Telemarketing was born in the United States exactly 30 years ago this summer. It started with AT&T's introduction of special out-bound telephone lines in 1961, and grew slowly until the mid-1970's when demand suddenly exploded for in-bound lines used in toll-free dialling.
By 1982, US expenditures for telemarketing services topped $12.9 billion, surpassing direct mail expenditures for the first time ever. Of that telemarketing total, some $5.9 billion came from toll-free calls.
Today, more than 500 million in-bound and out-bound calls are placed in the United States each year. These calls generate as much as $150 billion in annual sales revenues.
What's more, the American Telemarketing Association estimates that over 140,000 companies now use telemarketing in the United States, and U.S. telemarketing industry employs nearly 4 million people.
What about Japan?
In so many segments of business, Japan has followed and expanded upon the U.S. model with outstanding success. This being the case, Japan's telemarketing industry seems poised for an era of massive growth.
One clear sign of this is the existence of the Japan Telemarketing Association (JTA), formed in 1988 to provide a forum for the industry's pioneers. JTA's most recent figures indicate that the Japanese telemarketing industry is still only about 5-10% as large as America's. But Japan's telecommunications capabilities now lag only a few years behind, and the hardware/software is in place for a revolution in telephone usage.
For example, the "0120 Free Dial Service" offered nationwide by Nippon Telephone & Telegraph (NTT) since 1987 is in many ways equivalent to the "toll-free 800 system" originally developed by AT&T in the United States. The subscriber lines are dedicated for in-bound calls only, and the dialler pays no charge when using this service.
The only major difference has been the tariffs structure. Until recently, Japan's Free-Dial subscribers had to pay full collect-call rates for long-distance as well as local calls received, whereas the American toll-free system has always offered a sliding scales of discounts based on call volume, duration, and the time of day/week in which calls are received.
But thanks largely to a five-year lobbying effort by the American Chamber of Commerce in Japan, assisted by the JTA and the Japan Chamber of Commerce and Industry, NTT introduced a series of volume-related discounts of up to 20% off standard charges for free-dial calls in July 1990. Subscribers now enjoy some price relief on monthly phone charges, although it is still too early to tell whether the savings are sufficient incentive to ignite an explosion in free-dial usage.
Another telemarketing technology which could spur telemarketing's rise here is NTT's "Dial Q-2" service. Like "900 numbers" in the United States, "0990 numbers" in Japan entitle subscribers to revenues for each in-bound call they receive. Call charges are variable and can be increased by shortening the basic unit interval.
For example, ´10 currently pays for a three-minute interval in Japan at standard local call rates. But with Dial Q-2, this interval can be set at as little as 6 seconds so that the caller pays as much as ´100 per minute. A percentage of NTT revenues revert to the subscriber.
To date, it seems that most of the subscribing companies have been offering recorded messages of a sexual nature to induce in-bound calls, but more "legitimate" operations have begun to appear on the scene, such as a sports news hotline, a weekly astrology guide, and financial information services, to name but a few.
In the United States, 900 numbers also had to overcome an initial poor image, but today they are the fastest growing aspect of American telemarketing, used for surveys, sweepstakes, coupon redemption, catalog order-taking, legal services, fund-raising, and many, many innovative marketing applications. Japan can expect similar services to evolve as companies become more familiar with the technology.
Getting Business
The flip-side of the telemarketing coin is out-bound calls, an area in which Japan is progressing rapidly. The majority of the action is in the area of business-to-business lead generation, which closely parallels the American experience.
Each year, McGraw-Hill Research in the U.S. surveys businesses to determine the cost of an average sales call. By the end of the 1980s, that cost had risen to well over $250, or more than ´32,000 at current rates of exchange. In Japan, the costs are assumed to be even higher.
In simple terms, this means it is no longer profitable to send salespeople to serve small accounts. And it is absolutely necessary to achieve a high percentage of closings among the visits a salesperson makes.
Out-bound telemarketing has become absolutely critical in the United States to identify good leads for salespeople, and to provide services for less profitable accounts. As Japanese companies find it more and more necessary to tighten their belts and achieve greater efficiencies, telemarketing will be the answer they turn to.
By and large, it is easier to reach prospects by phone in Japan than it is in the United States. There are fewer "gate-keepers" whose job it is to screen out sales calls. Japanese businesspeople see it as part of their job to gather product/service information, and many of them even welcome such "cold" calls.
Tokyo-based direct marketing agency McCann Direct has conducted lead-generating campaigns for numerous clients in Japan over the past six years, with excellent results. Contact ratios are extremely high, with out-bound telephone service representatives able to contact some 87% of prospects targeted, compared with contact ratios well below 50% in the United States.
In terms of appointment ratios, these also run high in Japan. It is not uncommon to gain sales entry to 15% of the contacts made. And depending on the sales staff, closing rates can also be very high.
What Japan still lacks is an out-bound telephone service similar to the U.S. WATS (Wide-Area Telephone Service) system, to reduce charges for companies who use the telephone extensively for out-bound calls. NTT has been studying AT&T's WATS system for over five years, and is being pressed now by JTA and other business organizations to introduce dedicated lines with reduced tariffs. Should this occur soon, business use of out-bound telemarketing for sales support can be expected to blossom virtually overnight.
Other Changes
Apart from rate reductions, Japan's telemarketing industry can expect to fuel its growth through the spread of cable television and the proliferation of credit cards. Product advertising with toll-free numbers and cashless payment systems became standard fare in America only when cable hook-ups increased and precise targeting of viewer groups became possible.
Despite frequent attempts to air TV-shopping commercials on broadcast television in Japan, advertising costs remain prohibitively high. The penetration of CATV in Japan will enable the lower costs per contact and greater length of message required by telemarketers. In fact, Japan's first two-minute commercial produced for CATV usage was aired just last November, so the beginning of telephone-television marketing efforts is only recently at hand.
Other indications of a bright future for Japan's telemarketers include: the growth of Japan's computerized list industry, thus enabling automated dialling operations; the launch of the country's first nationwide "brand preference" survey conducted exclusively by phone; greater educational opportunities for telemarketers organized by JTA, NTT, and independent telemarketing agencies; and technology transfers from the United States.
Indeed, America has much to gain from the growth of telemarketing in Japan. Apart from providing new-to-market companies with methods of reaching prospective customers, increased telemarketing will provide opportunities for the U.S. to sell its telecommunications hardware, software, and knowhow to Japanese businesses, who are ever eager to learn from the experience of the world's acknowledged leader in a given field.
Note: This article appeared in the June 1991 issue of the ACCJ Journal.