When telemarketers used to interrupt his dinner hour, Douglas E. Palley often liked to cut the call short by saying, "I'm sorry, Mr. Palley died." He did so even though he was -- and is -- a telemarketer, president of a local company with 2,000 employees who handle about 20 million calls a year.
Now Palley has decided his company will no longer make the unsolicited sales calls that irritated him. CyberRep, the Tysons Corner firm he built with partner S. Tien Wong, terminated its last "cold-calling" contract with a long-distance company in August.
"It is our belief that the world of outbound telemarketing has a terminal sickness and is dying," Palley said in a recent interview, days after the Federal Trade Commission announced plans for a national do-not-call list to allow consumers to register to block unwanted telemarketing calls.
With 104 million calls made a day -- nearly six times the number made 10 years ago -- "it's the industry people love to hate," Palley said, noting that 27 states have already created do-not-call lists. So his company will concentrate on its "inbound" call centers, taking calls from customers inquiring about their accounts, ordering products or seeking technical help -- and hoping to use those calls as a sales opportunity.
CyberRep's move to stop cold calls completely sounds "a little extreme" to G.M. "Matt" Mattingley Jr., director of government affairs for the American Teleservices Association, which represents the telemarketing industry. But many telemarketing firms say outbound calling operations have been reduced in the past few years. "The days of cold calling are gone," said Tom Rocca, president of Mattingley's group.
At Baltimore-based Sitel Corp., for example, outbound calls accounted for 90 percent of the company's $100 million in revenue in 1995. In 2001, outbound operations accounted for only 15 percent of the customer service and telemarketing firm's $735 million business.
"Overall, telemarketing has been getting more difficult," said Jim Donahue, a spokesman for MBNA, which promotes its credit cards through telemarketing as well as direct-mail solicitations, the Internet and special events.
In the past, one in every four new MBNA accounts was generated by a telemarketing call, Donahue said. But in light of the growing resistance to these calls -- 8.5 million Americans have signed on to state or industry do-not-call lists -- MBNA may have to "adjust its business plans to meet the market challenge" and increase its other marketing efforts, he said.
Rocca said telemarketing calls will not disappear. The reason is simple: "They still work. A lot of companies still feel it's the fastest way to get a sales response, a quick yes or no," from consumers.
"A large number of people still sign up when we call," said Valerie Hasselbach, a spokeswoman for AT&T Corp., which many telemarketing firms name as one of the most aggressive telemarketers in the country. "It's still valuable. Otherwise, we wouldn't do it."
A look at industry numbers shows the growth in telemarketing, even with the recent slowdown. According to the Direct Marketing Association, sales from outbound telemarketing calls totaled $274.2 billion in 2001, a 51 percent increase from 1996, when sales were $181.1 billion. In 2002, the industry expected sales to reach $295.3 billion. Only mail solicitations generate more business: $359.1 billion in 2001 and $390.7 billion in 2002.
"There's no question that the rate of growth has begun to slow" for telemarketing sales, said H. Robert Wientzen, president of the Direct Marketing Association. He attributed this in part to a sluggish economy that has prompted many companies to cut back on marketing. But it is also largely due to the growing resistance to sales calls, Wientzen said.
Although the industry had projected that sales will reach more than $400 billion by 2006, the implementation of a national do-not-call list by the FTC is likely to reduce that number considerably, Wientzen said.
The FTC has said it expects that 60 percent of the nation's households -- or 60 million home phone lines -- will be registered on the anti-telemarketing list that the agency hopes will be operational by thissummer. Ultimately, agency officials predict, 80 percent of unwanted calls will be blocked. The Direct Marketing Association and American Teleservices Association have vowed to challenge the list in court.
Meanwhile, a growing number of firms, such as CyberRep, are taking no chances. They are placing a greater emphasis on making sales pitches when customers call them -- not vice versa. CyberRep's goal, Palley said, is to "turn the customer service center into a profit center."
Judy Tenzer, a spokeswoman for American Express Co., said the company has "grown the number of offers we make to card members when they contact us."
"They are calling on their own time and at their convenience, and that's always a good opportunity to tell them about some of our offerings," she said.
It doesn't happen for every call. "If you are calling to report a lost card, there's no sales pitch," she said.
But if you're calling to find out how many "reward" points you may have from using your credit card or to inquire about travel plans, "we may tell you about our baggage-insurance plan or see if you want to be connected to other operators who can discuss travel, insurance, even financial" issues, Tenzer said.
Until 1999, about half of CyberRep's business was in outgoing calls, with the percentage dropping each year as it let contracts expire. Trying to sell to customers when they call is a better way to do business, Palley said -- not just for customers, but also for telemarketing firms.
For example, it's much easier on the telephone sales agents. "Outbound calling really hurts morale. You can make 25 calls an hour, get hung up on, sworn at, and maybe, if you're lucky, you might make one sale," he said. As a result, turnover rates have skyrocketed, Palley said. For those employees making only outbound calls, one in five leave each month. By contrast, only about one in 20 employees handling inbound calls quit each month, he said.