By July 1, more than 15 million people had added their names and phone numbers to the Federal Trade Commission’s national do-not-call list. The free service blocks telemarketers from calling registered numbers; if they call anyway, they will be faced with a maximum fine of $11,000 for each violation.
The legislation was celebrated by consumers. When the list opened June 27, as many as 158 phone numbers per second flooded the FTC’s system. The list is expected to reach 60 million numbers in the first year, which leaves the remaining 100-plus million registered U.S. phone numbers potentially under siege.
The legislation has some loopholes. Calls from charities, nonprofits and political organizations are exempt. Calls from banks, telephone companies, insurance providers and airline companies are also not affected by the legislation due to the FTC’s limited jurisdiction, but that loophole quickly disappeared when the Federal Communications Commission unanimously endorsed the do-not-call list the day before it launched.
No one has watched this legislation with greater interest than Gary Taylor, president and CEO of Akron-based telemarketing firm InfoCision Management Corp. While he supports the idea of a national do-not-call list, he says the FTC’s rules behind the list are unfair to his industry and could devastate his business.
“Our philosophy has always been, we don’t want to call people who don’t want to be called,” Taylor says. “We don’t want to waste their time or our time.”
Regulation
Taylor’s firm, which he started alone in 1982, has grown into the eighth largest outbound teleservice”company in the country, with 3,000 employees located in 21 call centers in Ohio, West Virginia and Pennsylvania. he began with one client and $1 million in sales and has grown his company to dozens of clients across several industries, racking up $130 million in sales.
Taylor says InfoCision has always maintained its own do-not-call list and added its list to those of the two dozen states which have their own do-not-call lists. But the FTC’s Telemarketing Sales Rule, which includes the national do-not-call registry, goes too far, he says.
“They didn’t pay attention to the input the industry gave,” claims Taylor, who sent his senior vice president of corporate affairs, Steve Brubaker, to Washington, D.C., to lobby for changes to the Telemarketing Sales Rule legislation. “Everyone I’ve talked to doesn’t know how they’re going to comply with it.”
Taylor’s main concern is the mandate for “abandon rates” included in the new rules. An abandon or hang-up happens when a telemarketer has more people connected to phone lines than it has operators to serve them. If that happens, the person on the phone usually gets a dial tone when they answer.
In the new rules, the FTC requires all telemarketing firms to reduce abandon rates to a 3 percent maximum per telephone campaign. That means only 3 percent of the calls per campaign can be hang-ups. InfoCision performs about 130 to 150 campaigns per day, and has about a 5 percent abandon rate per day.
“The (Direct Marketing Association) standard is 5 percent per day,” Taylor says. “It took us quite a while to comply with that because we had to improve our productivity by 18 percent. We had to get more efficient to meet a very difficult, stringent standard. Three percent is an impossible standard in and of itself on a daily basis, let alone per campaign.”
One way to circumvent the 3 percent rule is to play a recorded message instead of hanging up, which states the name of the company, the reason for the call and an 800 number.
“If anything, that will create more criticism,” Taylor says. “It’s one thing to pick up the phone and have nobody there, but it would be far more annoying for me to call you and say, ‘I’m calling for Bank One and our 800 number is this.’ People are not going to be very responsive to that kind of intrusiveness.”
The FTC disagrees. In the Telemarketing Sales Rule’s Statement of Basis and Purpose, the FTC claims that abandon calls ” … frighten consumers, invade their privacy and cause some of them to struggle to answer the phone, only to be hung up on.”
“The whole dialer issue was the subject of a lot of discussion in forums,” says FTC staff attorney Katie Harrington-McBride. “The 3 percent amount was based on comments from all sides.”
Taylor’s other main gripe with the legislation is that telemarketers will not be permitted to call customers unless they have done business with the company in the last 18 months.
“That’s ridiculous,” Taylor says. “If you buy a car from Ford today, I can’t call you up in three years or four years when your warranty expires — even though you own a Ford product, and spent thousands of dollars for it — and offer you a Ford warranty. It would be illegal because you haven’t done business with me in the last [18] months.”
The FTC claims that calls placed two years after a transaction would conflict with a consumer’s expectations. The legislation reads, ” … [A] company should be able to claim the exemption only if there has been a relatively recent transaction between the customer and the seller … The Commission believes that 18 months is an appropriate time because it strikes a balance between industry’s needs and consumers’ privacy rights and reasonable expectations about who may call them and when.”
InfoCision, however, is somewhat protected from the new Telemarketing Sales Rule. About 80 percent of its business comes from charitable and nonprofit companies like the Salvation Army, the American Heart Association, the American Cancer Society, the American Red Cross, UNICEF and several Christian ministry organizations. All of those are exempt from the new regulations.
Taylor predicts the remaining 20 percent of InfoCision’s business, its commercial division, will suffer.
“Our big growth opportunity is the commercial area,” Taylor says. “That’s why this FTC legislation is very concerning to us. Our growth opportunities in the nonprofit marketplace are a lot more limited than they are in the commercial marketplace.”
Fund-raiser
Taylor started his career as a director of marketing for evangelist Rex Humbard’s television ministry. He left Humbard in 1982 to start his own marketing consulting company, only to find himself traveling all over the world to clients’ offices, which quickly grew tiresome.
“I focused on the telemarketing fairly early on because it was a way you could earn money without having to travel every single time,” Taylor says. “We started off strictly raising money for Christian organizations because of my background working with Rex Humbard and I knew most of the television ministry marketing people.”
Taylor’s three-year plan from 1982 to 1985 was to become the leading fund-raiser for Christian organizations to establish his credibility, and then expand to other nonprofit organizations. The plan almost never made it past year one.
“There’s nothing quite so motivating to find new business as when you have just enough in the checkbook to cover the next house payment,” says Taylor, who can now laugh about his start-up days. “I’ve found the key to breaking any new market is having two credible clients.”
The two-client rule proved out for InfoCision. From there, Taylor was able to add staff and expand his business beyond Christian organizations and nonprofits. InfoCision’s largest commercial client is Bank One and its credit card subsidiary FirstUSA. Internet service providers Earthlink and Microsoft MSN are also big names on InfoCision’s commercial roster.
Eventually, InfoCision grew to the size where Taylor had to delegate more responsibility to his staff and trust their judgment on more decisions. It was a gradual process, he says, but crucial to the development of the company.
“I used to have a very autocratic style because I knew everything that was going on and I felt like I knew more about it than anybody else,” Taylor says. “You have to defer to the people’s opinions that are closer to the situation than you. It’s something I’ve done pretty successfully.”
Taylor’s role is now often one of devil’s advocate.
“My job has become trying to poke holes in their thinking,” Taylor says. “If I have a gut impression — and my gut instincts are pretty good — I will push and I will question and I will make the person explain why they came to this conclusion and try and poke holes in their argument.
“If I can’t poke holes in their argument, then I know it’s the right decision and I go with it.”
Bad reputation
Taylor bristles at the overriding public perception of his industry as a fly-by-night, boiler room operation looking to rip people off.
“It makes me very angry,” he says. “Every telemarketing scam you ever see on TV is how our industry is portrayed.”
Taylor continues, “The hilarious thing is we enact all these laws when 99 plus percent of problems come from illegitimate operators who aren’t complying with any law whatsoever.”
That’s why he has carefully branded his company as the antithesis of the stereotypical telemarketing firm.
The company’s stately Akron headquarters, which opened in 1988, could pass for the offices of a large, upscale accounting or law firm, with a glass and brick exterior, plush green carpeting, rich hardwood desks, leather furniture and carefully placed ferns, flowers and potted plants. The main office’s 340 employees dress only in business attire.
“We’re not into wasting money,” Taylor says. “But we’ve found by having a nice environment to work in, people don’t mind working the long hours as much and pour their hearts into it and feel that it’s a sound, real company.”
Taylor is working with the University of Akron to create an institute for direct response marketing, a degreed program modeled after the university’s Fisher Institute for Professional Selling, which trains students for a career in sales management.
“The idea is to — not to just provide a degree program — but to educate students that it is a legitimate and worthwhile career opportunity and to elevate the image of telemarketing,” Taylor says.
Changes
It’s not uncommon for CEOs to downplay a crisis facing their industry or company. Former WorldCom chief John Sidgmore spun his company’s largest-ever Chapter 11 bankruptcy filing by saying, “We still haven’t lost any substantial customers,” adding that the filing would allow the company “a better chance to get our message across.”
Less than four months later, Sidgmore resigned.
Taylor isn’t quite so chipper about the looming Telemarketing Sales Rule, which the FTC and FCC will begin to enforce Oct. 1.
“It’s going to be a severe challenge,” he says. “No, I am not confident. We have got to dramatically expand our inbound opportunities because I think this will cripple the outbound. For commercial applications, it could destroy the industry, literally. It’s that onerous.”
He is focusing on landing more inbound telephone services as the way to expand InfoCision’s commercial growth. Two new contracts, the U.S. Golf Association and St. Jude’s Hospital, are primarily for inbound work, and InfoCision handles several inbound projects for Alltel Corp.
“Customer care for Fortune 1000 companies is what we really want to focus on,” Taylor says. “We would handle their inbound questions. Ideally, we would like to work with clients where we’re online with their database and are their partner long-term.”
It’s clear he isn’t wasting any time to save his company from losing 20 percent of its business. After all, his may be one of the few remaining outbound telemarketing companies by this time next year.
“This industry is responsible for almost $700 billion in sales,” says Taylor, quoting statistics from the Direct Marketing Association. “The outbound industry alone employs 6 million people and accounts for more of the Gross Domestic Product at 7 percent than the restaurant industry at 6 percent. If somebody instituted legislation that put an end to 50 percent of restaurants, don’t you think there would be some backlash to that law?” How to reach: InfoCision Management Corp., (330) 668-1400 or www.infocision.com
