Trying times

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Prognosticators said earlier this year that businesses might begin to see an economic turnaround in the fourth quarter. But October has arrived, and b-to-b direct marketers have seen nothing of the sort.

In fact, they—along with most of corporate America—face more challenges than ever. The economy shows no signs of substantial improvement anytime soon, and government regulatory issues are further dampening business activity.

Direct Marketing Association President-CEO H. Robert Wientzen said he is especially troubled by the sharp drop-off in prospecting by marketers as a result of widespread corporate belt-tightening. (See Q&A, page 21).

If marketers are renting names from list owners, those lists typically are much smaller than they were last year, said Jerry Cerasale, senior VP-government affairs for the DMA. "I think we really won’t see prospecting until at least 2003 and beyond," he said.

The current situation can be partly blamed on the U.S. Postal Service. The agency raised rates in July—the third time in 18 months—because of its woeful financial position, which many say puts its future viability in question.

A postal reform bill was shot down in Congress, and now various stakeholders support formation of a presidential reform commission.

"We reluctantly endorsed the commission because we felt, frankly, that was the only thing left to do," Wientzen said. "We’ve also spent time over the last few months talking with the [Bush] administration, trying to ensure the highest levels understand the issues of the Postal Service and the effect on the country and the economy, and we’re beginning to make some progress."

But Wientzen doesn’t expect rapid change. "We won’t see anything until the spring of 2004," he predicted.

While direct marketers try to make do with pinched budgets, they also face the prospect of increased government regulation. E-mail spam restrictions and federal requirements for telemarketing do-not-call lists are two major lightning-rod issues.

The spam debate

The longstanding debate over spam is far-reaching. To date, 19 states have enacted commercial e-mail laws. Restrictions vary from state to state, with five requiring that marketers put "ADV" in the subject line of messages. Others require ISPs to filter out e-mail deemed commercial.

One legal expert said the laws are not only unconstitutional, they’re ineffectual. "It’s like saying when you use direct mail, from now on you can only put it in a white envelope with the words ‘unsolicited mail,’" said Doug Wood, executive partner at Hall Dickler Kent Goldstein & Wood, which specializes in advertising law. "There’s not one direct marketer that would not scream bloody murder at that."

"You can’t enforce these laws in any meaningful way," Wood added. "The solution—some day, some way, somehow—is we’ll figure out a meaningful way to filter e-mail."

Originally championed on behalf of consumers, spam laws have ramifications for b-to-b marketers as well. The hot-button issue has discouraged many b-to-b marketers from embracing the medium. Also, at least some commercial e-mail is not reaching customers and prospects because of spam-filtering technology.

Janelle Poole, public relations manager for bCentral, Microsoft’s b-to-b division, said: "We have not been very active with e-mail marketing at bCentral because it is such a sensitive issue with customers."

Marketers tread lightly

Treading lightly seems to be the prevailing course of action. "We spend a lot of money compiling e-mail [lists]," said Monica Messer, president of infoUSA Inc.’s data and technology group. "We don’t want to misuse information, and we’re very protective of that data." InfoUSA markets 1.1 million business e-mail addresses.

"Our members are telling us they see problems with the amount of unsolicited commercial e-mail in their own in-boxes," the DMA’s Cerasale said.

Dianne Lucca, senior interactive marketing manager for IBM Corp., agreed. "The marketplace is very sensitized," she said, noting the volume of business e-mail she receives has risen dramatically. "It’s affecting people in the workplace. It’s affecting their time. It’s a lot more in your face."

Lucca predicted the problem will only worsen. "With the economy weakening, people will look at their overall direct marketing budgets. It’s a lot more economical to send out e-mail than a direct mail package," she said.

IBM is proceeding with caution and has indicated it has no plans to change strategy anytime soon. The company’s "Weekly Update" e-newsletter goes to hundreds of thousands of customers who’ve asked for it, but they don’t get general IBM e-mail unless they sign up separately to receive it.

While IBM has a corporate department that focuses on e-mail permissions and privacy, many companies still ignore the issue.

"Privacy is probably the No. 1 problem that is being paid the least attention to," said Chris Paradysz, CEO of list company Paradysz Matera & Co. Inc.

Privacy concerns are not limited to e-mail, as telephone marketers grapple with do-not-call laws and regulations.

"I really believe this is a bigger issue than we are admitting," said Ben Perez, chairman of Millard Group, a list company. "Twenty-seven states have do-not-call lists. That is not very far away from a do-not-mail list, and a do-not-e-mail list will come before that."

Both the Federal Communications Commission and Federal Trade Commission have proposed do-not-call regulations. Wientzen said a federal do-not-call list "is a bad idea." The DMA has maintained its own do-not-call list for more than a decade.

Do-not-call and b-to-b

While national do-not-call regulations would be clearly weighted toward consumer marketers, b-to-b marketers will also be affected.

"It’s less of an issue for b-to-b, but that doesn’t mean it goes away," Wientzen said. "There are a lot of small businesses out there, and a lot of them perceive information about them as personal. We have to be careful that we don’t treat small businesses like large businesses."

Attorney Wood, who also is general counsel for the Association of National Advertisers, said the legislative proposals are out of proportion to the problems they seek to address. "It creates hysteria way beyond the reality in the marketplace," he said.

Explaining that such regulation will only add to government bureaucracy and cost taxpayers money, he concludes: "It’s bad policy."

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