Privacy laws, spam hindering direct marketing efforts

Companies that use telemarketing and e-mail to deliver direct marketing messages to consumers are being seriously affected by new laws and growing consumer privacy concerns, according to delegates at the Fourth Annual Privacy & Security Summit, which is being held in Washington, D.C. , this week.

The trend is also causing new compliance headaches for companies, while making it especially difficult for new companies to prospect for customers.

"The cost of reaching consumers is going up, while response is down," said Jerry Cerasale, senior vice president of government affairs at the Direct Marketing Association Inc. (DMA) in Washington, D.C.

One of the biggest examples of the increased challenge facing direct marketers is the National Do Not Call registry set up last year by the U.S. Federal Trade Commission. So far, more than 57 million numbers have been included in the registry, and 200,000 more are being added weekly, said Lois Greisman, associate director at the FTC's Office of Consumer Protection.

At that rate, the registry appears to be on track to reach the 60 million number the FTC anticipated when it first set up the registry, she said. In addition, more than 60,000 telemarketers have also registered with the FTC.

So far, the registry seems to have worked to curtail unwanted calls to consumers, Greisman said during a panel discussion at the show. The telemarketing industry has shown "extraordinary compliance" with the requirements of the do-not-call law, she said. About 27 percent of respondents in a recent poll said that telemarketing calls had stopped entirely after their names were put in the registry, and as many as 90 percent said their call volume had dropped, she said.

But it has also sharply curtailed the number of outbound calls telemarketers can make. And it has created several compliance-related issues for direct marketing companies, said Keith Fotta, CEO of Gryphon Networks, a Norwood, Mass.-based firm that does compliance management work for several large companies.

For instance, apart from the national registry, 43 states maintain their own do-not-call lists. In addition to those lists, some companies also kept do-not-call lists of their own in addition to lists maintained by organizations such as the DMA. Looking ahead, it will be especially important for companies to ensure consistency between such lists, he said.

Because telemarketers need to update their lists monthly, Greisman said, "we expect that (they) will need to modify their systems to accommodate the more frequent downloads."

Meanwhile, new regulations are making it harder for companies to use e-mail as a marketing channel.

Measures such as the CAN-SPAM Act that went into effect Jan. 1 impose specific conditions on commercial e-mail sent to consumers. Companies, for example, have to clearly label their messages as commercial, cannot use false or misleading headers and subject lines, and are forbidden from harvesting e-mail addresses from online sources, said Kenneth Hirschman, vice president and general counsel of Digital Impact, an e-mail marketing firm in San Mateo, Calif.

Companies must also offer users clear opt-out mechanisms, provide them with a physical contact address and maintain lists of users who don't want to be contacted via e-mail, Hirschman said in a panel presentation.

Another huge problem facing direct marketing companies via e-mail is spam, Cerasale said.

The tremendous volume of spam being generated now is leading to increasingly aggressive measures by consumers and Internet service providers to block it, he said. The result: Companies with legitimate marketing messages are unable to get past the e-mail filtering, spam detection and blocking tools now in more widespread use.

The situation is getting so bad that even commercial e-mail that a consumer might have consented to receive -- such as online bills -- is sometimes blocked, either by consumers themselves or by ISPs acting on their behalf. "We've got to figure out spam or else e-mail (marketing) is going to die," Cerasale said.

At the moment, there are no plans to introduce e-mail legislation that would mirror the do-not-call list, Greisman said. The main reason that hasn't happened is because there is little way to enforce such laws because most spammers operate fraudulently and outside of the law anyway, she said. Such companies are unlikely to abide by antispam laws, and companies that do comply are most likely not the ones causing the problem, she said.

Still, Congress has asked the FTC to investigate the spam problem, and the agency plans to issue a formal request for information from vendors on possible ways to control it, she said.

"All lines are open, and all issues are on the table," Cerasale said.

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