Direct Threat

Here is how to carry out a very popular, relatively easy and surprisingly successful fraud. Identify a group of businesses which share a common trade and do not have highly developed marketing skills: hairdressers are a good example. Write inviting them to pay to be included in a directory of hair salons which will be widely circulated to potential customers. Pocket the money. Disappear without bothering to publish anything.

It is surprising how many companies have fallen for this ploy. A recently introduced twist is to affirm that failure to reply – even if it is to decline the invitation – constitutes acceptance under German law, leaving the target liable for the bill. While it is a deeply disreputable practice, it does reveal something about the nature of directories. There is a widespread belief that directories do exist on almost every business sector, even if companies in that sector have not seen it.

Indeed there are an incredible number of tightly-focused directories which are often the only source of information on that particular trade. This is a boon for business marketers, since the data is often endorsed by trade associations, giving the impression that they represent most of the market.

But if European legislation currently under consideration comes into effect, the directory may become an endangered species. And with the growth of electronic media, the process of compiling information in a paper format may in any case be obsolescent.

For the moment, directories are still used by many companies wanting to find out about suppliers and prospects, even in the marketing industry. “I have just filled out an entry for the Marketing Manager’s Yearbook to promote our services. In filling it in, I have been thinking about the readership. Inev-itably, it will be on other marketing managers’ bookshelves as a source of reference,” says Brenda Boardman, director of list broking and management at Lexicon Marketing Services.

But she also notes that the same information in the book will be rented out on tape and disk for direct marketing purposes. And it is this use which is likely to come under pressure from potential new legislation. For while the Data Protection Directive, which has been adopted and will pass into national law within three years, allowed legiti mate use of personal data for direct marketing, at least two pending laws may make things much more difficult.

The first risk comes from the Telecommunications & Privacy (formerly known as the ISDN) Directive. Alastair Tempest, director general public affairs and self-regulation at FEDMA (the Federation of European Direct Marketing Associations), says Article 11 could cause problems. “It states that personal data contained in an electronic or printed directory and which is available to the public through Directory Enquiries should be limited to what is necessary to identify the subscriber, unless he or she has given unambiguous consent to publish.”

Subscribers must be given the right to opt out of having their data used for direct marketing, to have their address published only in part, and to withhold information identifying their gender. The directive is currently self-contradictory – it says the service must be free of charge, but European member states may make a reasonable charge provided it does not act as a disincentive to register.

The real sting is in the tail of the article, as Tempest explains: “Member states may limit the implementation of the article to subscribers who are natural persons. It will be important that they do so, because the directive as a whole applies to businesses and consumers.” This is an important development, since previous legislation has only applied to consumer data. The extension to include business information could drive directories – and any other formats – out of business.

Article 12 has further dramatic implications. “With regard to unsolicited calls, it requires member states to take appropriate measures to ensure for the purposes of direct marketing that they are not allowed without the consent of subscribers or in respect of subscribers who do not wish to receive them.” That could mean harmonisation with the German law, which does not permit cold calling, or acceptance that a registration scheme like the Telephone and Fax Preferences Services is sufficient. This still has to be thrashed out in the directive.

Data owners and business marketers are keen to have this provision amended to reflect the different nature of business-to-business cold calling compared with business-to-consumer. “It would be pretty restrictive as far as automated calling and faxing is concerned. The point we are making is that for products like IT, where sales are made between enterprises, we don’t feel the issue of privacy is key. We are looking to make a distinction between corporate and consumer use of data ,” says Paul Evans, business development manager at EMAP Direct.

The argument that one company calling another is not as intrusive as when one company calls a consumer has merit. But it is countered by the direct marketing industry’s own trend towards treating business targets like consumers. If this continues, then business people might fairly claim they should have the same rights to opt out of data use as the general public.

EMAP Direct currently markets a directory of the top 30,000 IT users which gives 127,000 points of contact. Evans says: “We are hoping to develop a database which includes personal attributes. We could see in a short space of time information on whether an executive plays golf, for example.”

To justify this development he notes that, “a lot of IT sales are made on the golf course”. His company is not alone in moving its database in this direction. At TDS Inform, which sells a range of business information including the Business Census (an enhanced database of virtually every business in the UK), managing director Gary Selby says: “We are confident of the fact that a business person is just a consumer at a work address.”

He says that gaining a better understanding of the individual point of contact in a company helps business marketers to be more effective. But the key is still that the target represents the company, not his or herself, when it comes to making a decision.

With regard to the potential legislative threat, Selby says: “The fact that we have got an individual listed is largely irrelevant, so we don’t have to be too concerned how consumer legislation is implemented on business. We will have to accept it.”

Directories also face restrictions from yet another directive being considered by the European Commission. A Green Paper is due to be published on data privacy and publicly available data. One of its aims will be to define the public domain and how information in it may be used.

“In the original Data Protection Directive, one of the few good things was that it said public domain data could be used for correspondence purposes. We have interpreted that to mean it can be mailed or phoned. Under this proposal, it is going to be a question of whether you will be able to do anything,” says Tempest.

The Northern European members of the Union tend to have very restricted use and access to public information.

In Sweden, any information held by the government has to be published and openly available to prevent it from using such data against its citizens.

For the same reasons, Germany has adopted an approach limiting the amount of data which the public sector may gather. Data may be in the public domain, but that does not mean the public can access it, as they are able to with the UK’s Electoral Register. Again, these outlooks will have to be reconciled.

But there is a piece of European law which has at least cleared up one perpetual concern for directory publishers – the protection of their copyright.

“From time to time, our clients say, ‘why can’t we just get a directory and copy that information onto our database?’,” says Boardman.

The perception is that since a directory has been published and is often to be found in public places, such as libraries or Business Link offices, it is also in the public domain. Marketers may be tempted to copy out names and addresses and use them without paying a royalty.

The Protection of Databases Directive has changed copyright law to prevent “unfair extraction” of this kind. Data owners have 15 years’ protection before their information becomes freely available, by which time it is likely to be of little use. The courts have also taken a strict line, as in the Profords case which found the company had mixed Reed Directories and Yellow Pages information, without carrying out any “sweat of brow” enhancement.

The free availability of published information (or even electronically distributed data) means data owners have to take steps to monitor its use. “Seeding is seen as the best way of maintaining control over our copyright,” says Angela Norton, marketing manager of reference services, at Dun & Bradstreet. “We place seed names in all our databases. If somebody buys it for a one-time use and uses it ten times, our seeds would receive those communications and we would know about it.”

Large scale data theft is relatively rare, but there are grey areas. “If you rent a phone number with a person’s surname and initial – if you ring up and get their full name, does that mean you have enhanced the data?” wonders Boardman. The bigger concern is just how much business information is going to be available to marketers once current planned legislation is passed.

If an individual within a business can opt out of receiving cold calls, what will be the impact on business marketing? Some directory publishers, like Yellow Pages, do not offer named contacts, so they are unlikely to suffer. But one outcome might simply be a return to less targeted marketing activity, which is likely to annoy business people even more. The lobbying is already underway. The number for the European Commission is in the telephone directory.