With more than 48 million consumers enrolled in the national do-not-call list, card issuers may lead a mini-revolution in direct-mail campaigns and other marketing efforts.
The day of reckoning has arrived. On Oct. 1, the national do-not-call registry kicks in and the telemarketing industry almost surely never will be the same. On one hand, you can't help feeling a little sorry for those who make a living by calling folks. Then again ... naaaah.
The Federal Trade Commission's registry has significant ramifications for the card industry because outbound calling is its second-largest customer-acquisition method, lagging only direct-mail campaigns.
Card marketers have been mulling new ways to replace the phone to reach consumers. As with most strategic moves, bank card issuers are keeping mum on their plans. But vendors are stepping up, touting the latest and greatest programs.
One approach finding favor from marketers is tried-and-true direct mail. That may sound dull but there are some creative ideas bubbling up. The heretofore-staid U.S. Postal Service is encouraging a few intriguing propositions.
Secondly, marketers may bulk up their reward programs for current cardholders to encourage spending. That will mean an improved use by issuers of their databases of consumer information. Finally, some telemarketers are battling back with an emphasis on serving existing customers.
By the Sept. 2 deadline, 48.4 million consumers had signed on for the registry. Earlier this year, the industry's American Teleservices Association warned that as many as three million calling-related jobs could be lost as consumers enrolled ("One Last Fling for Outbound," July).
George A. Kestler, chairman and chief executive of telemarketer Americall Group Inc., says his industry will shrink as clients reduce the number of agencies they hire. "If they were using 10 agencies, they'll go to five," Kestler says.
That could mean the end for many firms. Kestler believes Naperville, Ill.-based Americall is well poised because 85% or its outbound calls are to his clients' existing customers, a group that can be called even if they have enrolled in the DNC registry.
But rough seas for some may prove to be smooth sailing for others.
Direct mailer ShipShapes recently won permission from the Postal Service to send irregularly shaped packages through the mail, instead of the proscribed rectangular envelopes. The company already has items in the form of football helmets, race cars and even those blue mailboxes. The idea is to grab the attention of bored consumers before they circular-file that latest mail piece.
In August, ShipShapes worked with Krispy Kreme to mail a package in Southern California that was a near-replica of its distinctive green and white doughnut box. Consumers opening the package didn't find doughnuts but did receive discount coupons to encourage a store visit.
"It's a challenge in direct marketing to get them to open the envelope," says Tom Becker, ShipShapes' president. "This sticks out in the mail. There's a whole lot of novelty."
There are some limitations but ShipShapes, a unit of Imageworks Manufacturing Inc., will create almost any shape package at its Park Forest, Ill., plant. It takes about one month from concept to a mailing leaving the shop, says Becker. Test mailings have seen response rates five times higher than the 0.5% that direct-mail usually generates, he says.
The attention-grabber doesn't come cheap. ShipShapes charges from $1 to $3 per piece depending on size though that includes postage and delivery. That compares to solicitation letters mailed first class that cost as little as 62 cents with postage, according to one major card-industry mailer.
ShipShapes' premium price means it will probably be used in campaigns that target top customers, says Becker, who notes that several card issuers are considering using the service later this year.
ShipShapes lobbied the Postal Service for three years to allow the mailings. The packages fall under a new category called Customized MarketMail. Christopher Ashe, the agency's program manager, won't name names but says that a Japanese auto company, a race car league and a major fast-food chain all have CMM mailings in the pipeline.
The Postal Service also shook things up when it began a negotiated service agreement with Capital One Financial Corp. this year. Cap One, the nation's fourth-largest card issuer, will receive certain discounts on its first-class mailings if it meets mailing thresholds, and accepts electronic reports on its undeliverable letters.
Cap One is the largest first-class mailer in the country when counting both its acquisition letters and statements, says Mike Plunkett, the Postal Service's manager of pricing strategy.
Under the three-year deal, the Postal Service will save because it doesn't physically return the undeliverable letters to the McLean, Va.-based issuer, says Plunkett. In return, the agency dropped the 20 cents per record it usually charges for sending an electronic file.
Cap One will save 3 cents per piece once it crosses an annual threshold of 1.225 billion pieces, Plunkett says. After sending 1.6 billion pieces, Cap One will save 6 cents per piece. Plunkett says the agency is in negotiations with dozens of other companies to create similar agreements.
Other direct-mail vendors besides ShipShapes are dressing up their offerings as the do-not-call program begins. Johnson & Quin Inc., a direct marketer based in Niles, Ill., suggests that clients improve the look of their letters with more color and other graphics. Technology has made top-notch letters more economical, says Jack Freeman, executive vice president. "Laser images can be darn near photographic quality. The graphic presentation has improved," says Freeman.
Meanwhile, mail providers are marketing programs that build upon the databases of information that issuers maintain on their cardholders.
First Data Corp.'s Decision Quest reviews a cardholder's purchase behavior to help craft marketing messages that can be put in monthly statements. That may be an insert or it could be copy that goes in the white space on the statement itself, says Dan Oswald, vice president, customer correspondence.
The customer's transaction history can be used to determine how the statement is designed, what message to use, and if a special offer should be included, says Oswald. "The real estate on the (letter) is managed by Decision Quest. It more efficiently uses the space and determines what inserts go in the envelope."
Stamford, Conn.-based Pitney Bowes Inc., known for its ubiquitous postage meters at American businesses, offers a similar product called Marketing Automation Solution. Pitney Bowes also has aligned with Siebel Systems Inc. to offer a program that integrates statement and marketing mailings with phone contacts.
The idea is to call the cardholder with a targeted marketing message soon after a monthly statement has arrived at her house. The caller reinforces the information and finds if the cardholder will act on the message.
Under the DNC rules, businesses can call a registered consumer if the business has a preexisting relationship with the consumer. Pitney Bowes uses a tracking system provided by the Postal Service to monitor letter delivery.
Mail and phone can also be blended when a new or replacement card has been sent. During the call, the phone rep determines if the card has been delivered to the right person and encourages activation. Pitney Bowes says this can both lower card fraud and assures a card doesn't end up collecting dust.
"This makes mail more 'intelligent' and more targeted," says a spokesperson. "More junk mail isn't the answer."
Meanwhile, telemarketing firms are trying to make their efforts more sophisticated as well. LiveBridge Inc. is expanding in the midst of the current gloom, primarily because it is emphasizing incoming service calls as a cross-sell opportunity.
Portland, Ore.-based LiveBridge announced in August that it was seeking to add about 500 staff to its roster of 3,000. The firm has five card-issuer clients, says John Bartholomew, executive vice president.
In 2004, clients will try to increase touch points where they interact with cardholders, he says. When the customer calls to activate a card or check on a savings account balance, she may be connected to a live operator instead of an automated response system.
Card issuers may also align with a third-party marketer so they don't have to make the outbound call. For instance, the issuer could hook up with a satellite-dish company that has sent out a direct-mail piece with an 800 number, says Bartholomew. Once the consumer has called in and agreed to buy the dish, he is switched to the issuer's phone representative.
"The rep will say, 'Would you like a card to pay for that dish?'" says Bartholomew.
LiveBridge also is expanding its language-services division, primarily to reach the growing Hispanic community. "The response rates are higher. The market is under-tapped so there is less propensity to get on the DNC list," says Bartholomew.
Marketing budgets for next year are still being finalized, he says, so spending is still kind of iffy. But one thing is clear. "There will be no growth in outbound," says Bartholomew.
Many marketers prefer to look at the onset of DNC as a glass half-full. The FTC's list should help to clear up a bewildering array of state, industry and corporate DNC lists, says Chris Heinrich, director of marketing services for Denver-based Heinrich Marketing Inc. And many calls had become a waste of time for issuers.
"Telemarketing was saturated," says Heinrich. "The vast majority of consumers eliminated are those that were hanging up anyway."
Many of Heinrich's clients are retailers looking for ways to revitalize their private-label card programs. Retail cards already face tough going against bank cards that offer an array of rewards along with lower interest rates. And some retailers garner half their card accounts through telemarketing, says Heinrich. The do-not-call registry and its possible reduction of millions of prospective consumers has retailers spooked.
Heinrich recommends that retailers use their one great advantage-the customers' physical presence in their store. Give cardholders a reward or discount at the point of sale to use their cards, says Heinrich. And "incent the cardholder to get a friend or relative to sign up. You want to get the same success ratio out of your (marketing) budget," he says.
Issuers might consider a few other options. Marketers with deep pockets can always go for television. Cap One's "What's In Your Wallet" campaign proved very successful in raising the brand awareness of what had been a relatively unknown issuer, according to marketing analysts.
On the other side of the cost spectrum is event marketing. The upfront cost-per-acquisition is around $70 compared to $100 for telemarketing, says James Lewchuk, vice president with Trendline Marketing in Tarpon Springs, Fla.
There is an art to selecting the events that fit the consumer demographic the issuer is seeking, says Lewchuk. Still, events promote the brand name and offer advertisers a quick answer on a campaign's appeal.
The national DNC registry may not be fatal for telemarketers but it delivers a blow that will inflict serious damage. For those with products to sell, the bright side is that there are plenty of other options from which to choose.
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