In the line of fire

Cost and time savings are driving growth in business conducted over the phone, with DRTV ads at the forefront. But there are still an alarming number of calls going unanswered.

Direct response television – DRTV – has undoubtedly been one of the main growth categories within TV advertising. Between 1994 and 1996, a major shift took place which saw the volume of DRTV commercials grow by as much as 275 per cent year on year.

In its 1997 research, BT and Channel 4 estimated that 25 per cent of ads now carry a phone number, more than double the 12 per cent it found in its first research of 1993.

As marketing trends go, this one seems irreversible. The development of TV as a medium is itself likely to fuel response commercials. Zenith Media estimates 153 channels will be on air by 2000, while digital TV penetration will reach 50 per cent in ten years. None of those channels will be delivering a mass audience on the current scale of ITV, and few are likely even to reach the scale of Sky Movies or Sky Sports.

Instead, they will be attracting viewers defined by one major characteristic, such as an interest in gardening, fishing or Manchester United. This is exactly what direct response advertisers are looking for – tightly defined niche audiences that can be reached at a viable cost per thousand.

But just as DRTV seems likely to become the mainstream, some issues are beginning to emerge which may put the brakes on its growth. “We have found that in the earlier part of the year, in connection with both automated and live call handling facilities, demand in quarter one of 1997 flattened compared with the year before,” says John Orsmond, chairman of DRTV specialist ARM.

This might not seem a cause for concern to most sectors of the marketing industry. But given that during 1995 to 1996 demand sign- ificantly outstripped supply for call handling support, any slowdown does require comment. And the seemingly endless investment in call centres by all types of industry means there is a lot of money riding on the growth of business-to-consumer telephone contact.

If in the future, one in 20 of us will be working in telebusiness (as some estimate), the calls we will be handling have to be initiated somewhere. For the move towards the phone is not just about more effective communications, it is about a reorientation of how companies and consumers want to do business. “Effective use of the telephone for modern business purposes means reaching more people more often in more places for more hours per day, all at a lower cost base and with a higher and faster return per head employed,” says Orsmond.

The calculation is a simple one. It costs 100,000 a year to keep a sales person in the field, but 60,000 to employ and equip a teleoperative – a cost-saving of 40 per cent. Likewise, if a company has an over-the-counter unit sales cost of 1.90, a direct mail sales cost of 97p and a phone cost of 63p, that opportunity to be 66 per cent more cost-effective is appealing.

DRTV has been proving itself to be the most powerful engine with which to drive a direct business and recruit new customers. But at the same time, problems are becoming more evident in managing this communications channel to maximum effect. BT/C4’s research says that 37 per cent of the calls being generated by TV ads are going unanswered. In research by the Teleusers Action Group (TAG), 66 per cent of the 106 clients surveyed said they experienced very bad problems with lost calls at their telebureaux.

Whether the calls are lost due to lack of capacity, poor systems or network overload is hotly disputed. What is inarguable is that the experience of failing to get through can alienate a customer or prospect, perhaps permanently. A groundswell of dissatisfaction is already evident.

In The Henley Centre’s “Teleculture Futures 1996” report, consumers were asked to rate organi- sations whose telephone service was at best fair and at worst terrible. While local authorities topped the list at 62 per cent, packaged goods companies were criticised by 52 per cent, supermarkets by 45 per cent and car manufacturers by 44 per cent. These are notably the new entrants into telebusiness. But even longer established players such as banks and building societies scored 30 and 29 per cent respectively, while insurance companies scored 27 per cent and catalogue companies 23 per cent.

No brand owner will want to risk appealing to the market if the outcome is a failed contact and possible annoyance. So how are DRTV advertisers dealing with some of the problems of poor infrastructure or systems overload? One example can be found in BT’s Friends & Family ad campaign, which won the Grand Prix at the 1996 IPA Advertising Effectiveness Awards.

An integrated campaign involving DRTV, direct mail and press, it drove membership of the scheme from 2.6 million in April 1996 to 13 million by early 1997. Within the campaign, the average response rate for TV ads ran at 0.03 per cent, with a high of 0.09 per cent in quarter one of 1996. In fact, in quarter three of 1996, BT pulled the key ad from the campaign because response rates were so high.

Speaking at the UK Direct conference, Heather McCann, head of external consumer communications at BT, revealed that, “we also had to downweight TV in the third week of the campaign”, because response was so strong – 33 million inbound calls. This amply demonstrates the scale of response which TV can generate, as well as the impact it can have on call handling systems.

BT more than any company should have the technology to deal with telebusiness. Even so, it has built a new telemarketing centre at Warrington, is planning two at Gosforth and Doncaster, and is upgrading its facilities in Bristol and Glasgow to cope with the new, phone-based way of doing business. This includes talking to its best customers through outbound calling. “It is putting ‘It’s good to talk’ into practice,” says McCann.

Getting the media buying right is one area where skills have been relatively lacking until recently. The number of true experts in this area can be counted on one hand. Ironically, this may have led to an understatement of the problem of lost calls, because ads are being run in slots which do not create response.

Orsmond says this may be happening as clients move DRTV budgets into the mainstream and out of research and development. “They may maintain an above-the-line brand-led agency which knows little about DRTV. That is why brand response TV has taken a hold,” he says.

BRTV, as it may be called, combines a brand message with a call to action. It is roundly condemned by DRTV purists as being a wasted opportunity. “Don’t place ads in spots which don’t deliver re-sponse,” says Orsmond. He also reveals that for one client’s campaign which used strictly response-driving ads, brand and product awareness reached 84 per cent. In other words, instead of dampening down the volume of response through branding creative and above-the-line media plans, brand and response goals can both be achieved by staying true to the discipline.

Direct Line is probably the best-known of the BRTV advertisers. According to a spokeswoman for the company: “Our argument is that TV is more for awareness, not a call to action immediately.” Since people only buy insurance once a year, Direct Line argues it cannot hope to be in front of a prospect at the right time. Instead, by maintaining brand awareness through TV and a strong presence in key response channels like Yellow Pages, any consumer who comes into the market is likely to put the company on their list.

Peter Fisher, general manager of product marketing at AA Insurance, acknowledged exactly this point in his own presentation at UK Direct. “Direct Line does not even have a freephone number, as my financial director reminds me every time he signs a cheque for BT,” he said. He notes that when consumers do go shopping for insurance, they are faced with hundreds of direct providers. The only chance of being one of the four the consumer calls for a quotation is through a sustained campaign of brand response TV.

Yet even this growing view is far from settled and is not yet reflected in the media schedules of six key direct insurers. The BT/Channel 4 research showed remarkable differences between them. At one end, Churchill is operating a pure direct response campaign. This involved putting 33 per cent of its commercials into daytime and 25 per cent into pre-peaktime. Just 20 per cent ran in early peak slots and less than ten per cent in peak.

AA Insurance is pursuing a self-declared brand response campaign. Half of its slots ran in early peak and 27 per cent in late peak, with 15 per cent in daytime and five per cent each in breakfast, coffee and pre-peaktimes through the day. At the other end of the spectrum, Direct Line’s brand campaign saw 28 per cent of its ads in early peak and 45 per cent in late peak. There was a small presence through the rest of the dayparts.

What such disparity between superficially similar advertisers suggests is that DRTV is a long way from being a fixed discipline. If the goal is simply to drive call volumes immediately, certain creative approaches and media plans do work. But at the same time they risk being compromised by flaws in call-handling capacity.

It is the nature of all response advertising that testing should be central to any decisions. But if it is the consumer’s patience that is being tested, the risks suddenly become much greater. It is in the interests of all parties – advertisers, agencies, media owners and network providers – to maintain the momentum of growth. The question is whether they can do so if there is no agreement about what exactly DRTV is.

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