Customer Service & Retention

Predicting the Future of Telemarketing

1 Jul, 2004

By: Chris Homer,Dr. Larry Ponemon,Lois Brown

At 8:30 a.m. on June 27, 2003, President George W. Bush stepped through the doors of the Oval Office and officially announced the national Do Not Call (DNC) registry, which had been launched just 8½ hours earlier by the Federal Trade Commission. “Unwanted telemarketing calls are intrusive, they are annoying, and they’re all too common,” President Bush said. “When Americans are sitting down to dinner, or a parent is reading to his or her child, the last thing they need is a call from a stranger with a sales pitch.”

Upon hearing those words, millions of Americans rejoiced: They had finally gained a painless way to prevent the intrusive phone calls they had hated for years. Within 72 hours of Bush’s speech, 10 million consumers had signed up—making it a federal offense for telemarketers to disrupt their lives. As of April 2, the registry had logged 58.8 million phone numbers.

Experts agree that millions more will continue to seek privacy protection, to the satisfaction of consumer groups everywhere. “We view the DNC registration as one of the most successful privacy protections in the U.S.,” Chris Hoofnagle, Associate Director of the Electronic Privacy Information Center in Washington, D.C., told CIO magazine. Clearly, consumers have spoken and this time telemarketers are the ones who have to listen.

What’s more, consumers are not just signing up to put an end to unsolicited sales call: They are also taking the next step on their enforceable right to privacy—filing complaints. By Dec. 31, 2003, more than 150,000 valid complaints had been filed and 45 telemarketers were the targets of more than 100 complaints each. By April, several states had sued telemarketers who called DNC-registered consumers.

Overall, consumer satisfaction with the system is almost unprecedented. A January Harris poll found that of those who have registered, 92 percent reported receiving fewer telemarketing calls and 25 percent said they have received no telemarketing calls since signing up.

But while consumers have been celebrating their new sales-call-free life, many telemarketing organizations have died and still others are in mourning. These companies feel that each consumer who signed up was another nail in their sales coffins.

The New Customer-Centric Telemarketing
Since the successful launch of DNC, everywhere you turn today the future of telemarketing is being debated. Some believe it’s dead; others say it’s been given new life. The case for the industry’s demise seems to make sense when you consider that 57 percent of U.S. consumers have entered their names into the 1-year-old national DNC registry. But flip the coin over and an equally compelling case is being made for the ongoing value of outbound customer calling—albeit in a very different form than it existed pre-DNC.

Many experts agree that outbound customer calling is still the most powerful component, in terms of its contribution to response rate, of any of the elements in the direct response sector. After all, if it hadn’t been so effective, it wouldn’t have been around so long. And by most reports, it isn’t going anywhere. In fact, the Direct Marketing Association projects outbound expenditures rising from the 2001 estimate of $75.6 billion to $91.4 billion in 2004, and inbound expenditures increasing from $92.4 billion to $149.1 billion in that period. The costs are about evenly split between Business to Consumer (B2C) and Business to Business (B2B).

It’s clear that companies are not willing to abandon entirely a form of marketing that has been so valuable for so long. However, there’s a third perspective to consider in this ongoing debate. Standing front and center between the doomsayers and the optimists are the consumers. And the one thing almost everyone agrees on is that telemarketing today is all about the consumers—what works for them and what doesn’t, what builds long-term relationships and what tears them down, what makes consumers buy and what makes them file complaints. After all, today’s New World Order is the direct result of consumers’ growing frustration with interruptive sales calls.

A Brief Consumer Privacy History
Although it has garnered the most media attention, the DNC is not the first step that consumer groups and the government took to end deceptive and abusive telemarketing practices. In fact, the road to the new stricter consumer privacy laws started in August 1994 with the signing of the Telemarketing and Consumer Fraud and Abuse Prevention Act. This regulation defined deceptive and abusive telemarketing practices and directed the FTC to establish enforced rules. Accordingly, the FTC created the Telemarketing Sales Rules (TSR), which went into effect in December 1995.

A statute-mandated review of TSR, starting in 2000, generated more than 64,000 comments from the public, which in turn sparked the 2003 amendments. Other new provisions established tougher restrictions on call abandonment, cracked down on unauthorized billing, and required transmissions of telemarketers’ caller ID information. Among the major implications was an overriding ban on calling people with whom a company does not have an established relationship.

Many experts predict that even today’s new stricter regulations are not the end of the consumer privacy story. They believe more regulations will come as the government continues to identify problems and ways to help consumers stay in control of the selling process.

What Does the Future Hold?
Despite consumer outcries for relief and the electronic alternatives to telemarketing now available, such as email marketing, industry pundits say the phone call remains a valuable means of making real-time, personal contact with current and potential customers. In fact, the phone continued to ring 10 billion times last year, according to one widely reported figure. And by all indications, it will keep ringing. However, experts say that telemarketing calls of the future will be quite different post-DNC. For example, they are more likely to be two-way conversations than one-way sales pitches, to build relationships rather than start them, to communicate a better-targeted offer, and to be made by agents who know more about the individuals being called than in the past.

Not every outbound customer call organization is closing up shop in the wake of the industry’s sea change. On the contrary, while companies are putting the old mass-cold-calling tactic and its short-term gains behind them, they are also looking forward with new strategies that not only work within the FTC’s consumer privacy guidelines, but also protect consumers’ privacy, boost customer satisfaction, and build long-term relationships. In fact, properly planned, executed and supported, outbound telephone communication can be an even more vital component of a well-rounded marketing program today than it ever was pre-DNC.

Among the new, more customer-centered activities driving allowable telephone calls to customers are several smart—and legal—strategies, including contacting customers with whom they’ve done business in the past 18 months, conducting permission-based marketing through proactive and highly targeted marketing campaigns, and conducting trigger-based and event-based marketing campaigns.

Among these, event-based and trigger-based marketing events—where companies make service calls or sales pitches in response to actions taken by customers—offer exceptional potential to both companies and consumers. These marketing events give companies the opportunity to contact customers who have demonstrated an interest in learning more about products or services they discovered through direct mail marketing, traditional advertising, online promotions or some other trigger.

These types of calls to customers are not only legal under the new guidelines, but also welcomed by consumers. In fact, the META Group advises companies to respond to the new stricter consumer privacy rules by “increasing their efforts to engage customers and prospects when they are most receptive to receiving messages—when they contact the company for information or make requests for products and services.”

Many forward-thinking call centers are already implementing strategies to incorporate this type of calling activity into their companies’ end-to-end marketing and relationship-building strategies. Frost & Sullivan recently reported that outbound calling to event-based customers is a growing component of telemarketers’ integrated CRM strategies. As evidence, the research firm found that several leading call center vendors are seeing healthy growth in demand for the use of outbound dialing for proactive customer care campaigns.

Predicting Smarter Telemarketing
While this event-triggered customer contact strategy is one of several growing avenues for companies who want to proactively and ethically encourage telephone conversations with their customers, to truly make the most of this opportunity, companies should make sure they are optimizing their customer contacts. For example, they need to take appropriate steps to make sure they are not further alienating customers by, for example, allowing inbound callers to end up in less than ideal service levels, guessing “when” is the best time to call customers, and leaving customer calling order up to chance.

While companies today have the desire to elevate outbound communications, many aren’t yet equipped with the tools that will help them achieve their customer-centric goals. Among the most advanced and effective customer-calling support technologies are those based on predictive analytics. Intelligently employed, predictive tools can help companies achieve several vital objectives, including driving inbound calling customers to the right level of service on every call, making sure companies are calling customers at their most receptive times, and ensuring companies are effectively coordinating their customer calling resources to maximize agent scheduling.

It’s well worth understanding predictive calling technologies, because they help call centers accomplish two critical goals: meeting their customers’ needs for privacy and meeting the business’s needs to be profitable. Here are three vital ways to drive customer contacts to new, more intelligent and more customer-centric levels of service when employing event- and trigger-based marketing campaigns.

  1. Predict your inbound callers’ ideal service levels. Today there are calling technologies that can identify inbound callers based on real-time customer data, tag every incoming call for appropriate service levels, and route them directly to the appropriate service, for example, computerized self-service or sales agents with specialized skills. Similarly, it can rescue from self-service those customers who need more direct agent attention. Because customers are better matched with the right resources, they are happier. As a result, the contact center has a better chance of making an immediate or future sale, while at the same time forging strong long-term relationships.
  2. Predict the optimum time to call customers. It’s a 24-hour world, but everyone lives, eats, sleeps, and works on their own unique schedule. Predictive technologies can identify the best time to call each event-driven customer when they’re available and when they’re most likely to be interested in hearing an offer.
  3. Predict the most effective calling schedule across multiple dialers. Companies don’t have to lose event-based customers behind a sea of customers who are calling for other reasons. Instead they can create a single prioritized and balanced calling schedule for multiple phone lines or call centers. This will further ensure that you are calling customers from an optimized daily calling schedule, as well as executing your calling strategies consistently across all call centers and dialers.

Ready, Willing, and Able to Move Forward
Throughout history, major business changes have shaken up industries and either heralded companies’ demises or caused them to make life-saving changes. The launch of the DNC was just such an industry shake-up for the direct marketing industry. During the past year many telemarketing companies have died, including the unscrupulous, deceptive and abusive—and who among us isn’t happy about that? But there has also been an increase in the number of telemarketers who are both ethical and customer-centric.

These marketers have heard consumers loud and clear—and are now ready and willing to do what it takes to maintain two-way communications with their customers via the telephone. Thanks to the advent of new predictive technologies, call centers will gain the means to be able to achieve these goals at a highly optimized level. As a result, they will continue to enjoy all of the benefits of proactive outbound relationship-building marketing campaigns.

In Whom Can We Trust?
Are certain companies and brands more trusted than others to protect consumers’ privacy? Specifically, do consumers believe there are companies that are more trustworthy than others to have processes in place to safeguard the personal information they collect, use and share about them?

According to the results of the “2004 Most Trusted Companies for Privacy” study, Internet companies, banks and healthcare organizations have earned the greatest trust among consumers while companies in the hospitality and retail food store industries are not considered as trustworthy by consumers. The study was conducted by Ponemon Institute, a privacy “think tank” headquartered in Tucson, and TRUSTe, a global privacy certification and seal program.

And the Most Trusted Are…
The Top 10 most trusted companies (see Figure 1) are: eBay, American Express, Procter & Gamble, Amazon, Hewlett-Packard, U.S. Postal Service, IBM, Earthlink, Citibank and Dell. The top five industries for privacy trust are: ISP (top rank is Earthlink), banking (top rank is Citibank), health care (top rank is Blue Cross/Blue Shield), consumer products (top rank is Procter & Gamble) and entertainment (top rank is Disney).

The web and standard mail study asked respondents to name up to five companies in 24 different industry sectors that they believed to be the most trusted for honoring their privacy commitments, such as the protection and safeguarding of sensitive personal information. Specific company names were not provided in the survey instrument to allow each subject to make their judgments without constraints.

A total of 6,309 responses were received and yielded a list of 187 most trusted companies for privacy. To determine the final list of most trusted companies for privacy, we used the following measures.

  • Companies that were listed by more than 20 respondents were included in the analysis.
  • Three separate rankings were used to determine the overall rank of an individual company:
    • R1: The rank order of a given company based on how many respondents listed the company. Larger companies or those with a bigger brand name would be more likely to have a higher response or ranking.
    • R2: The rank order of a given company based on the percentage of “first place” rankings. This is an unbiased measure because the percentage is not associated with the size of a company.
    • R3: The rank order of a company based on the ratio of positive to negative ratings. Unlike R1, this measure is biased to smaller companies because they are more likely to have zero negative ratings (as opposed to companies with larger market penetration).
  • Because the focus of the study was on companies “most trusted” for privacy, all aggregated negative ratings were excluded from further analysis after compiling the list of 187 companies.

How to Build Trust
The goal of the study was to try to determine the link between consumers’ perceptions of companies’ ability to protect their personal information and specific companies or brands. Because consumers are becoming more concerned about identity theft and the safeguarding of their personal assets, a low privacy trust score could provide companies with an early warning signal that their reputation and brand loyalty could be in jeopardy.

So, what do companies need to do to earn a high privacy trust score? According to our study, the most important factor is their overall reputation for product and service quality, followed by how they limit the collection of customers’ personal information. The third criterion is the use of advertisements and solicitations that respect consumer privacy. (See sidebar for “Ponemon’s Top Ten List for Building Privacy Trust”.)

Privacy Protection Is Important
Respondents were also asked what would worry them most if their personal information were leaked to individuals or organizations that do not have a right to this information. Seventy-six percent said that identity theft was their biggest concern, followed by stolen assets (32 percent) and stalking or spying activities (21 percent).

When asked how important the privacy of their personal information is, 82 percent of respondents believe that it is “very important” or “important.”

Consumers overwhelmingly believe the privacy of their personal information is critical when purchasing goods or services from companies. A key lesson to be learned from our study is that companies concerned about their reputation, customer loyalty and market share should consider making privacy core to their vision and mission.

Ponemon’s Top Ten List for Building Privacy Trust

  1. Strive to exceed regulatory compliance. Merely following the rules and being in compliance does not engender trust in your organization.
  2. Create privacy policies that are easily understood by and accessible to your customers, employees and business partners.
  3. Win the unanimous support and commitment from the organization’s executive team. Avoid organizational “silos” to managing privacy issues.
  4. Respect privacy and security as an enabler rather than a barrier to achieving customer relationships.
  5. Employ technology solutions that maximize data protection and minimize risk.
  6. Understand what your customers’ and employees’ privacy expectations are and build a privacy initiative that meets and exceeds them.
  7. Measure the success of your privacy and security programs with key performance indicators.
  8. Minimize the risk of employees’ misuse of personal information by making them an integral part of the organization’s privacy initiative.
  9. Train personnel to respect and properly manage, use and control sensitive and confidential information.
  10. Respond quickly to any privacy or security breach and have a crisis management plan in place to minimize damage to the organization’s reputation and brand.

 

Consumer Privacy: The Rules Aren’t Just for Telemarketers Anymore
Much attention has been paid to the Federal Communications Commission and Federal Trade Commission legislation of last year. With rules being enacted (or enforced) governing telemarketing issues such as abandon rates, transmission of caller ID information, and the national Do Not Call Registry, consumers have begun to feel much safer about their privacy. However, one additional critical area of consumer rights cannot be overlooked as it pertains to corporate compliance with privacy laws: recording law.

While primarily governed on a state-by-state basis, federal recording law (administered by the FCC) dictates how the consumer is notified that his or her conversation with your agent is being recorded, along with requirements for consent or opting out of a recording. Recording law is often viewed as a legislative means to prevent the illegal eavesdropping or wiretapping of calls by private or government entities. However, the same laws are in place to ensure consumers know that their conversations—whether to their credit card company, local utility, or favorite mail order catalog company—are being recorded. Regardless of the size of your organization, if you are recording transactions between your employees and your customers or prospects, recording laws affect you.

Thirty-eight states require that at least one party to the conversation consent to its recording (in those states, the calling party can qualify). In the 12 states that require all parties to consent to a call, all participants in a call must agree to the recording for it to occur. Regardless of the state, a verbal notification at the beginning of a call indicating it will be recorded (the infamous “This call may be recorded for quality purposes and training” statements) must be played, informing the consumer of the possibility of a recorded conversation. Going even further, some states require that a beep tone be played at regular intervals during a call, reminding the consumer of the call recording.

The penalties for not complying with federal and state recording statutes can be considerable. While in many states the violations are considered misdemeanors, and as such have small fines for each violation, other states take recording law much more seriously. Severe violations can have fines up to $10,000 per incident, along with the possibility of imprisonment in rare instances.

Federal statutes also allow for possible criminal prosecution and major fines, as well as civil remedies, where those whose privacy was shown to be violated can collect damages. While not as actively monitored and enforced as the more well-known telemarketing laws, recording law is monitored to varying degrees by each state. More often, consumers who feel they may have been recorded illegally or unfairly during a conversation will make a complaint to their state Attorney General’s office, who then will initiate an investigation if warranted.

The critical point to remember when managing your contact center is that consumer privacy extends well beyond current telemarketing laws and regulations. As a contact center manager or executive, it is wise to know the full scope of consumer privacy as it applies to your company’s business mission, and to make sure that everything is being done to protect the customer’s privacy and protect your organization from potential litigation.

For state compliance issues, check with your state’s Attorney General’s office to review the statutes and regulations. Most states have them online for quick review. For federal regulations, the Federal Communications Commission is a good place to start. It’s also a good idea to check with an attorney or engage a consultant group well-versed with telecommunications regulation.