Telemarketing

Related Terms: Advertising Strategy; Marketing

Telemarketing is the process of using the telephone to generate leads, make sales, or gather marketing information. Telemarketing can be a particularly valuable tool for small businesses, in that it saves time and money as compared to personal selling, but offers many of the same benefits in terms of direct contact with customers. In fact, experts have estimated that closing a sale through telemarketing usually costs less than one-fifth of what it would cost to send a salesperson to make a sale in person. Though telemarketing is more expensive than direct mail, it tends to be more efficient in closing sales and thus provides a greater yield on the marketing dollar.

Telemarketing is especially useful when the customers for a small business's products or services are located in hard-to-reach places, or when many prospects must be contacted in order to find one interested in making a purchase. Although some small businesses operate exclusively by telephone, telemarketing is most often used as part of an overall marketing program to tie together advertising and personal selling efforts. For example, a company might send introductory information through the mail, then follow-up with a telemarketing call to assess the prospect's interest, and finally send a salesperson to visit.

Telemarketing can be either inbound or outbound in scope. Inbound telemarketing consists of handling incoming telephone calls—often generated by broadcast advertising, direct mail, or catalogs—and taking orders for a wide range of products. Representatives working in this type of telemarketing program normally do not need as much training as outbound reps because the customer already has shown an interest by calling in.

Outbound telemarketing can be aimed directly at the end consumer—for example, a home repair business may call people in its community to search for prospects—or can be part of a business-to-business marketing program. Representatives working on this side of the industry generally require more training and product knowledge, as more actual selling is involved than with inbound operations.

Major applications of business-to-business telemarketing include selling to existing accounts, outbound new account development, inbound order processing and inquiry handling, customer service, and supporting the existing field sales force. As the costs of field sales continue to escalate, businesses are using telemarketing as a way to reduce the cost of selling and give more attention to marginal accounts. Telemarketing programs can be either handled in-house by a company or farmed out to service bureaus. Operations range in size from a one-person in-house staff member at a small business to a major corporation or service center that may have as many as 1,000 telephone stations.

One of the advantages telemarketing has over other direct marketing methods is that it involves human interaction. Used correctly and by professionals, the telephone is a very cost-efficient, flexible and statistically accountable medium. At the same time, the telephone is still very intimate and personal, one person speaking with another.

Although telemarketing has been the center of some controversies—ranging from scams run over the phone to a number of legal issues that have been the center of debate at both the state and national levels—the industry continues to grow. In fact, the American Telemarketing Association found that spending on telemarketing activities increased from $1 billion to $60 billion between 1981 and 1991. By the mid-1990s, telemarketing accounted for more than $450 billion in annual sales. This increased use of telemarketing resulted in an unexpectedly strong backlash and for telemarketing firms the landscape in the early 21st century has changed dramatically.

FEDERAL DO-NOT-CALL LIST

In 2003, the popular uproar against telemarketing calls grew so loud that legislators in Washington took notice and took action. Following the lead of several states, federal legislators passed a law in 2003 that made it possible for people to register to have their home phones included on a do-not-call list and by so doing "opt-out of telemarketing." The law is the Do-Not-Call Registry Act of 2003. This act authorized the Federal Trade Commission (FTC), under sections of the Telemarketing and Consumer Fraud and Abuse Prevention Act, to implement and enforce a do-not-call registry to be established and run by the commission. The registry is nationwide in scope, applies to all telemarketers (with the exception of certain non-profit organizations), and covers both interstate and intrastate telemarketing calls. Commercial telemarketers are not allowed to call a number that is on the registry, subject to certain exceptions.

Organizations not covered by the law include nonprofit organizations, political campaigns and companies that have an existing business relationship with a call recipient. The goal is to eliminate cold calls for all those who chose to "opt-out" of telemarketing, it is not designed to keep companies from calling their customers for repeat sales. As of early 2005, the FTC reported having close to 65 million numbers in the do-not-call registry with an additional 150,000 added monthly. Under the law, telemarketers are required to purchase a copy of the list for the area codes they wish to call and then remove from their call lists all numbers that appear on the FTC list. Those companies that fail to comply with this law face the imposition of heavy fines. In late 2005, the largest fine to-date was imposed on the satellite television company, DirectTV. The fine charged DirectTV was $5.3 million. The underlying complaint named as defendants DirectTV, five firms that telemarketed on its behalf and six principals of those telemarketing firms. "This multimillion-dollar penalty drives home a simple point: Sellers are on the hook for calls placed on their behalf," said FTC chairman Deborah Platt Majoras in an article in the magazine Brandweek.

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