Pressure for companies to do more business more quickly and with fewer employees has forced acceleration in direct and database marketing. As a result, some observers believe that a few large global companies with sophisticated telecoms equipment have secured a permanent advantage over small local players.
John Orsmond, chairman of marketing communications consultancy ARM, is concerned about the formative condition of the UK market in the face of powerful overseas competition.
“There is massive investment in new technologies, driven by wider availability to more companies at falling prices. Companies are investing in systems rather than recruitment. But a skills and resource shortage in telecoms and technology is damaging the UK direct marketing industry,” he says.
Fraser Watson, managing director of Ogilvy & Mather Teleservices, agrees that the skills shortage is a significant problem. “There is a lack of good quality staff, both from an agency perspective – like people on the phone – but also among the people running those operations. Unless the industry starts putting in some proper training and development, in 18 months the problem will have escalated,” says Watson.
Orsmond says outside interests have already started to seize the ground that local telemarketers are neglecting. “Without urgent action and increased investment, the UK is vulnerable in the global market. With a mature US infrastructure capable of plundering the UK, there isn’t sufficient investment to ward off hostile threats to the home-grown telemarketing industry,” he says.
Someone who knows all about this aspect of the industry is Leah Ragiel, marketing and commercial director of Market Reach, the British sister company of US-based Tele Link Systems. But she does not believe that the growing overseas investment in UK telemarketing is cause for concern.
“The rapid growth of the UK telemarketing sector means there is lots of room for more players, both small and big.
“Telemarketing is such a big area and there are so many different aspects, I don’t think any one company can really excel at all of them.”
However, Watson estimates that about 20 per cent of the UK’s agency volume is now in the hands of companies outside the UK. He believes that although this trend will continue, it masks a situation that is relatively stable: “There is a myriad of other suppliers, some are specialist in terms of their application and others are local in terms of their geographical location or linked in some way to a market research organisation.”
Natalie Calvert, managing director of the Calcom Group, agrees that globalisation of the telemarketing industry is a major factor and will continue. “I think we’ll see more US companies coming to the UK. A lot of the large bureaux are now doing more global work. The smaller ones are much more UK-based.”
If some action must be taken for the UK telemarketing industry to withstand current and anticipated pressures, is unchecked local growth the answer? And just how fast is the industry actually expanding?
Watson estimates, on the basis of figures from BT (which is looking at it from the perspective of network traffic provision) and soundings from his agency’s clients and suppliers, that the growth rate of telebusiness in the UK is running at between 40 and 45 per cent, which, in his view, is “steep”.
Ragiel says she is impressed by the speed at which the local market has developed. “When we came into the market three years ago, the use of telemarketing for sales-type programmes was really just beginning. Some companies were using inbound telesales, but hardly anyone was doing outbound,” she says.
Much of the subsequent growth, she notes, has been among the bigger players. “The major consolidation has certainly been at the top of the market. We’ve seen a lot of new companies coming in, and also some tremendous growth among the key players. But I think you can get too big, and I would caution against that.”
How technologically competent are the smaller players by comparison? Ragiel asserts that the degree of technological sophistication a small company achieves is a matter of choice. “To buy an automatic call dialler (ACD) or a predictive dialler is a significant investment but it’s not prohibitive. However, there will always be small telemarketing firms that do small projects and run them manually,” she says.
Yet small agencies are already feeling the effects of expansion as giant service providers enter new fields in search of increased the profit margins.
Says Watson: “With some of the major pieces of work that we pitch for, people like AT&T and BT are with us on the pitch list, and very soon we will be pitching against the cable, water and electricity companies.”
In the face of such formidable competition, Orsmond is concerned about the tendency of small and medium-sized organisations to lag behind in the information race. “This is worrying due to the large number of smaller companies in the UK. Those that fall behind will perish,” he warns.
He pinpoints another disturbing factor, particularly in the telebureau field: the highly volatile nature of client/supplier relations. A recent study produced by ARM revealed that two-thirds of client users had been with their external suppliers for less than a year. Insufficient capacity and lost calls were key client concerns. In-house facilities faced similar difficulties. “The problem is that these systems are mechanism-driven but component-built, and therefore vulnerable to the weakest link,” says Orsmond.
Craig Proctor, head of CCN Business Support Services, which recently won a pitch for Channel 5 business, says a flexible approach essential. “The telemarketing boom is highly diverse, with much of its growth occurring in areas that are new developments – not just for telebusiness operators, but for customers as well.
“It is a confusing buyer’s market, with a varied supplier market. The buyer must ask: how has the supplier met previous challenges? Does it have the capacity and willingness to be flexible? And has it already got the ability to measure and analyse the progress of projects?”
The obvious way to satisfy client demands, Ragiel believes, is by moving towards niche telemarketing. “We’re going to see more and more specialisation, whether through the type of telemarketing that companies are involved in or for whom they work. Many large telebusiness companies are reorganising their operations into industry specific groups.
“We’ve always found that it works; that is how we can deliver a high quality of telemarketing. By focusing on those areas, we’re already very far along the learning curve. When a new client comes to us, all we need to do is the overlay training about their particular way of packaging the product,” she says.
Calvert observes a growing dualism in the market. “The industry is becoming fragmented. There are two types of telemarketing agency: those for whom telemarketing is their core business, and those giving more of an added-value service. It’s been a gradual progression, but it has accelerated in the past 18 months with recent acquisitions and mergers.
“Also, companies that currently have telemarketing as an added value service are recognising the key role that it plays in enabling them to lock into a client on a long-term basis. What will be key for the future is the integration of technology, people and processes to provide a combination that will work effectively for a client,” says Calvert.
Watson predicts a three-tier structure for the industry in years to come. “Tier one is the large players in the market which are moving to handling very large scale, multinational, response-oriented campaigns. The second group are people who, like ourselves, are looking at the telephone not just as a response mechanism or a service provider but as a link with other marketing and advertising media.
“The third group consists of people who are simply good call centre providers, who provide a quality service at a reasonable price to people who want, for example, to do 5,000 calls on a one-off project.
“If they try to make that leap into tier two or tier one, there are going to be people who miss the ledge and fall off.”
But Calvert offers encouragement for low-volume providers which are discouraged by having to compete with the array of services larger organisations can offer.
“Often in a smaller agency you will get more of a human touch. The larger bureaux are also going much more into partnerships or strategic alliances where they share some of the cost and risk and also some of the benefits, whereas the small ones are working much more on an hourly type rate. The smaller agencies still appear to be much more flexible and able to work on more intricate telephone activity.”