Should all cold calls be banned?

The answer may not be as obvious as you think.

Sometime back, a scribe who covers marketing and advertising for a leading publication, asked me how the tele-marketers get her number and call her on her mobile, often at hours more uncivil than appropriate.

Before answering her question, I asked, “Do they address you by your name?” She didn’t exactly remember but said, more often than not, they didn’t.

Next I asked, “Do they offer you something that you are actually looking for?” “Never,” pat came her answer. But then she hesitated, “Once in a while they do. Recently, this guy called me and asked about home loans. How did he know I was planning to buy a house and was exploring a home loan?” She looked concerned about invasion of her privacy.

A debate has ensued on the subject, thanks to PIL filed in the Supreme Court. The SC’s response has heightened it, making a lot of practitioners nervous.

As both a direct marketing practitioner and an aggrieved consumer, I will attempt to provide a view that’s pretty close to what actually takes place at the back-end?

There are no databases to begin with!

Yes, in at least 80% cases, tele-marketers making unsolicited (cold) calls don’t have any database at all. They know absolutely nothing about you, not even your name!

Surprised?

Actually, the way these calls are conducted is pretty uncomplicated – the tele-marketers list a series of mobile numbers, and keep calling these numbers one after the other. For example, an executive is ordered to call a list of 1,000 numbers beginning with 98101. So she calls 98101–00000, then 98101–00001 and so on till she reaches 98101–01000. Her co-workers dial similar lists.

This explains why you’ll rarely find them addressing you by your name, leave alone having any idea if you’re in the market for what they’re trying to sell, be it personal loans, or credit cards, or phone connections.

Question: Isn’t this a rather expensive, time-consuming and irritating way of making contact with prospects with whom you intend having a long-term business relationship?

The answer is simpler than you might imagine.

All mobile phone users, especially those using services of private GSM operators, belong to the most affluent segment in the society – after all, anyone spending a minimum of Rs 300-400 month must be earning at least five times more than an average Indian. Calling each one of them is like reaching out to the readers of premium magazines. Even if a miniscule number say ‘Yes’ they more than compensate for the time and money wasted on the ones who say ‘No’, more so when the products sold via cold calls often have very handsome margins (personal loans, credit cards).

The second reason is more powerful – by calling you on your mobile number, the tele-marketer actually gets to make her pitch to you PERSONALLY; she doesn’t have to wade through filters like secretaries and receptionists.

Most cold calls are over in less than 15 seconds, and the tele-marketer is free to dial the next mobile number! This means, the tele-marketer can make three to four times the number of SUCCESSFUL contacts than she could if she were calling landline numbers. Their benefit is obvious: overall cost of contact drops dramatically as each tele-marketer becomes thrice as productive!

The entire approach is not too different from door-to-door selling: the salesman knocks your door, rattles off his pitch in a few seconds the moment you open the door; if you’re interested, he continues, otherwise he goes to knock the next door.

This sort of ‘interruptive advertising’ is completely against the principles of direct marketing, where you use the information about prospects (database) to market your products and services. For instance, if you were to receive a tele-call (even at an odd hour), where tele-marketer offers you a tax saving insurance plan when you are actually scouting for one, will you be irritated by it? No. If you are busy, you’ll ask the tele-marketer to call later. If you aren’t, you’ll be all ears.

By using this ‘interruptive advertising’ approach over what is perhaps the most personal of all media – a person’s mobile phone – tele-marketers run an enormous risk. Sooner or later, prospects are bound to protest, threatening to have all such calls banned.

Why then are tele-marketers taking this sort of risk?

Before we answer, let’s first find out who are the heaviest users of telemarketing?

The heaviest users are certainly banks, who sell a basket of products – credit cards, personal loans, car finance, home loans, opening of a bank account and now insurance. The second most frequent user, a distant second as a group, are insurance and telecom service providers. Then there are the rest – all kinds of brands from pizzas to hotels to magazine subscriptions to donations – but these are few and far between. Between the three groups mentioned above, banks probably account for 90% of the calls. Henceforth, for sake of convenience, I’ll address ‘tele-marketers’ as ‘banks’ and vice versa.

Let me tell you something that’ll probably startle you: Banks don’t spend any money on outbound telemarketing! It’s their Direct Selling Agents (or DSAs) who do telemarketing, entirely at their own expense! As compensation to cover their cost, they receive from their principals, i.e. banks, ‘result-linked-compensation’, traditionally referred as ‘commission’.

It’s pretty ironical: banks need long-term customers to grow both in stature and profits, and the DSAs need immediate sales to survive. So the banks let the DSAs irritate their prospects to earn their commission, simply because banks don’t pay for the irritation, nor do they directly make any calls themselves.  Banks win when their DSAs win customers or business. DSAs lose if they didn’t succeed. Great situation. And who suffers? Poor consumers, who made the mistake of getting themselves mobile phone connections!

Let’s delve a bit on how telemarketing has grown in our country.

In the beginning there was nothing wrong with the above model. DSAs used telemarketing to ‘prospects’, but you weren’t really irritated. Because calls were far fewer – perhaps one or two a week; and they came over your landline phones – your office receptionist or secretary or colleague often filtered them, or your spouse or child did at home; besides you got time to ask who was calling so that you could decide whether or not to spend any more time on a call.

All these were certainly major problems for DSAs! They couldn’t go berserk with the number of calls made because each call took some time  – 3 to 4 minutes – yet their success rate in speaking to the ‘prospect’ (you or me) was poor. Telemarketing was prohibitively risky. If it was used at all, it was only after a good deal of deliberation.

Then two things happened which changed the situation: first, the proliferation of mobile phone – we suddenly have more mobile users than land line users; and second, no charge on incoming calls of mobile phones.

This gave the telemarketers a new opening: Call the mobile.

The problem was ‘database’. They grappled with it for a while, searching the right prospects. But this proved too expensive and time-consuming. Mobile numbers are not listed, most people use pre-paid connections, and, in the early days, we shared our mobile numbers with only a few select people.

DSAs cracked the database problem pretty quickly. Or rather, they decided to completely bypass it, by simply calling mobile numbers in series.

Now imagine the number of calls you’re likely to receive every week with every bank having up to 10 DSAs for each of their products in each major city. Now it’s easy to explain way you get so many calls from the same bank, trying to sell you a product that you have repeatedly and unambiguously rejected!

This has been going for on nearly two years now, with the frequency of calls increasing steadily.

Without regulation, everything spreads like cancer. That’s exactly what’s happened to telemarketing. We’re called at odd hours, we’re called during meeting and private dinners, and, what’s worst, we’re called when we’re out of town, and have to pay roaming charges to listen to irreverent product pitches. No wonder mobile users are livid, especially if they’re using roaming on foreign trips.

On the other hand, the poor tele-marketer has no way of knowing if you’re in town or not.

Everyone agrees that telemarketing has become a nuisance. But who’s to blame? The DSAs? Or the banks?

My finger points at the banks. Let me explain.

Competition among banks in intense. Retail banking has grown manifold over past few years, thanks largely to low interest rates resulting from low inflation, and lack of investments in manufacturing sector. Flush with surplus funds, banks are going after retail consumers like there’s no tomorrow. They’re chasing unrealistic targets in every product they offer. And to meet those unrealistic targets, they’ve appointed an excessive number of DSAs in every city.

In the dog-eat-dog overpopulated world of DSAs, individual operators have little choice but to somehow ‘get the numbers’. Left with little or no database support, and without any regulation or guidelines to check them, DSAs have turn to indiscriminate telemarketing.

It’s helped them meet targets, so they’ve started depending more and more on it, causing so much irritation that we now have a PIL challenging their right to call us.

The saddest part is that DSAs have, as a rule, done very badly. I’m yet to see even one DSA rake in serious money from telemarketing; most go belly up in no time.

A drop in the quality of their tele-calling and sales staff has further compounded their problems, with most of the better ones going to work for the relatively high-paying BPO sector. As a result, their costs are going up, even as banks keep mounting the pressure to ‘get the numbers’.

Till now, we’ve discussed why we receive calls on our mobiles where we’re NOT addressed by our names. But what about the calls we get on our landline and mobiles where we are addressed by our names? The recently PIL specifically mentions that telecom companies have ‘handed over’ our names and phone numbers to banks (and others) who use these names to make unsolicited telemarketing calls to us.

How do we tele-marketers get our names?

There are two sources from where they obtain our contact details. The first is the banks’ customer list, which they hand over to their DSAs. The second comes from the contest and feedback forms filled by us from time to time.

First, the customer list. This is the most desirable form of telemarketing and should have worked well, but for a major glitch: The same list is handed over to all DSAs. What’s more, the data that’s doesn’t follow even basic list hygiene, not to mention data mining. While the DSA may know your name and phone number, and sometimes even your address, they have no idea which bank products you already have! I keep receiving calls from the same bank (actually different DSAs of the bank) offering a product that I’m using!

Naturally, I find this ridiculous and awfully irritating. Also, on each occasion I receive such a call, the bank’s image takes a nosedive in my eyes. Why can’t they practice the basic list hygiene? Why don’t they spend a little time at the back-end in mapping my existing relationships and potential needs before getting in touch with me? Beats me. But I can hazard a guess – such an exercise will cost the bank some money; simply handing over the data costs them nothing, as they don’t spend anything on calling you up.

That most DSAs, unable to support such monumental inefficiency, have to shut shop is hardly the banks’ worry… as long as there are enough replacements around.

Banks are also digging their own graves too, by causing their brand names incalculable harm (remember, they are also spending crores in mass media to build image). I doubt if I’ll ever value any loyalty initiative from a bank that keeps bothering me several times every month to buy a product I already have! In other words, ill targeted telemarketing is a sure-fire recipe for never building long-term, lasting relationship with customers.

The worst is that legally you can’t label these calls as infringements into your privacy (not even in USA, despite their new law against unsolicited tele-calls). So, such calls will never stop, and never stop irritating us, unless banks take a long-term view.

As I said earlier, the second source of telemarketing calls where the caller has our contact details originates from us, through contests, lucky draws and feedback forms. Much of this data eventually reach DSAs hungry for lists of prospects.

To prevent such calls, should we stop participating in contests or offering feedback?

Certainly not!

Government can step in here and bind such sponsors to seek express permission from respondents before sharing their details or calling them on their own. The Government could make it mandatory for such forms to contain in big and bold (not small print, as is often the case) the sponsor’s request for using the respondents’ data for making telemarketing calls. Respondent should have the option of turning down this request. Such legislation will go a long way in protecting the privacy of consumers who don’t want unsolicited calls.

The PIL however mentions that telecom companies share such data. Nothing can be further from truth. In my past 4 years of working with telecom companies and DSAs, I’ve never come across a single instance of a telecom company allowing anyone other than its own DSAs to use its customer data.

But there may times when such data has accidentally leaked to DSAs who don’t sell telecom products. (By same count, data of banks’ customers may land up with DSAs selling non-banking products.). I’d advice telecom companies to practice far greater and far more stringent regulation in controlling their customer database, to prevent it from reaching anyone other than own DSAs.

Finally, the government can’t escape its share of the responsibility. It’s the only party that gets unadulterated gain from the state of things. By not laying down any guidelines, it has let telemarketing explode. So that it may earn 10.2% service tax on each call, and another 10.2% on every bill that tele-agents raise on their clients. The government is making easy money by simply abdicating responsibility and letting telemarketers invade our privacy!

In a nutshell then, the banks are the biggest culprits, with the government as their all-knowing accomplice.

Two questions remain:

1.      Is all telemarketing bad? Are there no benefits of taking a telemarketer’s call?

2.      How can we regulate telemarketing to get it rid of its present ills?

Benefits of telemarketing

Take a look at these possibilities:

My bank calls to warn me that one of cheques will be dishonoured because the signature doesn’t match. Would I want to prevent that call?

I get a call from bank selling car finance, reminding me that I mentioned in a recent communication to Ford (contest form) that I’d like to test drive the new Ford Fusion. Is that unpardonable intrusion?

A telecom company calls to say that their data shows that I travel to Mumbai at least three times every month, and if I were to shift to their telecom service in Delhi, they’ll waive my entire roaming charges in Mumbai. Would I rather the call be blocked?

The above cases are of tele calls I’ll actually welcome. Why? Because they are all relevant to me.

So the key to positive telemarketing is relevance.

This brings me to the next question, on regulation of unsolicited telemarketing calls.

I believe there are two ways to do it: first is strict, self-regulation by banks and other brands that use telemarketing to acquire customers; the second is a couple of positive legislations by the central government.

Self-regulation

1.      The banks must prohibit all their DSAs and their own tele-callers from making any call unless the person being called is a customer of their principal or has explicitly expressed the intent to receive such calls. I believe a clause to this effect in their agreement with DSAs will be adhered to.

2.      The banks must ask their customers about the products they would like to explore in future, and pass on the data of interested customers to their DSAs. Banks can do that in two ways – by doing a periodic survey along with their monthly/quarterly statements, and by offering their customers an SMS or an IVRS based service where the customer can register for a product he or she is looking for. Such services or numbers can be advertised in their mass media or through direct mail. If all banks offered such a service, I’ll probably register myself with three or four banks whenever I’m in the market for a particular financial product.

3.      Banks continuously study their customers’ usage data. This will help them to identify ‘hot’ prospects, whose details they can then pass on to their DSAs. In other words, they can practice list hygiene, and at an advanced level, data-mining.

4.      In all of above, the purpose of self-regulation will be defeated if identical lists are passed onto different DSAs. It’s critical that banks pass on such lists in ‘batches’, never sending the same list to more than one DSA. This will automatically reduce futile calls dramatically.

5.      Whenever a DSA makes a call to anyone who is not a customer, he must announce to the customer the source from where his name was procured and in what context is he or she is being called? I believe this will instil a great deal on confidence among the prospects receiving such calls.

What the government needs to do

1.      Government must make it mandatory for sponsors to disclose on the contest and feedback forms that the information given by the respondents will be used for telemarketing only if the respondent grants them the permission. Such declarations must be explicitly stated and clearly visible. Any violation to this effect must be punishable.

2.      Similarly, any call made to a person without knowing the receivers’ name must attract punitive action.

3.      The Government can ask all users of telemarketing (including DSAs) to register with appropriate authority where they can make a declaration to comply with all the above regulations.

To sum up, let me reiterate two things. Carpet-bombing consumers with irrelevant cold calls at inappropriate hours isn’t just invading privacy. It’s a criminally wasteful way to market, guaranteed ruins your agents on the short-run and your own reputation before long. Regulation is one part of the answer, relevance is the other.