Its hunting season on marketers, thanks to “Do Not Call” regulation and anti-spam legislation, and companies such as Publishers Clearing House are in the line of fire.
The 50-year-old marketer of magazine subscriptions believes it has taken every conceivable precaution to protect customers privacy. Publishers Clearing House refuses to buy or sell customers e-mail addresses, sends no information to those who havent asked for it, and addresses each customer complaint. It keeps precise track of when it has the right to e-mail each customer and how many attempts have been made to remove a name from a mailing list. It even keeps records of all communications.
Too bad. “Were confident that were doing the right thing. And were also sure were going to end up in the courts,” says Rory Cumming, vice president and general manager of pch.com, Publishers Clearing Houses Web site.
All over the world, companies are bracing for the possibility that angry customers—weary of answering phone calls from strange salespeople during their dinner hours and opening e-mail boxes filled with pornography—will test the limits of their right to privacy by filing a lawsuit. The customers may even have the force of law on their side.
In September, California Gov. Gray Davis signed the nations toughest statewide legislation to date regulating the sending of electronic spam. The law, which Long Island, N.Y.-based Publishers Clearing House is watching carefully, gives residents the right to sue anybody that sends them unsolicited commercial e-mail and establishes fines of $1,000 per message, or as much as $1 million. It is scheduled to take effect January 1.
On Oct. 22, the U.S. Senate passed a bill that contains a provision sponsored by Sen. Charles Schumer (D-NY), calling for a national Do Not Spam registry. Like the recently established Do Not Call registry limiting phone marketers calls, this database would severely limit the use of e-mail for selling services or goods.
Indeed, more than 50 million people have signed up for the national Do Not Call registry, which the Federal Trade Commission and the Federal Communications Commission began enforcing jointly in October despite several court challenges. So far, these agencies have received more than 15,000 complaints of violations, which if true will cost the perpetrators $11,000 each. There are also 42 sets of state Do Not Call rules, which are allowed to be stricter than the federal rules.
Selling Versus Harassment
The challenge for companies is to find legal ways of selling to customers by phone or e-mail without harassing them. That means updating databases to exclude specific names from marketing pitches, based on policies that differ across states—and even countries.
“A company trying to make all its databases comply with all the rules has an overwhelming process task,” says Bill Blundon, chief marketing officer of Extraprise, a Boston-based technology-services firm with several multinational clients. “People are really scrambling to figure out what to do.”
Some companies, gun-shy for fear that anything they say could be used against them in court, are even refusing to discuss their plans to comply with laws to stop telemarketing and e-mail abuses. Case in point: Allstate Insurance. The company went mum after the Institute for International Research—a company that holds industry conferences—circulated an e-mail interview with Allstate vice president John Hershberger characterizing Allstate as unprepared for Do Not Call. An Allstate spokeswoman says the company is complying with the law and has no further comment.
“We brought this on ourselves—its all telemarketers faults,” says Scott Stawski, vice president of the marketing consultancy Inforte. “We must find less-intrusive ways to sell.”
Analysts and consultants say its difficult to prepare for these laws because they raise enough questions to make court challenges inevitable. For example, companies are puzzling over the meaning of Californias requirement that residents cannot be e-mailed without “a clear and conspicuous request” for recipients consent.
A seminar on Do Not Call held in London last month by Extraprise drew hundreds of people—including lawyers networking to see how well peers understood the laws. Extraprise is advising all clients—even those who do business only in the U.S.—to abide by the European Unions privacy laws, which are being mimicked in much of the world. The E.U. starts from the premise that customers own their personal information and businesses need their permission to use it. The E.U.s latest privacy directive—which member countries were required to adopt on Oct. 31—prohibits e-mail marketing without consent and establishes a private right-of-action similar to Californias.
“[These laws] get to the fundamental nature of our society,” says Bill Blundon. “The U.S. has been fairly generous with freedom of speech, but now a lot of tactical decisions are changing the philosophy of how business communicates with the world.”
Managing Customer Data
The wild card is how well companies will be able to manage their data. Publishers Clearing House uses a combination of DoubleClick and internally developed software to track every click when a customer visits its Web site. The marketer records the date, time, Internet address and e-mail address every time information is entered or changed.
But that technical challenge is relatively simple compared to the one faced by a multinational company. In the short term, Blundon says, its “a few weeks and tens of thousands of dollars” to scrub a database against a customer list. But scrubbing a name from every salespersons laptop in every division in every country is a daunting task.
“If Im a credit-card company and you have my card, can I call you and sell you insurance?” he asks. “Thats not true in the U.K. Trying to consolidate databases is a big issue; then sharing information across the company is a big issue.”
For now, many companies are struggling.
In response to the telemarketing and spam backlash, some marketers are looking for new sales channels they can control. AT&T Consumer wants to use its Web site to contact customers, although a spokesman says it is “too early” to discuss how the site will work.
Pitney Bowes, in a back-to-the-future approach to paper mail, developed software that allows the insertion of custom advertisements on bills and then tracks envelopes through the mail using bar codes. Companies can send out highly targeted advertising and will also know when the check is on the way. Intelligent mail-handling tools are generating interest among companies such as Lands End and American Express, which tend not to acquire new customers through telemarketing, notes Ken Landoline, vice president of the Robert Frances Group, a technology analyst firm.
Carnival Cruise Lines is in a different position. Trevor Johnson, Carnivals technical architect for Siebel Systems software, says Do Not Call has knocked a quarter of the customers out of Carnivals database.
Conflicting advice is abundant. Extraprise discourages clients from using e-mail at all as a marketing tool because spammers have polluted it. Digital Impact, which handles e-mail marketing for Fortune 500 companies such as Hewlett-Packard and Citibank, disagrees. That company is even offering to represent businesses in small-claims court should the need arise.
But Extraprise and Digital Impact agree on this: When in doubt, do not contact. In the meantime, clean up your data.
Blundon tells clients to update the schema for all customer databases with fields indicating how and when they have agreed to be contacted (and add spare fields for future use). Propagate changes across the network and any local databases, have local I.T. people audit the changes, and then “test, test, and test your databases for compliance.”
Digital Impact general counsel, Ken Hirschman, says clients should be able to track Internet addresses. The goal: Show the particular date a customer visited a companys Web site and record the page where he or she gave consent.
“[Anti-spam lawsuits] may be a temporary issue,” says Hirschman.”Clients who do have less-than-stellar permission practices or sloppy databases will clean them up. Will it have any impact on spammers? No. They are impossible to find.”
Meanwhile, the volume of spam as a percentage of legitimate e-mail continues to rise. Brightmail, which develops spam-blocking software, reports that 54% of all e-mail sent in September was spam. This is up from 38% in September 2002, and 18 percent the previous April.
Those numbers have led to discussions about ways to strengthen the technical infrastructure of the Internet, which was designed to be open, making it easy for spammers to spoof both their identities and the origins of their messages. One proposal would “white-list” legitimate senders of e-mail and filter out the rest.
But any technical fix would have to rise above the interests of individual parties—including Internet service providers, software vendors, and the government—and would not completely eliminate spam.
“We need strong legislation and an effective defense system,” says François Levaste, vice president of marketing at Brightmail. “There is no single silver bullet.”
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