For example, an entire session could be devoted to the differences in language and culture, how those differences affect scripts, operator training, the length of calls, and sales ratios, etc.
I could also speak at length on technological differences. In fact, I understand that Mr. Michael L. Darland is in the next hall giving an hour-and-a-half talk on "Computerized Predictive Dialing" right now, so I must assume that those of you here have come to learn about something other than the latest hardware and software from America.
What I will discuss this morning is what I feel to be the critical difference between Japan and America's telemarketing industries, and that is the area of applications. By applications, I mean "how telemarketing is used in the course of business."
I will be discussing some very specific differences in the way telemarketing is employed in the two countries, and I will be describing a number of opportunities that Japan can take advantage of by learning from the most recent experience of America's telemarketing pioneers.
As a bit of background, let's first consider the vast difference in scale of the two telemarketing industries.
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. Comparable figures are not available for Japan, but my best guess is that the U.S. telemarketing industry is at least 10 to 20 times larger than Japan's.
The ATA figures that over 140,000 companies now use telemarketing in the United States. The American telemarketing industry employs nearly 4 million people. A high-volume telephone service agency in the United States will typically have between 50 and 500 telephone service representative positions. It will be highly automated and highly integrated, utilizing on-screen scripting and data capture techniques, auto dialing and real-time reporting. It is a truly paperless environment.
The evolution of American telemarketing to this stage did not happen as quickly as it might sometimes seem. That Japan's industry lags well behind in terms of overall volume and penetration of the market is a function of history.
Telemarketing in America will be 30 years old next year. It started with the introduction of AT&T out-bound WATS lines in 1961, growing very slowly until the mid-1970's when there was an explosion in in-bound toll-free calls. 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, or 45.7% came from in-bound toll-free calls.
Japan, by comparison, has only about 15 years of telemarketing experience, and the birth of the telemarketing industry here can really be linked to the start of the Japan Telemarketing Association just two years ago. Although telemarketing in Japan is advancing rapidly, it is still in its infancy by US standards.
Let's concentrate for a bit on the in-bound aspect of telemarketing in both countries. What differences do we see?
Inbound telemarketing has come a long way since the introduction of so-called 800 systems in the United States in 1965. In the early days, companies with nationwide reservations systems were the first to take advantage of it. Airlines, hotel groups and car rental companies discovered tremendous economies in having a centralized reservations system and a single telephone number to allow customers to make reservations from anywhere in the country.
Over the years, such manufacturers as automobile makers and electrical appliance companies added in-bound lines as a way of providing product information and handling customer inquiries.
Next came inbound lines for order-taking, spearheaded by catalog companies and retail outlets offering direct delivery services.
And even the United States government has entered into in-bound telemarketing with the introduction of hotlines enabling citizens to get information about tax-paying, government publications, and welfare assistance right over the phone. In fact, with the recent crisis in the middle east, the United States Army is actively soliciting new recruits through its own toll-free number, 1-800-USA-ARMY.
Japan, of course, has in-bound technology. In many ways, NTT's 0120 Free Dial service is equivalent to the toll-free 800 system originally developed by AT&T. I will not talk today about the differences in pricing and optional services which still make America's toll-free system more effective and efficient than Japan's free-dial system. As the Japan Telemarketing Association and NTT know, I speak on this topic quite often, so I will give it a rest today.
For the next few minutes, I would instead like to show you what I believe is the the biggest difference between toll-free 800 and free-dial 0120. Let's see what this service looks like to the average American consumer.
What you have just witnessed was seven and a half minutes of direct response television advertising. The average CM was one minute in length and displayed a toll-free 800 number for 15 seconds or more. You saw telemarketing used to sell magazine subscriptions, videotapes, and raise funds for impoverished children. You saw it the way Americans see it.
In the United States, telemarketing means"television marketing" to many consumers. The use of 800 numbers in television CMs has been the driving force behind American telemarketing since the early 1970s. I think I can safely say that without 800 numbers, there would be virtually no cable television service in the United States. And without television, consumer understanding and usage of toll-free services would would have stagnated at one tenth its current level.
What about Japan, then? Are the afternoon shopping programs promoting free-dial numbers? Are traditional advertisers incorporating 0120 response lines in their CMs? Is cable television becoming a powerful force in the marketing communications mix?
The answer to all of these questions is, of course, "no." Television is not yet being used effectively to bring the free-dial message to the general public. Working for an advertising agency as I do, I can tell you quite frankly that Japan's media specialists and CM creators rarely think about direct response when planning television advertising. It is only when the client demands the addition of a telephone number that they consider it, and even then they will resist because it may be harmful to the CM image.
Let me give you a specific case in point.
I recently recommended the use of a free-dial number in a weekly three-minute news program produced by one of the "big 5" commercial networks here in Tokyo. My client, who was sponsoring the program, approved the concept. In fact, the sponsor felt it was an excellent idea.
The television network, on the other hand, totally rejected the use of a phone number in the program. Response by postcard was all right, but not by free-dial, even though the sponsor was willing to pay for all of the operational expenses involved.
Why was this proposal rejected? Many reasons were given: The news program would loose its entertainment value if we asked so strongly for response. The network might receive claims from viewers if any problems occurred over the phone. But most of all, there was no precedent. No other program was using free-dial for response, so this network wouldn't either.
Ladies and gentlemen, there will be no extensive consumer use of free-dial numbers without advertising. There will be no great telemarketing boom in Japan without television. Networks and advertisers must both embrace the opportunity to be in direct communication with their viewers and customers if telemarketing is to grow in Japan. Precedents must be established. And we must keep the pressure on to tap the tremendous response potential which television offers. While I am on the topic of in-bound telemarketing, I would like to address another controversial topic. It involves one of the most powerful new tools available to telemarketers: an in-bound technology which actually charges more than standard rates for the inbound call and pays the added revenue to the subscriber.
In America, this technology is called "900 service." In Japan, it is known as "Dial Q-2." Call charges are variable and can be increased or decreased by shortening or lengthening 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.
The obvious question is: Why would a caller pay more than the standard rates to make a local call? Well to date, Japanese telemarketers seem to have come up with only one answer. Let me show you:
This application of the new technology shows little imagination. What's more, it runs the risk of creating a bad image for Dial Q-2, which will inhibit other, more imaginative telemarketers from taking advantage of this service.
I must admit, in America, the first applications of 900-number systems were similar to those in Japan. But we quickly learned that too much "pink" advertising would kill the spread of this technology to other fields. American telephone service agencies and the telephone companies themselves took the initiative in developing more creative applications of 900 numbers, so that today this is the largest growing aspect of the American telemarketing industry. Let me give you a number of examples.
900 numbers can be used in catalog marketing.
John McGovern, President of Progressive Distribution Services in Michigan, is offering mail order companies a 900-number service to gain new subscribers for their catalogs. Traditionally, a buyer may request a catalog by mail and pay $2 or $3 for it by check or credit card. Now, the 900-number allows payment to be made as part of the telephone request.
McGovern claims response rates using this 900-system are three to five times greater than with the mail. Also, the catalogs can be sent the very next day instead of up to four weeks later, as is the case with many requests by mail. Convenience is the key factor of this service.
900 numbers can be also be used to conduct open sweepstakes.
Just two months ago, in September, millions of Americans received a sweepstakes offer by mail called Dial-A-Prize. A unique entry number was displayed on the outside of the envelope. Each re-cipient was instructed to call a 900 number and to use their push-phone to key in their entry number. The cost of the call was $2.
While the caller waited for the number to be checked by the computer, demographic and lifestyle questions were asked and the answers were added to an electronic database for future marketing purposes. Callers with winning entry numbers were instantly informed that they would received microwave ovens, coffee makers, or electric hand blenders.
The first two million callers each received a paper cup dispenser, and all callers were entered into a drawing for the top prizes: a Pontiac mini-van and an RCA home video entertainment center. This sweepstakes generated not only millions of entries and a wealth of hard-to-get demographic and product usage information, but also a higher readership for the mailing package and millions of dollars in gross revenues to defray campaign costs.
Another way 900 numbers can be used is to provide information services.
People are willing to pay for information when it is relevant, useful and up-to-date. Stock market prices, currency exchange rates, and other financial information can easily be sold over the telephone using 900 numbers.
I know of a company in Australia which offers a weekly horoscope by telephone using a form of 900-number. Amazingly, they are not offering this service in Australia for local callers, but in West Germany, England and Italy for astrology fans who are willing to pay international phone charges plus a premium to know what the stars have to say about their future.
The same Australian company has a rock-and-pops hotline featuring news and interviews with top international singers, actors and actresses, from Michael J. Fox to Michael Jackson. Fans are quite happy to pay a surcharge to hear "personal" messages from their idols.
In fact, many in-bound 800 services are now being switched to 900 numbers in the United States. Here are two examples of information hotlines previously offered for free, which are now available at a price.
Apart from these imaginative applications, 900 numbers can even be used for fund-raising.
When the South African black leader Nelson Mandela visited Japan last month, he made front page news in virtually every newspaper. He appeared frequently on television, radio and in magazines, which delivered his anti-apartheid message to millions of Japanese.
This was also true when he visited the United States several weeks ago. But in America, the Mandela Welcome Committee took advantage of 900-service technology to give millions of Mandela-watchers the opportunity to contribute directly to the anti-apartheid cause.
Two Mandela Freedom lines were established charging callers 95 cents per minute to hear Mandela's recent comments on living conditions in South Africa and the need for new jobs, health care, housing and voting rights in that country. Callers could use their push-phones in an interactive dialog to "vote" on political issues and pledge financial support to the anti-apartheid cause.
Money raised in this way was donated to South African charities allied with the South African leader. Japanese fans of Mandela had few opportunities to participate in his visit. But thanks to 900 numbers, Americans could use their telephones to do something personal to support Mandela's anti-apartheid efforts.
The telephone is indeed a powerful tool. And 900 numbers are currently leading the way for telemarketing into the future. According to a recent study entitled "The 900 Services Industry Report and Forecasts," 900 numbers will generate $2.2 billion in annual revenues in the United States by 1992. If this technology is to become a major part of Japan's telemarketing industry, NTT must position its Dial Q-2 technology very carefully.
I might add here that 900-number technology is not currently available in Europe, but it can be expected as the EC moves toward market unification in 1992. Already, pan-European 800 numbers have been introduced via satellite broadcasting channels, magazines and newspapers. Standardization of cross-border rates will soon allow telemarketing to take hold in Europe and we will see the advent of truly novel international telemarketing operations.
I would like to turn now from the in-bound side of telemarketing to out-bound. And in particular, I would like to address the subject of business-to-business applications of telemarketing, an area in which Japan has vast opportunities to excel.
Each year, McGraw-Hill Research in the US surveys business to determine the cost of an average sales call. By the end of the 1980s, that cost had risen to well over $250, which is equivalent to more than 32,000 at today's exchange rates.
What this means in simple terms is that it is no longer profitable to send sales people to serve small accounts. And it is absolutely necessary to achieve a high percentage of sales among the calls a salesperson makes.
Out-bound telemarketing is absolutely critical in a B-to-B context in the United States. And 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.
At McCann Direct, we have conducted lead-generating campaigns for about half-a-dozen B-to-B clients in Japan over the past several years. I must admit, the results have been excellent.
First of all, contact ratios are extremely high. In recent campaigns, out-bound telephone service representatives have been able to contact 87% of the prospects we have targeted. That compares with contact ratios well below 50% in the United States.
The reason out-bound contacts can be made more easily in Japan is there is little or no screening of calls. Few Japanese businesspeople below the rank of president have their own private secretaries to block out sales calls. And no Japanese company wants to appear rude or insensitive to inquirers, so the out-bound call almost always gets through to the right person.
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. Depending on the sales staff, closing rates can also be very high.
I would like to urge those companies who depend upon a B-to-B sales force to consider how sales personnel are currently being used. A salesman is being employed most efficiently when he spends 100% of his time selling. He is under-utilized if he is spending any amount of time searching for leads. Leave all the non-sales activities to telemarketing and your sales will soar.
Moreover, sales staff should concentrate their activities on the largest and most profitable accounts. Let out-bound telemarketing take care of the smaller, less profitable ones. What you'll find is that your best customers will appreciate the increase in personal contact, and your smaller accounts will appreciate the increase in attention which only cost-efficient telemarketing can offer.
In consumer communications, the same approach is true. And I have seen out-bound telemarketing work wonders in Japan.
Where a relationship between the caller and receiver already exists, telemarketing can be used for direct sales, account servicing, research, upgrading relationships, collection of overdue payments, providing information, and many, many other marketing functions. What is missing in Japan, which we have had in America for nearly 30 years, is WATS.
WATS stands for Wide Area Telephone Service and it allows the out-bound telemarketers significant savings on telephone rates by establishing dedicated out-bound lines to function within a specific call zone. This was the very first progressive telemarketing service offered by AT&T in the early 1960s.
In Japan this summer, NTT introduced discounts of up to 20% for in-bound free-dial calls. Now it is time to introduce reduced charges for companies who use the telephone extensively for out-bound calls.
NTT has been studying AT&T's WATS system for at least five years that I know of. They should have enough information by now to implement dedicated out-bound services at lower rates next year. And as Japan's telemarketers and NTT's best customers, you should expect nothing less from NTT in 1991. Give them a push.
What these lower rates and dedicated systems will achieve is a revolution in out-bound consumer contact. And sophisticated technologies, such as Computerized Predictive Dialing being discussed next door, can be put into operation cost-effectively.
Apart from increased consumer and business contact, Japan's telemarketers will soon find that low-cost WATS lines can be used for intra-company communication. The volume of information passed between a large company headquarters and its branches can be enormous. In the United States, WATS lines allow fax and computer data to be transmitted as well as voice data. By applying out-bound services and technologies within a company as well as between a company and its market, tremendous efficiencies can be achieved.
It is evident in both America and Japan that consumers are generally enthusiastic about the availability of toll-free numbers for obtaining information, making reservations, and placing orders. They are also very receptive to out-bound calls when a prior relationship has been established. And you will find that they are even willing pay extra charges for 900-number or Dial Q-2 access when valued added services are made available.
In the United States, more consumers shop by phone than by mail. One national survey has indicated that about half of all direct response purchases are made by telephone, and that more buyers intend to increase their purchasing by phone than intended to decrease such purchasing.
However, because Americans value their privacy, they are very concerned about the indiscriminate use of out-bound telemarketing. Quite recently, there has been considerable legislation passed in the United States, which will make it difficult for telemarketers to conduct their operations.
According to a recent article in Target Marketing magazine, more than 30 of America's 50 states have already passed laws restricting home telephone solicitation and/or automatic dialing recorded message programs. For example, in 1988, Florida passed as "asterisk" bill which prohibits unsolicited calls to residents or businesses whose names are accompanied by an asterisk in the telephone directory. And in Connecticut, a ban on unsolicited fax advertising has been in effect since October 1989 carrying fines of up to $200 for violations.
The United States Direct Marketing Association responded to these personal privacy concerns by initiating a Telephone Preference Service (TPS) in January of 1985. TPS enables consumers to have their names and telephone numbers removed from national telemarketing lists.
Additionally, the Ethics Committee and the Telephone Marketing Council of the USDMA have drawn up a set of twelve Guidelines for telemarketers to follow in using the phone in sales.
The Guidelines are self-regulatory in nature. All telemarketers are urged by the USDMA to observe them. And I believe they can give useful direction to Japanese telemarketers as well. Let me detail them briefly:
1. Inform contacts of who is calling and why. All telemarketing contacts should promptly disclose the name of the sponsor and the primary purpose(s) of the contact. No one should make offers or solicitations in the guise of research or a survey when the real intent is to sell products or services or to raise funds.
2. Be completely honest. All offers should be clear, honest and complete so that the recipient of the call will know the exact nature of of what is being offered and the commitment involved in placing an order.
3. Disclose all terms of agreement. The telemarketer should disclose the full cost of the merchandise or service, all terms, conditions, payment plans, and the amount or existence of and extra charges such as shipping and handling.
4. Call during Reasonable Hours. Telemarketers should avoid making contacts during hours which are unreasonable to the recipients of the calls.
5. Use of Automatic Equipment properly. When automatic dialing equipment is used, the telephone should immediately release the line when the called party disconnects. When using taped messages, permission should be obtained from the individual by a live operator before the recorded message is delivered.
6. Taping of Conversations only with permission. Conversations should not be taped without consent or the use of a beeping device.
7. Remove names upon request. When requested to do so, telemarketers should remove the names of contacts from their telephone lists and offer to remove such names from the lists they provide to other telemarketers.
8. Be extra careful when addressing minors. Telemarketers should be especially sensitive to the obligations and responsibilities involved when dealing with minors.
9.Deliver goods promptly. When shipping prepaid merchandise, telemarketers are obliged to conform to the FTC 30-day delivery regulation and should ship all orders as soon as possible.
10. Honor Cooling-Off Periods. Telephone marketers should honor all cancellation requests received within three days of sales agreements.
11. Avoid calling indiscriminantly. Telemarketers should avoid calling unlisted or unpublished phone numbers unless a prior relationship with the subscriber exists. Random and sequential dialing techniques should never be used in sales and marketing situations, whether a manual or automated process.
12. Follow Legal Practices. Telemarketers should operate in accordance with the laws, codes and regulations established by national and local authorities regarding advertising, marketing, and the transaction of business by mail, telephone, and the print and broadcast media.
Most of this is just good common sense, but it only takes a few instances of unethical telemarketing to give the entire industry a bad reputation. As Sandra Pernick, president of the American Telemarketing Association has said, "Chances are, when you see a telemarketing story in a newspaper or on TV, it will be negative."
I would encourage every telemarketer here today to adhere to these ethical guidelines and to work vigorously to see that other companies observe them as well.
As our time together is growing short, I would like to use the remaining minutes to quickly take you through three important trends of which Japan's telemarketers should be aware. It is these three trends which will determine how the industry here will grow towards the 21st century.
The first trend is the Technology Gap, or what might called the difference between abilities and skills.
As I noted earlier in my example of Dial Q-2 services, Japan now has at least one very sophisticated technology, an ability, which is not currently being used skillfully. And Japan is not the only country with this problem, by the way.
In the United States, Automatic Number Identification equipment has been available for several years. It can be used to identify the number from which a call is being made before answering. This equipment could be used by consumers to screen out harassing, threatening or obscene phone calls. It is a very useful and potentially helpful technology. But its primary application to date has been among in-bound operators to obtain demographic data on callers before answering.
Imagine a customer's surprise when the operator already knows who is calling before he or she has even said a word. In the state of Pennsylvania, courts have recently determined that this violates state wire-tap laws because it acts as a call tracing device. Here is a pure case of the Technology Gap. We have a very high-tech ability, but we are not skillful enough to apply it properly.
Japan's telemarketers must be extremely careful in applying new technology to see that it does not cause concern for privacy among consumers. This is particularly true of Automatic Dialing Recorded Message Programs and Interactive Audiotex Services, as well as Automatic Number Identification. We should not let our technological capabilities rule out common sense. The Technology Gap can only be overcome if we apply new technology creatively and compassionately. Our machines are only as good or as bad as the people who operate them.
The second trend which will affect Japan's telemarketing industry into the next century is that of Education.
It is often said in the United States that telemarketing is a "default career." Until recently, few people have gone into telemarketing at or near entry level because they really wanted to. Most often, they needed a job, and telemarketing was convenient and largely indifferent to to educational level or prior work experience. Telemarketing traditionally employs many part-timers, and turnover rates are extremely high by the standards of other industries.
Nowadays, people prefer to enter careers that are future-oriented. It is much easier to recruit and retain bright young employees if they can clearly see the positive aspects of telemarketing and the opportunity for career advancement as the industry grows.