Telemarketing: Overview

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As early as the 1900s the telephone was being used as a sales tool. Industries such as steel and financial services rang current and potential customers to secure leads. However, it was in the late 1970s that telephone technology became sophisticated enough for centralized call centres to make sense economically.

Telemarketing as it is now known began in the early 1980s. In 1981, total business expenditures for telemarketing exceeded dollars spent on direct-mail advertising for the first time; by 1987, spending on telemarketing was more than double that for direct mail (US$41.2 billion vs. US$17.2 billion), according to the American Telemarketing Association.

Growth trends

In the 1980s the ever-higher cost of face-to-face sales calls made telemarketing more attractive, especially in a B2B environment. Advances in telecommunications, computers and database management, which decreased costs and increased efficiency saw telemarketing take hold. Consumer acceptance of 1800 numbers (reverse charges), which led to a rise in inbound telemarketing and a growing body of successful inbound and outbound telemarketing campaigns led more companies towards using telemarketing techniques.

By 1985, there were reportedly 50 telemarketing service agencies in the US. Some companies used these third-party calling centres while others set up in-house operations. A decade later, the number of agencies had grown to 900, with 60% having at least 50 employees. Total agency employment in the US was 4.5 million. The number of telemarketing operations, in-house and outsourced, in the US, rose from less than 80,000 in the early 1980s to 565,000 in 1995.

By the mid-1990s, US businesses, including financial services, technology sectors, automotive industry, insurance and telephone companies, spent nearly US$90 billion a year on telephone marketing. The ATA estimated that the telephone generated more than US$280 billion in sales of goods and services to 81 million Americans.

By the beginning of the 21st century, virtually all consumer marketers had set up 1800 numbers for inbound telemarketing purposes. The toll-free service allowed consumers access to businesses to ask questions, which provided the marketer additional sales opportunities.

Meanwhile, outbound telemarketing remained strong for B2B and B2C. As of 2000, there were approximately 69,500 in-house and third-party call centres in the US, according to Datamonitor, an international market research company. Industry employment was estimated at 5.6 million and sales of goods via telephone marketing at approximately US$585 billion.

More than 1 million calls per hour

In 2000, the top 10 telemarketing companies had the combined capacity to make more than 1 million calls per hour. New technologies such as predictive dialling, an automated system that allows sales representatives to spend their time only on calls that are answered rather than on dialling and waiting for the phone to ring, and computer-telephone integration, which allows sales representatives to access information about the customers with whom they are speaking, increased capacity.

However, the industry has not been able to shake the disreputable image that has persisted since its earliest days. In the late 1990s, the US Department of Justice estimated that telemarketing fraud cost consumers between US$40 billion and US$50 billion annually, or about 10% of legitimate telesales at the time. As of 2000, annual fraud costs had increased to an estimated US$60 billion.

Aside from outright fraud, telemarketing also endures a bad reputation because many people simply do not like to have their lives interrupted by sales calls. A 2000 Shopper Report survey found that 93% of US households surveyed wanted to stop receiving telemarketing calls entirely.

 

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