Chapter 2

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Telemarketing Theory

2.1 The Scope of Telemarketing

2.1.1 Telemarketing Defined

"Telemarketing utilizes sophisticated telecommunications and information systems combined with personal selling and servicing skills to help companies keep in close contact with present and potential customers, increase sales, and enhance business productivity."

It is a new marketing discipline that uses telecommunications technology as part of a well-planned, organized, and managed marketing program that prominently features the use of personal selling, using non-face-to-face contacts.

In other words, Telemarketing uses the telephone as a direct marketing medium through which a variety of sales and market research activities can be carried out. It can also be a key source of information on a company's prospective and current customer base, markets, inventory, distribution channels, advertising and promotional efforts. When combined with information and management systems, it can bring trained personnel into computerized contact with potential customers, and maintain that contact profitably.

2.1.2 Why Telemarketing

• Saves Time: In business-to-business marketing, Telemarketing can be used in an appointment-setting program that can increase the total field selling time available. It stands to reason that if field sales reps can be provided with specific daily appointments, especially at the beginning and end of the day, management can be reasonably assured that the field sales organization is likely to be out doing what it is supposed to be doing: making sales presentations to qualified prospects. When Telemarketing used this way, effectively extends the field selling day, increasing sales productivity and reducing sales costs.

• Cost Efficiency: Because Telemarketing is lower cost, it can be used effectively with marginal accounts that normally wouldn't rate a field sales call. Such customers can frequently be turned into profitable accounts with Telemarketing. It can also be used with almost equal efficiency no matter what the customer's geographical location might be. Thus, penetration of new markets and major shifts in market geography can be accomplished soon with Telemarketing. Finally, the telephone can be a more flexible device than the field salesperson. For example, to do customers surveys by phone, to set up appointments, to announce significant changes in price of products, to upgrade orders and to check details.

• Instant Response: Because the person at the other end of the line can react immediately. If customers don't understand something, they can ask questions at once. If they have objections, they can make them, and you have an opportunity to respond.

• Improved Cash Flow: Telemarketing programs can have more immediate results than field sales programs, and they can often begin to generate orders almost instantly. Such immediate results, can allow cash flow to cover marketing costs, as well as permitting much tighter inventory control.

• Expanding Territory: Telemarketing can readily target new customers, efficiently making initial qualification contacts, and closing the sale, all essentially independent of geographical considerations. Where field sales calls are required the prequalification process makes it much more likely that expansion can be accomplished with the existing sales force.

• Customer Relations: First, a phone call takes much less of the customer's time than a face-to-face sales. Secondly, phone calls can be more regular and frequent than face-to-face sales. Thirdly, since Telemarketing can be either inbound or outbound, the customers familiar with a company's Telemarketing operation can get much quicker response to ongoing problems or questions.

• Seasonality: Telemarketing allows the marketer to get around the restrictions of seasonal selling periods. Because of mailing times and delays, Telemarketing allows the marketer actually to extend the buying period by speeding up receipt of the order.

• Lower Personnel Costs: A Telemarketing staff, despite all the training and experience required, is much less costly to maintain than high-priced field sales personnel. In addition, Telemarketing needs fewer people, and there no bodies to transport, shelter, feed, and entertain.

• Versatility: Once a functioning Telemarketing operation is in place, it can be easily adapted to a wide range of functions. The same equipment can be used among other things, to sell, to do surveys, to announce changes or special offers, to make appointments, to qualify leads, to cross-sell, and to check credit.

• Ease of Start-Up: Since the equipment used in Telemarketing is readily available, and since Telemarketing operations can often be set up using existing space and personnel, a Telemarketing operation is relatively easy to start up.

2.1.3 The Constructive Factors of Telemarketing

Figure 2.1 The Constructive Factors of Telemarketing

2.2 The Growth of Telemarketing

In 1992, thirteen billion calls were made to 800 numbers, yielding sales of $7.73 billion. By 1997, sales from 800 numbers are expected to be $11.4 billion, with most growth expected from small-to-medium-sized business.

As sales and revenue grow, more and more companies establish or expand their Telemarketing operations. Between 1980 and 1985, the number of companies involved in telephone sales grew from 1,500 to over 80,000. By 1993, there were 565,000 Telemarketing operations in the United States.(Please see Figure 2.2)

The rapid development of information technology has certainly played an important role in the growth of Telemarketing. It has made Telemarketing more efficient and created the capability to provide more personalized service. In addition, it also provides huge employment opportunities for those who have the skills to enhance customer relations. Computer assisted Telemarketing systems, predictive dialing, and enriched databases are just a few of new developments. The growth of professionalism and the success of Telemarketing are predicted to result in one of the faster growth employment opportunities in this decade.

Figure 2.2 The Growth of Telemarketing in USA

2.3 The Customer’s Sale Cycle

The eight stages can be shown as a hierarchy of effects model. (Please see Figure 2.3)

Not all companies sales cycles include each individual step. In some cases, a few may be combined into a single step. But the organization is engaged in selling to business or in selling to consumers, most if not all of these steps in the sales cycle are involved- individually or in combination, and are incorporated into the act of selling.

Different industries fulfill each of the steps in the sales cycle with different communication vehicles.

Figure 2.3 The Customer's Sales Cycle

There are many ways that Telemarketing can be used to support or replace field selling. To learn where, let us take the eight steps in the sales cycle and identify each in terms of five levels of interest( account calls that are nonrevenue producers (service calls), call made with accounts that are only marginally profitable (revenue in relation to the cost of the sales call), and primary accounts that demand and deserve attention from field salespeople plus the levels of high-cost and low-cost products. (Please see Table 2.1) In Table 2.1 illustrates this identification process.

Telemarketing can be a good communications medium for moving prospects through many of the steps in the sales cycle. In exploring the opportunities, consider where Telemarketing might be used to support or substitute for other media, particularly field salesperson.

As you can see in Table 2.1, the face-to-face visit can be targeted for priority assignments. On the other hand, a Telemarketing Center can be assigned all service calls and can be called upon to displace the field salesperson in handling marginal accounts. In addition, Telemarketing Centers can supplement field salespeople in serving primary accounts.

Table 2.1 Integrating Telemarketing into the Sales Cycle

									Aware- ness	Inquiry	Infor- mation	Sales Desire- Re- sponse	Pro- posal	Close Sale- Purchase	Follow- Up	Service
Service Calls									T	T	T	T	T	T	T	T
Marginal Accounts									T	T	T	T	T	T	T	T
Primary Accounts									S	T S	T S	S	S	S	T S	T S
High Ticket Products									T S	T S	T S	T S	S	S	T S	T S
Low Ticket Products									T	T	T	T	T	T	T	T

T = Telemarketing S = Salesperson

Although handling nonrevenue calls becomes an expense that the account may not have borne before, it is low in relation to the cost of in-person visits. It becomes profitable as it uncovers qualified leads, assists in supplementing the salesperson’s visits, and opens an opportunity to sell once the customer’s problem is resolved.

In the case of marginal accounts and low ticket products, a Telemarketing Center can receive inquires, provide information, receive customer response, offer a proposal, close the sale, follow up, and provide answers to product problems.

In primary and high ticket products, Telemarketing specialists can supplement salespeople at many steps in the sales cycle. For example, customer inquires often can be satisfied over the telephone, and information can be provided orally that suits the customer's need. And, as a follow-up after the sale, the telephone is a natural.

By viewing the sales cycle as a fit, it can work alone or in concert with a face-to-face sales force.

2.4 The Types of Telemarketing

2.4.1 Inbound Telemarketing

The people who want to reach companies call a special 800 number. This possibility has grown up only since the introduction of toll-free 800 numbers by AT&T in 1967, which made it practical to have call centers receiving calls from the entire country. In brief, toll-free service led to centralized nationwide call facilities which led to increased call volumes at single locations, which increased the incentive to maximize revenue and cut costs. In fact, Americans dialed AT&T 800 numbers over six billion times during 1988( more than sixteen million times a day! AT&T estimates the number of calls is increasing by a billion calls a year. One of the biggest inbound operations in the United States is operated by the Home Shopping Network, which handles 200,000 inbound calls daily for its 24 hours shopping channels (such as channel 60 in Chicago area) and other clients. Airlines, hotels, and virtually every catalog company rely on inbound Telemarketing to take reservations and merchandise orders.

Inbound calls can also focus on customer service or consumer information. For example, at the General Electric's GE Answer Center, a force of 250 answer 250,000 questions a month about how to get the most from GE products, they rely on a centralized consumer product database that allows them to call up information on just about anything that has to do with GE products. Many companies now have consumer information lines to serve customers.

Successful inbound Telemarketing programs are created by paying careful attention to such factors as the type of telephone service chosen, the carrier picked to provide the service, the planning to meet fluctuating call volumes, and the design of the advertising that carries the phone number.

2.4.2 Outbound Telemarketing

Cold calls can generate leads to sell products. A good example of a lead-generating call would be one placed by an insurance agent to a new community resident about home insurance. The agent is trying to get his or her foot in the door and will not try to sell a policy until a subsequent face-to-face meeting. By contrast, a TSR who calls a consumer to subscribe to a product will try to take an order before the call ends.

Table 2.2 The Types of Telemarketing

Type			Title	Subtitle	Content and Purpose
Inbound			Order, Preengagement	Order Acceptance	To use 800 numbers to accept customers’ order.
			Information Collection	Information about Products or Service	To use 800 numbers to answer customers’ question. Then, combine their comments with product development and improvement.
Outbound			Promotion	Promotion	To ask customers’ opinions about product and service. In addition, to entice and encourage to purchase.
				Keep Selling	Main objective is the member whose membership expiration date will come.
				Re-Promotion	To entice or encourage customers to purchase again.
				Upgrade	To entice or encourage customers to buy firm’s new products.
				Thanks for Purchase	After purchase, the firm calls customers to express appreciation.
				Service after Purchase	Periodically supply services after customers purchase.
				Exhibition Invitation	To invite customers come to visit.
				Bill Receiving	To notify customers by phone that firm will receive the payment.
				Preengagement before Distribution	To confirm that customers are home for distribution.
				Update Data	To use telephone to update the data of customers.
				Assist other Media	After TV advertising or Direct Mail, to use telephone to trace customers’ responses.
			Market Survey	Actual Condition Survey	To survey customers’ satisfaction, according to age or job level.
				Consciousness Survey	To survey consciousness of products or firm, according to age or job level.
				Motive Survey	To survey about motive of purchase.
				Recognition Survey	To survey that customer’s recognition of products or services.
				Effectiveness Survey	To survey the effectiveness of advertising.

According to the Direct Marketing Association, large numbers of companies place outbound calls to sell products and services to their customers. They include: 31 percent of all consumer publications, 70 percent of all business publications, 5 percent of all consumer catalogs, 25 percent of all business catalogs, 25 percent of all consumer products and service companies, 71 percent of all business products and services companies, 39 percent of all clubs and continuity offers, 18 percent of all financial services organizations, and 50 percent of all computer hardware and program software organizations.

Outbound Telemarketing also can be used to notify existing customers of an unexpected delay in shipments or other problems in an order, or to qualify leads from prospective customers by determining their interest in a product before passing the name on to a field sales representative for a personal sales call.

2.5 ANI, ACD, ARM, and WATS

When too many phone calls reach a particular number, they can be placed on hold, and assigned to the next available representative through automatic call distribution. In off-peak periods, calls can be evenly distributed among stations. If callers have waited a long time, overflow service can automatically shift the calls from a high traffic ACD group to a less congested one. ACDs process incoming or outgoing calls very quickly and effectively. These computerized devices are most effective when you have 15 or more lines in use on a consistent basis. The points to check out in ACDs include record keeping of calls made from individual telephones, backup operation in the event of a power outage and internal switching capabilities. And, with 800 automatic number identification, integrated data/phone terminals show the Telemarketing operator not only what phone number the caller is dialing from, but also important facts from that database about the caller's information before the call is answered. If desired, certain proprietary software can be used to capture name, address, and demographic information on incoming calls, without having the operator key it in.

ARM (Automatic Recorded Message) can be extremely cost-effective when a specific telephone presentation is to be made, i.e., a political message or an insurance company name change being relayed to a group of policy owners.

WATS (Wide Area Telecommunication Service) is available for outgoing and certain incoming calls, WATS lines are rented by long-distance carries based on hours of usage, location of calls (known as zones or bands) and a variety of other factors. Discounts are given for volume calling. The main disadvantage is the high cost for additional lines.

This page was made by Alex Tsai .

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