some calls, such as those relating to unpaid bills, can still be placed, even if a customer requests that company not to call.)
The law under which the TSR was set up mandated a review of the rule after five years. Hearings were conducted as part of that review, and these included discussion of the establishment of a federal do-not-call list under the auspices of the FTC. Following more than two years of work, the FTC has now begun the process to implement a national do-not-call list as an amendment to the Telephone Sales Rule. Consumers will be able to sign up for the list in the summer of 2003. Based on the large response to the state do-not-call lists, registration for the FTC list will be phased in region-by-region to avoid overwhelming the system. Sometime during the fall of 2003, telemarketers will be required to subscribe to the list and honor it.
The Federal Communication Commission has jurisdiction over some of the industries that are the heaviest users of telemarketing: telecommunications, insurance, and airlines. Its decision to join with the FTC in the creation of a common do-not-call database means that people who sign up to be on that list should find that almost all such calls cease. The two federal agencies have coordinated their requirements so that they provide telemarketers with uniform regulations regardless of the business for which they may be calling. However, in states that do not have legislation that limits telemarketing within the state and/or do not have a state do-not-call list, businesses that operate strictly within the state and who make their telemarketing calls strictly within the state may still be allowed to do telemarketing.
Even if you do not register for the do-not-call list and therefore are still eligible to receive telemarketing calls, there are some new consumer protections included in the new rules. The rules will now prohibit telemarketers from blocking or otherwise subverting caller id systems. Furthermore, the rule will prohibit telemarketers from receiving a credit card number or account number from anyone other than the consumer and from sharing such numbers with anyone else. There must be an audio or written confirmation maintained on file that the consumer gave the number directly to the telemarketer. This regulation is designed to thwart the marketing technique whereby the consumer is promised the service free for some period of time before deciding whether or not to accept it. Most consumers assume that if they do not call back and authorize continuation, service will cease. They do not know that the company already has the credit card or account number and will bill continuation of the service to it unless told not to do so. The new rule would prohibit such charges.
Because the FTC only has jurisdiction over interstate business, not intrastate business, its rules do not pre-empt state rules, although it is trying to harmonize its rules with the states in order to minimize the difficulty that telemarketers will have abiding by all of the different rules. The FCC announcement stated that its rules cover both interstate and intrastate telemarketing calls, although it should be noted that the industries it regulates generally involve interstate commerce. States may still adopt more restrictive laws governing intrastate telemarketing. Currently the restrictions imposed by state do-not-call lists range from practically no restrictions, in the case of Alabama, to restricting almost everything in the case of others, such as Wisconsin and Indiana.
The courts have ruled that generally political speech and requests to support charities are given more protection than is commercial speech. Therefore the legislation establishing the TSR and the TCPA explicitly exempted political calls from regulation. Even the new do-not-call list will not prohibit these calls. Charities that do telephone solicitations themselves rather than employing a call center or third party are also exempt from the do-not-call limitation under the TSR.
Industry Response – Compliance and Lawsuits
The need to keep do-not-call lists current has given rise to new business opportunities. New technologies are being developed that will block predictive dialers from dialing numbers on the do-not-call list, e.g., Call Compliance and Gryphon Networks. Although opposed to the concept of mandated do-not-call lists, the Direct Marketing Association has decided it can make money by managing these lists for states.
The teleservices industry is not going lightly into that good night, however. The industry has filed two lawsuits challenging the new TSR rules. There has also been a flurry of press releases and articles arguing that preventing telemarketers from calling will violate free speech, will increase unemployment — especially in rural areas and among women, disabled people and young people — and will cripple the national economy. Furthermore, it is argued, such restriction will only force telemarketers to move offshore where violators will be harder to find and prosecute.
Affiliate Programs and Related Actions
As regulations and costs escalate, companies that rely on telemarketing to consumers as one of their communication channels may need to find other means of direct marketing. Internet-based tools such as permission email marketing, affiliate programs, and banner advertising offer companies other low cost methods of communicating with buyers. Affiliate programs, which enable companies with similar target markets to refer customers to each other, and banner advertising on sites that target the same type of customer have been other successful ways of expanding companies’ sales and customer bases. Training staff who answer incoming customer calls to market related services is another route that telemarketers are taking.
Permission email marketing has proven to be a strong direct marketing tool. Unlike the case of telemarketing or email “spam,” recipients of permission email have requested to be placed on mailing lists or expressed an interest in certain types of products or services. Permission email enables marketers to develop a one-to-one relationship with their customers. Additionally, the customer relationship management programs that many permission marketers are implementing enable the company to record information about their customer and prospect interactions and habits. Companies can use these data to offer products and services their customers or prospects want and need, thereby increasing the response rate and the ROI of these programs.
It is important not to confuse permission-based email with e-mail spam. Spam is the sending of unsolicited email marketing messages. With the technology now available, it is possible to send bulk email messages at very little cost to the sender. The effectiveness of this as a marketing tool is highly doubtful, however, and the cost in time and aggravation to the recipient is growing exponentially. Unlike telemarketing, which targets home telephones, spam is often sent to business email addresses. It is estimated that 70% of all email traffic is spam and that the cost to businesses is more than $10 billion annually. Not surprisingly, states have begun passing anti-spam legislation. Furthermore, federal anti-spam legislation has been introduced. One bill would set up a national “do-not-spam” registry – comparable to the telemarketing list — which e-mail marketers would have to check prior to sending mass emails.
Finally, don’t try unsolicited faxes as your alternative. They are already illegal. Under the new FCC regulations, express written permission must now be obtained before faxed advertisements may be sent to a customer.
* Those who read this article prior to June 27 are advised that information in the article was revised on June 27 to reflect the announcement of the FCC that it was coordinating with the FTC in the establishment of a national do-not-call list.
 Ben Finley, “Government Working on National Telemarketing Do-Not-Call List,” Knight Ridder/Tribune News Service, Washington Dateline, (September 22, 2002); Robert Bulmash, “Q: Should Government Protect Your Dinner Hour from Annoying Telemarketers?” Insight on the News, Symposium, News World Communications, Inc., (March 17, 2003) p. 4.
 Bulmash (March 17, 2003).
 Mary Ellen Podmolik, “Hang-up: FTC Regulations Disconnecting Telemarketers,” Crain’s Chicago Business, Crain Communications, Inc., (January 6, 2003), p. 4.
 Bulmash, (March 17, 2003).
 Jim Krane, “Telemarketing Technology Trumps TeleZapper, Other Privacy Gadgets,” Business News, The Associated Press, February 26, 2003.
 Solveig Singleton, “Should Government Protect Your Dinner Hour from Annoying Telemarketers?” Insight on the News, Symposium, News World Communications, Inc., (March 17, 2003), p. 47; Walter S. Mossberg, “The Mossberg Solution: A Device that Stops Telemarkers?” The Wall Street Journal, D4 (May 8, 2002); Don Jackson and Jon Hamilton, “Bad Policy,” PRIMEDIA, Business Magazines & Media, Inc., (March 1, 2003), p. 3.
 Jennifer Bayot, “Telemarketers Offering a Plan to Cut Sales Calls to Cellphones,” The New York Times, (October 21, 2002), p. 5.
 Timothy Muris, “Open Forum: Behind the Do Not Call Rule,” (excerpts of testimony before the House Committee on Energy and Commerce), American Banker-Bond Buyer, 27, No. 17, Thomson Publishing Corporation (January 20, 2003), p. 4.
 The Federal Trade Commission Website about the changes in the TSR can be accessed at http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt107.shtm.
 Anonymous, “Direct Marketing Association and American Teleservices Association Sue FTC to Halt Do-Not-Call List,” Hall Dickler Kent Goldstein & Wood, LLP, .
 Steven Ginsberg and R. H. Melton, “Virginia Blocks Bulk E-Mailers,” Washington Post, (April 30, 2003), p. B1.
 Ginsberg and Melton, (April 30, 2003).
 SB 877, (the CAN-SPAM bill) can be accessed through the Congressional Website at http://thomas.loc.gov/ Once there, type “SB 877” in the box that asks for the bill number and click the “search” button.
 William Glaberson, “Dispute Over Faxed Ads Draws Wide Scrutiny After $12 Million Award,” New York Times Abstracts (July 22, 2001, p. 18, col. 1).