Aww, jeez. Wouldn't you know it? The numbers actually look pretty good. The somnolent economy, record bankruptcy rates, and the rising specter of regulation last year weren't able to slow down third-party telemarketing companies that serve card issuers.
Credit Card Management's annual industry survey found a 23% rise in hours for the outbound calling companies that responded to the survey. Firms taking inbound calls that responded logged a 41% increase.
Two-thousand-two, however, could prove to be the telemarketing industry's last golden year. Callers annoyed consumers one-time too many at dinner hawking aluminum siding or a new card program.
Citizens squawked, the government acted, and new regulations are coming down. The Federal Trade Commission is rolling out a national do-not-call list along with some tougher calling rules beginning this month. And the Federal Communications Commission may announce this summer an even more expansive do-not-call registry.
All this has put a dark cloud over the industry. Telemarketing's mood was summarized in March by the "Teleservices Survival Conference" organized by the American Teleservices Association trade group in Washington, D.C.
Predictions from industry experts are dire. "If this goes into effect, estimates are that 50 million households will sign up for DNC," says Tim Searcy, executive director of the ATA. "That wipes out 50% of our prospect list," adding that the industry may also see the loss of two million to three million jobs.
The ATA is suing the FTC on constitutional and jurisdictional grounds in federal court in Denver and hopes for a ruling by October, he says.
One silver lining is that the changes have been known well in advance. Many firms have been complying with the dizzying array of do-not-call rules that 32 states already have instituted.
Some industry leaders suggest there will be further consolidation in the business. The move to cheaper offshore call centers should continue, and surviving firms will upgrade their technology to better comply with the rules.
"The need to market cards will continue. This will require another level of sophistication," says George A. Kestler, chairman and chief executive of Americall Group Inc. in Naperville, Ill.
The regulations have some card issuers rethinking their marketing and actually discussing their telemarketing plans publicly, a sign of the significance of these changes.
MBNA Corp. says in its 2002 annual report that it would use less telemarketing and possibly shift its acquisition efforts to the Internet. This comes despite the fact that the second-largest card issuer gathered about 34% of its new accounts in the U.S. last year through telemarketing. The new rules will increase costs and decrease efficiency in reaching prospects, according to MBNA.
A Bank of America spokesperson tells CCM in an e-mail it has dropped all outbound telemarketing and only contacts its cardholders at their request.
Despite the bad news, some telemarketers posted strong numbers in 2002. The top outbound telemarketing firm serving card issuers in 2002 was RMH Teleservices Inc. Newtown Square, Pa.-based RMH logged 10.5 million hours, more than doubling the 4.6 million it recorded in 2001. It was the second consecutive year RMH held the top position.
Coming in second was APAC Customer Services Inc., tallying 5.1 million hours, a 42% rise from its 3.6 million in 2001. Moving up nicely was West Corp. with 3.3 million hours, a jump of 120% from the 1.5 million it reported in 2001.
APAC was the top inbound firm, taking 36.6 million calls on behalf of issuer clients, tripling 2001's 12.2 million. West Corp. finished second with 33.7 million calls, down slightly from 2001 when it led the field with 34.4 million calls.
That good news is overshadowed by the FTC's amendments to its Telemarketing Sales Rule. The national do-not-call registry will allow consumers to register for free beginning in July on the Web or through an 800-number. A consumer's phone number is to remain on the registry for five years, unless she asks to be removed or her number changes.
In September, telemarketers and other calling businesses will have to use the registry to scrub their lists of the registered consumers. Going forward, telemarketers will have to clean their lists at least once every 90 days.
In the regulators' lingo, issuers and others that hire third-party telemarketers are called sellers. Under the FTC's plans, sellers will pay $29 per area code annually up to a maximum of $7,250 for the lists. In October, the FTC will begin enforcing the new amendments, with callers facing fines up to $11,000 per violation.
The FTC's amendments include several other changes that could cause problems. Telemarketers must transmit caller-ID information when calling, and the practice dubbed call abandonment must be stopped. Abandonment occurs when telemarketers call numerous prospects simultaneously and connect to the first that picks up the phone. The rest are abandoned.
There are some qualifications to the abandonment rule that will allow it to continue, but telemarketers must have technology in place to monitor the practice.
Also, there are some exceptions to the rules that give many card issuers breathing room. For one, the FTC's jurisdiction doesn't cover banks, credit unions and insurance businesses. But the third-party telemarketing companies that these industries hire are covered by the new rules.
Companies with an established business relationship with a registered consumer will still be able to contact that customer. Companies can also keep calling for 18 months after the consumer's last purchase, and any company that has received written permission to call from a registered consumer can pick up the phone.
There are indications the FCC will announce a do-not-call registry that supercedes the registries of both the FTC and the states. Additionally, the FCC's oversight includes the banking industry so new rules could directly affect issuers. The two regulators have been put on notice by Congress that they are to "maximize consistency" of their telemarketing rules.
During the comment period on the FCC's plan, several issuers wrote that a national list would be an improvement over the confusing patchwork of state laws and the soon-to-be FTC rules.
"A national list makes it more efficient, cost effective, and easier to do data processing," says Scott Strumello, an associate with Auriemma Consulting Group Inc., the Westbury, N.Y.-based marketing consultancy to many issuers.
Strumello says issuers are investigating whether they will continue to get good returns on their telemarketing investment.
Issuers will focus instead on growing returns from their current customer base rather than outbound acquisition campaigns, says Christopher Keenan, director of Wilmington, Del.-based card consultancy De Novo Corp. That means using your inbound customer-service contacts to build the relationship. Along with increased income, the hope is to reduce an attrition rate that can reach 30% over five years, he says.
The goal is a "warm handoff" where the telemarketer handles something like an account-balance question, then mentions another product to the customer, according to Keenan. "The rep begins the cross-sell, then sends the customer to an issuer employee to go into the details," he says.
And there will be an emphasis on spotting the customer most likely to generate sales, says Greg Bovee, vice president of new technologies at Deerfield, Ill.-based APAC.
"Not all customers are equal," says Bovee. "We find the most-likely buyer versus the least-likely. That helps with cost cutting and makes us more efficient."
As always, third-party firms are offering technology improvements to keep issuers interested. For example, Bill Rieke of Cincinnati-based Convergys Corp. says Convergys' advanced speech recognition (ASR) systems improve on widely used touch-tone interactive voice recognition (IVR) systems. With ASR, callers are prompted to answer questions verbally, a method that customers prefer because they control the flow of the call, says Rieke, director of product and industry marketing.
"The call-completion rate goes to 85% compared with 50% for IVR," he says. Convergys reported 15.1 million inbound calls and 1.3 million outbound hours for issuers last year.
Some experts are predict issuers will increase direct-mail campaigns. An inexpensive Web technology that builds on mail is a one-shot, online application form with its own Web address that is listed in the acquisition letter.
Issuers can get a quick read on how well a mail campaign is going by monitoring the online applications, says Brandon Freed, executive vice president of Chicago-based Douglas-Danielle.
Another trend that should continue is the outsourcing of call centers to India and other countries. This summer Convergys will open two centers in the Philippines with a total of 880 seats, joining two India-based centers with 3,000 seats. Rieke says that using an offshore calling center can cut staff costs by 30% to 45% and the cost of a telemarketing campaign by 5% to 15%.
The new regulations should make it clear to telemarketers that some people just don't want to hear their sales pitch. Savvy issuers must use technology to both find the right consumers, and contact them with the right approach, says Becky Lasswell, vice president of Analytic Innovations LLC, a marketing firm with several card-issuing clients.
"It's not only who you reach but how," says Lasswell. "Why bother people that don't want to be bothered?"
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