Beyond Call Center Metrics

It is easy for call centers to forget the importance of ROI (return on investment) to prospective clients. Many centers fail to realize that their services are not limited to answering calls and offering customer support. In fact, despite the significance of call center metrics, this alone does not tell the entire story.

In order to sustain client relationships, call centers need to think beyond call center metrics. They must strive to understand their clients’ exact needs. Besides inquiring about call volume and hours of operation, centers should ask questions such as: What are your outsourcing objectives? Do you have any sales targets/goals for us? Who are your competitors? What are your current sales/support targets? What can we do to create the best ROI?

PRACTICAL STEPS
While utilizing the call center’s calls for new thinking on the client’s part, the call center must also understand each client’s unique needs. Here are some practical steps for success:

• Stay abreast of new marketing strategies.
• Attend trade shows and develop contacts with other vendors.
• Provide business consulting, especially for clients new to using call centers.
• Provide current data on the client’s competitors.
• Offer a clear picture of what the client can expect.
• Help each client understand their goals and how to achieve them.

Not every business is looking for the lowest cost option. Many clients are willing to invest in a call center that fully understands their business needs and creates profit. They need a call center with a track record of producing great ROI. More importantly, they need a center that is fully committed to their success and strives to exceed their expectations on all levels.

It is the call center’s responsibility to frequently update clients on its progress. The center should devise incentive programs to reward customer loyalty and attract new customers. Surprisingly, clients often fail to inform the call center of their concerns. If call centers do not communicate with clients regularly, they may lose their client base. So every call center must take the initiative to communicate with clients regularly, even if things are going well.

The call center can also use service calls to gauge customer satisfaction. This can mean asking:

• What can we do to make things better?
• Are you interested in any other product of ours?
• Was the infomercial interesting?

When this information is passed on, clients can make improvements and be more competitive.

Choosing the right call center can be confusing for any client. So it is very important that call centers be prepared to go the extra mile for their clients. Any good call center understands the importance of call center metrics. But not many are willing, or even able to go the extra mile.

It’s the call center’s responsibility to be committed to its clients’ success and increase their bottom line. For any call center that fully understands this commitment, it means going beyond call center metrics. This ensures the most coveted prize–success.

Suresh Dakshina is senior marketing manager at InSO International Call Center. He can be reached at (626) 531-6080, or via e-mail at suresh@inso.us.

Which Should Come First: Radio or DRTV?

Should you test radio before you launch a DRTV campaign? Yes! Should you try radio after you’ve built success on television? Absolutely! The fact of the matter is that radio and television work very synergistically, regardless of which medium comes out first. We have had a number of clients test radio first, hone the message, understand the drivers and build up some traction before jumping into DRTV–and we’ve similarly taken successful television campaigns and converted them into DR radio stars. Here are the lessons learned from either progression.

Radio Takes the Lead
In the increasingly competitive and risky world of DRTV, there is a lot to be said for the ability to test multiple creative messages and offers, clearly identify your most responsive audience and train your inbound team prior to launching a DRTV campaign. That is one of the greatest values that DR radio has to offer–it allows the marketer a “laboratory” where he or she can test numerous variables that have a direct correlation to their ultimate TV campaign–for a fraction of the price associated with a typical infomercial campaign.

This “real world” approach–where you accumulate both experience and empirical data, not to mention cash flow–is far more useful and accurate than focus groups or other pre-launch surveys. Granted, not every product is appropriate for a “radio first” strategy, but we have seen it pay huge dividends for players in the lead-generation space.

Two lead-generation clients–both of whom had started out in direct mail before considering a move into electronic media–approached us to conduct national tests. We started with relatively modest budgets and focused primarily on creative testing. The ability to test numerous creative messages simultaneously is one of radio’s greatest strengths and, as is often the case, we found that some spots worked extremely well, while others fell flat. This variance is key–too many marketers try radio with a “one-and-done” approach whereby either the first spot succeeds or the medium is a bust, when nothing could be farther from the truth. You need to test multiple radio spots or else you risk pulling the campaign prematurely.

As part of the normal testing protocol, we expanded the placement of the winners, pulled the losers and immediately saw cost-per-lead (CPL) results that met or exceeded each client’s expectations. We also tested numerous offers, inbound scripts and other key variables to not only improve the CPL, but ultimately lower the cost per order (CPO) well under the client’s target.

The key to the story is not what we did, per se, but that a radio-first approach allowed both clients to try a number of key elements of the campaign in practice before spending the tens of thousands of dollars necessary for a television campaign. DRTV was always their goal, but radio served a very strategic role in conditioning the campaign before being thrown into the television ring. The end result: both campaigns went on to be massively successful on television using the exact scripts, offers and other elements that we had proven to be successful on radio. Ultimately, the volume of results from television was significantly larger than our radio tallies. However, that success may have never come to pass if it had not been for radio contribution pre-TV.

Radio Follows Suit
One of our current success stories on radio faced the daunting challenge of living up to the expectations and performance levels established on television. Suffice it to say that this campaign was a mega hit on TV and frankly, some members of the client’s team felt that radio was a waste of time. Not only did they expect radio’s results to be way off the mark monetarily, but honestly, they just did not see how we were going to be able to reproduce their “recipe for success” from television.

The fact is that we didn’t reproduce their “recipe.” Instead, we came up with one of our own, totally unique to radio and its particular capabilities and characteristics. The end result was a radio-specific approach with results as profitable (or in some cases, more profitable) than those coming from DRTV.

The point of the example is to show that in order to allow radio to be successful, you cannot expect it to march in beat with the exact methodology or messaging that may have proven successful on television. Contrary to what some believe, radio is not “television without the pictures.” It is a unique medium that has its own means of conveying a value proposition and moving the audience toward response.

In this example, the audience was certainly familiar with the product from television, but the only way they related to it was through the carefully crafted–and in their minds, potentially artificial–medium of the infomercial. The testimonialists weren’t people they knew or related to on a personal level, so how was that suspicious listener to know whether or not the product really worked, rather than simply being skillfully packaged?

Enter the on-air radio personality and their credibility with that audience. Now, instead of an anonymous testimonial, you have someone the audience knows, relates to and trusts saying, “I’ve seen it on TV, too, but now I’m going to see if this thing is real or not.” Once that on-air radio personality validated that the product did perform as well as the examples shown on television, the audience’s trust was won over and the response was overwhelming.

Radio definitely benefits from the awareness and messaging that may precede it on television, but in order to be successful as a stand-alone medium, it needs to express that value proposition in its own unique way. Too many marketers come to radio with a “just do it like we did it” mentality, and then when radio fails, they blame the medium instead of the methodology. Again, not every product that works on TV is going to work on radio, but for those who do have the potential for cross-over, the approach should be one of “here’s what worked for us–please take from it what you will and do whatever you need to make radio its own profit center.”

Buck Robinson is president and CEO of Glen Allen, Va.-based Robinson Radio Inc. He can be reached at (804) 726-6400, or via e-mail at buck@robinsonradio.com.

The Battle to Shape the Future of Mobile Computing

Apple and Google are engaged in an epic battle to profit from mobile computing, as mobile phones become the computers of the future, according to a recent article in BusinessWeek. These two companies are similar in many ways. Both are admired by consumers, they each have over $20 billion available for research, product development and acquisitions, visionary founders, competing smartphones, web browsers, music and tablet computers, which positions them as major rivals moving forward.

Google became a direct competitor to Apple’s iPhone with the recent introduction of its Nexus One smartphone that utilizes Google’s Android operating system. Apple recently purchased Quattro, which specializes in mobile advertising that targets consumers based on their behavior, after being outbid by Google for mobile ad company AdMob. With the acquisition of Quattro, Apple is aiming to make the current form of mobile search obsolete by developing new types of mobile ads.

MOBILE MARKETSHARE
Steve Jobs is trying to revolutionize mobile advertising the same way he changed music players and phones. One way he could accomplish this is by using Apple’s geo-location technology to deliver ads that are relevant to your location. Apple also has access to valuable consumer information, including which apps, videos and songs mobile users downloaded and detailed customer data such as credit card numbers and home addresses that will allow them to combine advertising and e-commerce in new ways, per BW.

It’s predicted that within five years, more people will access the Internet through mobile devices than through desktop PCs. Mobile advertising today is only $2 billion compared to the $60 billion online ad market. Mobile search is still in its infancy, but it will account for 23 percent of all searches in 2016, up from 5 percent today. So there’s potential for Google and Apple to tap into billions of dollars in revenue through the sales of mobile phones, software, ads, apps and services as the mobile market grows.

The key to success is through Google or Apple figuring out a way to make mobile more profitable by winning the mobile ad battle and sharing the revenue with app developers. “The mobile platform that creates the most ways to make money wins,” noted David Hyman, CEO of MOG, in BusinessWeek. Apple has a big lead over Google with 125,000 apps developed for Apple devices vs. only 18,000 for Android devices.

Google CEO Eric Schmidt believes that mobile ads will become more important than PC advertising because of the personalization and localization, according to BW. Schmidt speculates that mobile phones might one day be free with advertising paying the way. “If Google could do that, they would be untouchable. Apple wouldn’t be able to come up with an answer for that,” commented technology consultant John Metcalfe to BW.

The rivalry between Google and Apple should be fascinating to watch as these two technology titans battle to dominate the mobile computing space in the years to come.

Peter Koeppel is a Wharton MBA and president of Koeppel Direct, a full-service media buying agency based in Dallas. He can be reached at (972) 732-6110, or via e-mail at pkoeppel@koeppelinc.com.

DRTV: Down, But Not Out

Some television networks, and even some agencies, are questioning whether DRTV has a future. A panel at ERA’s Great Ideas Summit even asks the question: Will DRTV go the way of the newspaper industry? It is easy in difficult times to see nothing but gloom and doom. And there is no denying the fact that these are difficult times for media and marketers of all stripes.

But let’s step back, take a deep breath and exhale slowly. DRTV isn’t going anywhere.

THE DRIVING FACTORS
Networks and stations are concerned about DRTV media rates that have been on a steady decline for several years. A time period that might have sold for $5,000 five years ago might be sold for less than half that rate today. There are various reasons for this decline including: the dilution of the audience through the increase of new networks and expansion of digital cable; increased daily Internet usage (Twitter, Facebook and YouTube); the opening up of more paid programming time to DRTV advertisers as traditional ad spending continues to decline; and, of course, we can’t overlook the poor overall economy.

As a result of all this, we hear rumblings from networks that they will have to insert station programming back into what is now being sold as paid. But, the reality is that the networks will not generate any more revenue from regular programming–and, in fact, probably will generate less–than they do from DRTV. Ultimately, station programming would still be competing for the same viewership as paid programming, and subject to the same degree of audience segmentation.

At the end of the day, networks know that DRTV provides a steady revenue stream, even if it is smaller than it once was. This would explain why networks are actually increasing–not reducing–their paid programming inventory. With ministerial and humanitarian programs also being hit hard by the poor economy, these organizations are not paying large premiums to the networks for long-term commitments as they did in the past, which is also creating a greater network need for DR dollars.

From the client perspective, there remains plenty of interest in getting DRTV schedules on the air. The clients still count on the media, as long as the rates are in line with response. Smart marketers will continue to produce hit shows that can spend $1 million a week on television. In other words, there is an ample supply of DRTV product/content and money ready to be spent. And there’s still a very healthy market for a hit DR show.

Peggy Gobel is vice president, director of cable media at Cannella Response Television. She can be reached at (262) 763-4810, ext. 31, or via e-mail at pgobel@drtv.com.

Weight-Loss Battles Heat Up

The New Year ushers in the height of the diet season during which marketers of weight-loss programs and products vie aggressively for their share of the marketing pie. This diet season, however, has brought increased challenges for marketers of weight-loss products.

First, the Federal Trade Commission’s (FTC) newly issued testimonial and endorsement guidelines, which took effect in December 2009, have required most marketers of weight-loss products to reevaluate and edit their existing shows for compliance with the new guidelines. Absent clear direction from the Commission, marketers struggled to find creative ways to adapt existing shows to the new guidelines and to then secure clearance from the networks, some of whom have taken a somewhat conservative view of the guidelines’ requirements.

Online marketers of weight loss, business opportunity and other perceived high-risk products and services loss were greeted following the New Year with news that their merchant accounts were being shut down by MasterCard. Many of the impacted sites involved the marketing of products via free trials or other forms of negative option marketing, which are currently subject to intense scrutiny not only by the credit card companies but by the state attorneys general, the FTC and the class action bar. While the state of negative option marketing and card-on-file transactions are outside the scope of this article, it is safe to say that the landscape for these transactions is rapidly evolving and the future of post transaction marketing–at least in the online environment–remains uncertain.

While marketer attention has thus understandably been focused on regulatory and merchant account issues, a recent lawsuit filed by Weight Watchers against Jenny Craig serves as a striking reminder that your own competitors can be a powerful source of potential challenge, as well.

WEIGHT WATCHERS V. JENNY CRAIG
In mid-January, Weight Watchers filed a lawsuit under Section 43a of the Lanham Act against Jenny Craig. The Lanham Act is the section of the trademark law that allows competitors to sue one another over false and misleading advertisements. Remedies under the Lanham Act include injunctive relief and monetary damages, which can include treble damages where the deception is willful. At issue in this lawsuit are claims by Jenny Craig, in print, broadcast and online advertising that clinical studies prove that Jenny Craig’s clients lost over twice as much weight as those on the largest weight-loss program.

Although Weight Watchers is not explicitly named in the advertisements, the reference to the largest weight-loss program is a clear reference to Weight Watchers and there is ample case law supporting the proposition that a competitor does not need to be specifically named in order to bring a claim for false advertising against a competitor.

According to the Weight Watchers complaint, in order to support this claim, Jenny Craig relied on the results of two separate and independent tests–one conducted by Weight Watchers over 10 years ago and another conducted by Jenny Craig. The Weight Watchers study, which was conducted 10 years ago, was a randomized two-year trial that was actually designed to compare the weight-loss and health benefits achieved and maintained through self-help weight loss with a structured program. According to the complaint, the Jenny Craig study was designed to test in a randomized controlled trial whether participation in the Jenny Craig Centre-based program and/or the Jenny Direct program is associated with greater weight loss at six, 12 and 18 months and whether weight loss is maintained over a 24-month period compared to self-help conditions. Thus, neither study was designed to directly measure weight loss achieved on one program as compared to the other.

Weight Watchers has alleged in its complaint that the studies upon which Jenny Craig is relying cannot support the advertising claims at issue. First, according to Weight Watchers, although Jenny Craig’s advertisement compares Jenny Craig’s current weight-loss program to Weight Watchers’ current weight-loss program, the Weight Watchers clinical study was conducted on a program that was in existence over 10 years ago and is at least four generations removed from the current Weight Watchers program. Because the Weight Watchers program has undergone significant changes and modification during this 10-year period, Jenny Craig cannot compare the results of its weight-loss program to the results achieved on a Weight Watchers program that is no longer in effect.

Secondly, and perhaps most significantly, Weight Watchers has alleged that in order to support a comparative claim between Weight Watchers and Jenny Craig, Jenny Craig must conduct a randomized head-to-head test between the current Weight Watchers and current Jenny Craig programs. In essence, Weight Watchers is alleging that the only type of testing that can support a direct comparative claim between the two programs is a direct head-to-head test between the two. If Weight Watchers prevails on this point, this would certainly place at greater risk many current weight-loss advertisements that contain broad and often unqualified superiority claims without any corresponding head-to-head testing.

THE RAMIFICATIONS
This current battle between Weight Watchers and Jenny Craig is the latest in the series of brand wars that dominated the traditional advertising marketplace during the past year. A comparative advertising lawsuit under the Lanham Act can be a very powerful tool through which competitors can attack each other’s advertising. While direct response marketers have not resorted to Lanham Act litigation with the same fervor as traditional marketers, as the economic climate continues to place pressure on marketers and as branded products become more commonplace in direct response, it is possible that the brand wars trend will find its way into the direct response community as well. At the very least, this case between Weight Watchers and Jenny Craig is one that should be closely monitored by the direct response community, as it will certainly establish some important precedent regarding the type of substantiation required for these types of comparative claims.

Linda A. Goldstein is a partner and chair of the advertising, marketing and media division at Manatt Phelps & Phillips LLP in New York. She can be reached at (212) 790-4544.

Painting the Town Red

Those who questioned the decision to move ERA’s mid-winter gathering–now known as The Great Ideas Summit–from Miami to New Orleans after many years, may not realize that the call for change was made within months of Hurricane Katrina, when the world’s collective sense of duty to the ravaged region was fresh and acute. It’s hard to believe that the disaster occurred well over four years ago and as the industry gathered, news of Haiti’s crushing earthquake brought back memories of Katrina–and stark reminders that life has been anything but easy in the Big Easy.

But to the industry’s credit, more than 50 colleagues gathered together on the Sunday before the conference in concert with the Beacon of Hope Resource Center, a New Orleans grassroots nonprofit organization aimed at helping areas impacted by Katrina. Together, an army of direct marketing professionals weathered near-freezing temperatures and painted hundreds of yards of fence in a public park that was once flooded. There was the sales guy, slopping as much paint on as quickly as possible and calculating his net contribution in terms of square footage; partners working in unison and others wandering apart; and, of course, the anal-retentive COO trailing some 20 feet behind everyone else to ensure that no spot was left unfilled. It was a veritable blender of work styles, impulses and predispositions, yet unified by a common purpose.

Afterward, local residents shared some first-hand stories of their Katrina experience: Possessions left water-logged, unrecoverable or lost forever; the rescue of pets that had survived for days on nothing but pluck; and the sense of dread upon returning to what was once their homes. They shared a final sentiment: gratitude–gratitude that strangers from all parts of the country and the globe would take time out of their weekend to lend helping hands, hands numbed by frost, yet thawed by good humor and a spirit of camaraderie.

That experience set the tone for the rest of the NOLA experience. It was a vivid reminder of what is unique about New Orleans–its people, genteel and gracious and the finest of hosts; its culture, a strange gumbo of southern, Cajun, voodoo and swamp; its music that runs the gamut from jazz to blues to zydeco; and perhaps most of all, its cuisine, delectable beyond reason, although containing more calories than you can work off in a P90X sweat fest. The nightlife? Let’s just say it’s the X-Games of Excess. In short, all of the reasons why New Orleans is worth restoring to its fullest vitality, and the perfect spot for the direct response industry to gather, do business, network and collaborate.

So, while some may have lamented the lack of sun, New Orleans generated its own kind of heat ignited by the flicker of gas lamps, the glow of new faces and sparks borne of novel, exciting experience. As one Ellen Glasgow once commented, “The only difference between a rut and a grave is the dimensions.” If the direct marketing industry has learned anything over the past many years, it’s that embracing change is imperative. So, while one might not want to make a regular diet out of deep-fried alligator, hopefully everyone can agree that without the likes of such risky fare once in awhile, reality would bite.

Rick Petry is a freelance writer who specializes in direct marketing and is a past chairman of ERA. He can be reached at (503) 740-9065 or online at rickpetry.com or www.twitter.com/thepetrydish.

How Can One Website Outperform Another?

Our clients tell us that every web marketing company out there claims their DRTV landing page websites have the best performance. By “best performance,” I think we all understand it as a website that will generate the most revenue per visitor or, put another way, the highest conversion rate and the highest average sale.

I guess we (web marketers) all better say that if we want to get clients and stay in business. So I make the same pitch. But inevitably the client or prospect says, “You guys all say you have the best performance. So what makes yours better than the next guy’s or the one my friend built me. How can any one website outperform another?”

This is a good question. How can one website possibly outperform another? To the uninitiated, it may not even seem logical that this could be possible.

A MULTITUDE OF LITTLE THINGS
The truth is, we have done thousands of tests over many thousands of orders. In doing so, we have discovered a multitude of (seemingly) little things that affect performance and, as a consequence, we have discovered that one website truly can outperform another.

We have won and lost thousands of tests against ourselves over the past three to four years, and we continue to discover new things that both help and hinder performance. And knowledge of each is equally important.

Speaking of this “multitude of little things,” can you guess what a few of them are? Can you estimate how significant of an impact they can have on your business? Without getting so specific as to give away trade secrets, we know that by doing one certain thing on a landing page, we can improve your conversion rate by 50 percent or more.

Did you know that by structuring the presentation of your offer in a certain way, you can improve your RPO significantly?

Did you know that placing text in a certain location or picking the wrong headline can cut your response rates in half?

Two websites rarely perform exactly the same even if you change only small, seemingly innocuous elements. In fact, I have seen the scenario with two otherwise identical websites, where two–two!–words were added to a page on one of them–and in 10-point type–and response dropped by 80 percent!

So believe me, seemingly similar websites do perform quite differently, and the difference in results can have a dramatic impact on your bottom line. In this sort of environment, there is but one truism: you gotta test, and test constantly!

Think about it, would you have the guy down the street who has a video camera shoot your commercial instead of hiring a talented producer with the experience needed to make it a success? Of course not!

Why? Because you know that two different commercials for the same product can yield drastically different results. The one produced by your neighbor and his camcorder would never get the same response as the professionally shot and edited version from a pro.

The same is true on the web.

If you are only running one version of your website–in other words, if you’re not testing–you’re getting out-hustled and out-performed by the guy down the street. Assuming you have multiple website creatives for the same product running on a single platform, here are the four fundamentals you need to have in place to determine which one is the best-performing site.

You need a traffic splitter and an accurate reporting mechanism.

You then need some kind of testing plan to determine which items to test. (This would include things like the positioning of different site elements, headlines, form configurations, Flash vs. HTML, plus dozens of other items.)

You need a platform on which to conduct progressive A/B split or multivariate tests against a control, continually moving forward with the winners of each test.

You also need a technical platform specifically designed to execute and report usable test data. We have one we call AutoCart.

Once you have these basic elements: a traffic splitter, parties focused on accurate results, a testing plan and a testing platform, you are ready to begin.

As an example, let’s say you want to begin by testing something simple like background coloration or the positioning of the video on your website. To test the video player, you would build four or five versions of your site with the video player in various locations on the page. Then, run a minimum of 1,000 orders through the splitter and you would notice that at least one of the five sites will provide higher conversion and revenue. (In a recent test case we conducted, the location of the video that provided this boost was the lower left position.) Next, you would apply this to another five websites for other products and see if the results replicated. If they did, you would know you were onto something and could expand your testing process to additional items. Once you tested those, you could move on to the next ones. The process needs to be continual.

Once you have done this process for three to four years, conducted over 1,000 tests on all elements of website designs, layouts, buttons, logos, seals, copy, upsell configurations, positioning, etc., we think you’ll have a different view on whether all websites perform the same.

Bob Greenstone is CEO of Permission Interactive Inc. in San Diego. He can be reached at (619) 708-7456 or at bob@permissioninteractive.com.

Reflecting on Great Ideas

The days following ERA’s twice-annual conferences always present an opportunity for staff to decompress, debrief and reflect on the event. And while there are always aspects that we can–and will–improve upon, it’s with a sense of satisfaction that I look back upon The Great Ideas Summit 2010.

I must confess that there was a certain amount of trepidation leading up to the summit–which introduced not only a new name, but a new venue (in fact, a new host city–New Orleans) and an entirely new education program, as well. But I am pleased to report that the industry embraced the changes. More than 750 members of the direct-to-consumer commerce community were in attendance, setting a new standard for ERA’s mid-winter event. It was a gathering of industry leaders, with c-level executives making up more than half of those in attendance. Some 350 companies from around the world were represented. In fact, international attendees–from 40 countries–comprised more than 25 percent of the total, confirming again the truly global nature of the industry and your association.

While the statistics are impressive, it was the attendees’ level of engagement and the quality of the dialogue across a variety of crucial industry topics that set The Great Ideas Summit apart. Panelists from the education program–including industry leaders who regularly speak at conferences around the country–were consistently impressed with the level of audience interaction and the quality of the discourse. For example, there was the session on online best practices where the questions began 30 seconds into the presentation and continued until 10 minutes past the allotted hour. Or the “bonus” and up-to-the-second briefing by legal experts regarding MasterCard and its position on post-transaction marketing. Or the spirited question-and-answer session following the keynote address presented by the FTC’s David Vladeck. This truly was a conference characterized by vital and dynamic debate, where the most critical issues were not only discussed, but advanced.

More needs to be said regarding post-transaction marketing. ERA has been proactive in addressing member concerns about MasterCard merchant accounts and has been in direct communication with MasterCard’s leadership team. They have indicated that they do not anticipate introducing new guidance and do not currently endorse or plan to endorse the guidance of any individual, corporation or association. Your association will continue to keep you abreast of relevant developments as they occur.

There also has been intensifying interest in government regulation of online marketing and post-transaction activities. The Senate Commerce Committee, the Federal Trade Commission and state attorneys general are examining the use of pre-acquired account information, free-trial offers, free-to-pay conversions and other forms of advance consent marketing. During the summit, Bureau Director Vladeck addressed his concerns about emerging practices, noting that “the Commission strives to keep up with developing technology and ensure that marketers are held accountable for their actions.” In anticipation of future activity, ERA is working to educate relevant parties about appropriate industry practices. As part of this effort, ERA is actively consulting an issue-based task force to consider revisions to ERA guidance. As proposed legislative or regulatory changes are formed, you can be certain that ERA will respond in a way that supports appropriate marketing practices.

An Examination Of Recent Legal Developments In Mobile Advertising Along With Practical Considerations For Direct Response Retailing Over The Mobile Channel

By Karen L. Neuman

The accelerated growth of mobile commerce, combined with the acuity of location-based applications makes it possible for direct response retailers to use the mobile channel for locally targeted mass marketing. One estimate, according to Mobile Marketer, puts worldwide mobile phone connections at 4 billion; while another by Neustar and SMS Mobile Marketing predicts that mobile revenue in the United States will reach $3.3 billion by 2013. SMS text messages dominates mobile advertising in markets like the U.S.

Regulators and courts are trying to keep pace, attempting to balance business interests in accessing consumer data and tracking habits for operational and transactional efficiencies against consumers’ interest in protecting privacy and controlling the collection, storage and use of their information.

This article highlights some recent legal developments that could be important as you consider adding the mobile channel to your ad campaigns, and offers some practical tips that can be taken to address potential risks.

FTC PRIVACY ROUNDTABLE DISCUSSIONS
The Federal Trade Commission (FTC) has broad jurisdiction to protect consumers from unfair and deceptive practices and promote fair competition. It has used these powers to protect against fraudulent or deceptive advertising. A familiar example for the direct response industry are the October 5, 2009 amendments to the agency’s long standing guides concerning the use of endorsements and testimonials in advertising. The FTC has also exercised its authority to engage the industry and the public in formulating an appropriate framework for protecting privacy and ensuring data security in online behavioral advertising and the mobile marketplace.

The linchpins of the current approach to privacy in the United States are privacy policies, industry self-regulation and nonbinding fair information principles (FIPs). The FTC is now examining, through a series of “privacy roundtable discussions,” whether this approach is sufficient given perceived new risks to privacy posed by the proliferation of more invasive data collection and tracking technologies.

The FTC seems to be particularly interested in: 1) the convergence of offline data collection technologies–such as biometrics and loyalty card analytics–with online data to create a ubiquitous data environment; 2) technologies such as “flash” or other “super” cookies that override consumer privacy preferences; 3) the sharing of social networking data with third parties, including mobile applications for advertising; and 4) how far down the chain consumer preferences should be honored as between first and third parties.

The roundtables are not formal rulemaking proceedings. They do suggest, however, that the FTC is questioning whether the current approach to privacy and data protection goes far enough. It is unclear if there will be immediate regulation. One probable outcome is increased enforcement under the Federal Trade Commission Act. Other plausible scenarios include revisions to the FTC’s FIPs and heightened degrees of protection for sensitive data, such as individual financial or health information. In addition, the record developed from the roundtables could form the basis for an FTC report to Congress in which greater rulemaking authority is sought. This could, in turn, result in proceedings to codify existing guidelines and some of the proposals discussed at the roundtables. These could include regulations aimed at bad actors with safe harbors for other entities that meet specified requirements.

Given this fluid regulatory environment, there are some practical steps that can be taken when planning a mobile ad campaign.

• Comply with industry best practices and be familiar with the FTC’s Online Behavioral Advertising Guidelines.
• Disclose the extent of tracking, retention and uses of data, including your policies for sharing with third parties, and provide opportunity for meaningful notice and consent. Tailor disclosures to mobile device screen size and resolution.
• Undertake a review of your terms of service, privacy policies and data security policies, updating them as necessary to address new technologies or to reflect actual or anticipated changes in the law.
• Refrain from using flash cookies, other super cookies or technologies that override consumer privacy preferences. Refraining from using these tools is a good way to differentiate your company from others. Otherwise, fully disclose their use with clear opt-out directions.
• Collect only as much information as necessary for the specific transaction and retain it only as long as necessary.

SMS TEXT ADVERTISING
SMS text advertising involves sending no more than 160-character messages directly to customers’ mobile phones to deliver information about a brand or product, direct them to websites or call centers, or otherwise engage them with mobile coupons, contests and sweepstakes entries or products like DVDs. SMS enables marketers to target and reach an audience that has elected to receive messages and is seen as more likely to respond with greater immediacy than they would with other media.

The features that make SMS appealing to advertisers also raise red flags for regulators and consumer groups. They include the uniquely personal, location-based nature of mobile phones and the corresponding ability to mine, acquire, retain and share individual data for profiling and targeting. SMS technology increases the potential for the receipt of unsolicited text messages or mobile spam in violation of federal and state consumer protection laws. In addition, multiple parties are typically involved at various stages of creating and sending SMS text ads, increasing the possibility that a customer’s consent to receive content from one party will be improperly shared with third parties. This in turn heightens the risk that a customer’s stated preferences will be ignored and their information misused.

A federal appeals court in California recently addressed these concerns in Satterfield v. Simon & Schuster. In that case, the plaintiff brought suit under the federal Telephone Consumer Protection Act (TCPA) for an unsolicited text ad received by her son after she downloaded a free ringtone for his cell phone. The ringtone was downloaded from a website operated by Nextones. The text ad was sent as part of a book promotion launched by publisher Simon & Schuster. The publisher outsourced the campaign to a marketing firm that obtained lists of cell phone numbers, including the plaintiff’s, purchased by another entity from various websites, including Nextones. During the course of the ad campaign, five companies accessed or acquired the plaintiff’s phone number before the text ad was ultimately received some two years after the ringtone was downloaded.

First, the court had to consider whether the TCPA applied. The court concluded that it did, finding that 1) SMS messages are calls within the meaning of the statute, and 2) equipment with the capacity to store, generate randomly or sequentially dialed numbers and call those numbers is automatic dialing equipment within the meaning of the statute. It returned the case to the lower court to determine whether the equipment used to generate the SMS message met those criteria.

The court went on to examine whether the consent given for the ringtone applied to each of the entities in the campaign chain. The court concluded it did not. The third parties involved in the campaign were not “brands” or “affiliates” to which the original ringtone consent applied because they shared no corporate structure or corporate relationship with Nextones. The fact that Nextones licensed its subscriber list for use in this campaign was found to be an insufficient degree of affiliation for purposes of the reach of the Plaintiff’s consent.

This case offers some practical “dos and don’ts” when planning an SMS campaign in the U.S.:

• Know your privacy policies and TOS agreements and follow them.
• Know which law(s) could apply based on the equipment used to store and disseminate the campaign’s SMS.
• Specifically identify the ad campaign and the entity that will be sending the SMS text. Do not send messages to a consumer who has not given express consent to receive these messages. Confirm that third parties with whom you contract comply with required consent(s).
• Do due diligence on lists of cell numbers used for the campaign to determine the precise nature and extent of provided consents.
• Do due diligence on all companies in the campaign chain that obtain a consumer’s mobile number for compliance with the consumer’s consent, including any stated restrictions.
• Comply with industry best practices governing recommended disclosures.
• Although not an issue in the case, refrain from engaging in practices that could reach or attract children. If you do engage in those practices, make sure you comply with applicable laws and regulations.

This case and the FTC roundtables suggest that the interests of direct response retailers and those of your customers may be more closely aligned than you might assume. While it may seem burdensome to implement some of the practical steps suggested here, doing so could differentiate your company, creating a competitive advantage and building good will for your brand or product.

FCC “NET NEUTRALITY” RULEMAKING
An important proceeding that could affect how direct response retailers use the mobile Internet to reach customers is the Federal Communications Commission’s (FCC) net neutrality rulemaking proceeding.

The FCC has jurisdiction over domestic and international communications involving wireline, wireless, satellite, radio and cable. The D.C. Circuit Court of Appeals is considering a case that could clarify the FCC’s jurisdiction over the Internet and the extent of its authority to regulate mobile and other broadband Internet Service Providers.

In October 2009, the FCC initiated a proceeding to consider draft rules that would require broadband ISPs, including various providers of mobile wireless broadband, to provide Internet access for unaffiliated applications, services, content and devices on a nondiscriminatory basis and subject to “reasonable” and “transparent” network management practices.

There are two aspects of this rulemaking that direct response retailers should be aware of.

First, the FCC is considering whether it will permit ISPs, including mobile broadband providers, to employ certain practices to manage traffic over their networks. Some of these practices include using tools that enable ISPs to distinguish among different classes of traffic for prioritization and scheduling transmission, particularly for high bandwidth use applications like video, gaming, and streaming content. Other proposed network management practices include usage-based mobile data pricing or time of day pricing.

Second, the proposed transparency requirement, if adopted, will require ISPs to disclose their network management practices. It is possible, therefore, that ISPs will compete on the basis of these practices, thus enabling businesses, including direct response retailers, to “comparison shop” as they formulate their mobile advertising plans. With sufficient competition, for example, time of day pricing could be a factor in launching an SMS contest or other campaign. The potential for latency could vary from one carrier to another and should be similarly factored into when a campaign’s SMS messages are sent. Similar consideration should be given, if possible, to terms in agreements among ISPs disclosing the extent to which transmission prioritization determinations will be honored as traffic is handed off from one to another.

In the context of this rulemaking, the FCC is exploring ways to find new spectrum (the range of electromagnetic frequencies allocated for various purposes, including mobile communications), and better use existing, underutilized spectrum (through compression technologies, sharing and other arrangements) to support the rollout of 4G mobile networks. Increased spectrum availability could enhance mobile advertising by adding capacity to mobile networks. In order to add this capacity, the FCC could try to create incentives to encourage existing spectrum holders to relinquish or share their spectrum. For example, the FCC could guarantee broadcasters distribution of their content in exchange for their spectrum. It would be important to know the practical consequences of any such agreements for purposes of planning your campaigns and anticipating the potential for latency as a result of these agreements.

THE TAKEAWAY
This article examines some recent federal regulatory initiatives and legal proceedings that you should be aware of when adding the mobile channel to reach consumers. You should also be familiar with applicable data protection laws, including those intended to guard against identity theft, and pertinent state consumer protection and common law–topics that are beyond the scope of this article. There may also be instances where laws of foreign jurisdictions apply, and you should know when those laws are triggered.

A common theme that connects the proceedings discussed here is a focus on meaningful disclosures of terms and conditions that enable users to make informed decisions about participating in the mobile marketplace, whether the user is a consumer receiving content over their mobile device or a DR retailer seeking optimal circumstances for delivering mobile advertising messages to consumers. Companies that take proactive measures to address these issues will be better positioned with respect to potential enforcement or other legal proceedings. They will also put themselves at a competitive advantage in the mobile marketplace as the mobile channel expands beyond existing technologies and mobile marketing continues to mature.

Karen L. Neuman is a partner in St. Ledger-Roty Neuman & Olson LLP, a Washington, D.C. law firm specializing in technology, media and telecommunications. She can be reached at kneuman@slrno.com.

CEO Keith Stewart Breathes New Life Into What He Calls An “18-Year-Old Startup.” The Industry Veteran Talks About Changing The Company Culture And Restoring Customer Confidence In The Brand.

By Vitisia Paynich

For years, ShopNBC had been struggling to capture market share, while its rivals vied for the No. 1 and 2 spots. To differentiate itself from the competition, this $517-million multichannel retailer, headquartered in Eden Prairie, Minn., focused its energy on more high-end product categories with a high pricepoint to match. The average selling price was around $200. However, this business model proved too challenging, leaving the company with mounting debt and growing customer dissatisfaction. And in the past 18 months, the company has had three CEOs.

ShopNBC, owned and operated by ValueVision Media, was determined to shift the tide and transform itself into a formidable adversary in the electronic retailing space. In 2008, the company coaxed Keith Stewart out of retirement and convinced him to take on the role of COO.

Stewart joined the company with impressive credentials. He spent 20 years in retail, 15 of which were with QVC in merchandising and operations. In 1998, he relocated to Germany where he successfully launched QVC Düsseldorf. Prior to his retirement, Stewart had created the largest international televised retailer outside of the U.S.

Why did this industry veteran come out of retirement? “Because I’m a lousy golfer,” quips ShopNBC’s CEO. Although Stewart was self-effacing when first asked this very pointed question, he insists that he was up for the challenge. In fact, he believes in the company so much that he elected to forego his first year’s salary to prove it.

In addition to jewelry, ShopNBC now concentrates on other product categories like apparel and home goods.

Stewart was named president and CEO one year after coming on board. And in the time he has taken the reins, ShopNBC has turned the corner by not only broadening its customer base to 1 million but also increasing its online business by 38 percent–a number that continues to climb. In addition, he’s aligned himself with other seasoned home shopping experts including fellow QVC alums Randy Ronning, who serves as ShopNBC’s chairman, and Bob Ayd, who was promoted in January to president.

Electronic Retailer caught up with Stewart to learn more about how he’s been able to put ShopNBC on the right path.

Electronic Retailer: When ShopNBC approached you to come on board nearly 18 months ago, how would you describe the company’s financial state at the time?

Stewart: It was tenuous at best. You have to be candid with yourself if you’re going to take a big step like that and you have to take a very objective look. At that point in time when I was interviewing, the balance sheet was OK. They had a very long list of strong assets, but the company had been losing thousands of customers every month. And for almost 18 years, the company did not deliver a profit. So, that’s an immense change to have to make, not only in business results but also in the overall culture of the organization. But there was just an awful lot of opportunity in front of us.

ER: Did this cause you to reconsider joining the company?

Stewart: No. I’ve spent considerable time at a startup in Germany and I viewed this as an 18-year-old startup. They have plenty of opportunity and with the right business decisions, the right direction, and the right team, success is imminent.

ER: During that time, about two-thirds of ShopNBC’s distribution agreements were due to lapse at the end of 2008. How did you turn that around?

ShopNBC crew members prepare the set for the next show.

Stewart: I wish it were just the distribution agreements; it would have really simplified everything. Looking at it from an employee’s perspective and vendor’s perspective, there were three CEOs in 18 months. The morale was very low among the organization. As I mentioned, the company was losing thousands of customers every month for quite some time. The business operations itself really drove high return rates and low customer service ratings. We were focused primarily as a jewelry retailer, and we had looming debt of $44 million coming due very soon. On top of that, we had distribution contracts that were set to expire. So, there was an awful lot going on all at once.

Carving out the distribution footprint, what we did was put together an affiliate relations department. Secondly, we knew we had complete control of the negotiations with the MSOs and satellite companies and we approached this very much as a win-win situation. They knew from our requests that we had to lower our costs. They also knew it was important that we continue to provide content for them and for their customers. Fortunately, we did renew 100 percent of those contracts. And not only were we successful in re-upping the distribution, but we also dropped $24 million out of the expense line. In many of the larger markets, we improved our channel positioning.

ER: Part of your new business model includes recruiting what you’ve described as the “Gold Standard” of executives. How does their experience factor into the restructuring process?

Stewart: Their experience complements the larger group of employees at ShopNBC. And that mix is a very powerful one. Many of these people you are referring to have seen the movie. It’s a very competent group of people who are focused on business results and on customer centricity.

ER: When Electronic Retailer interviewed ShopNBC in May 2007, the company was on the path toward becoming more multichannel-oriented. Does this remain part of your current marketing strategy?

Stewart: It’s central to our marketing strategy. We’re going to serve the customer any way he or she wants to be served. So, those portals–as technology grows–go beyond the platform of merely television. It is a dot-com platform. It is a mobile platform. And we were the very first electronic retailer to launch on a mobile platform with the iPhone. While we continue to improve that technology, one needs to bear in mind that the customer is everywhere. If it’s on Facebook, MySpace or Twitter, we need to continue to service them in the many ways that they want to be serviced. So, we’ll continue to broaden the ShopNBC strategy as part of our multichannel distribution efforts.

ER: What is ShopNBC’s unique value proposition?

Stewart: The unique value proposition starts with our positioning in the market as the premium lifestyle brand. At the end of 2008, our average selling price was over $200. And we knew we had to lower that average selling price to open up access to more and more customers. Our stated goal by the end of 2009 was right under $100 and we did hit that goal. However, that is not about lowering quality–it’s about opening pricepoints and broadening our appeal to our customers. We continue to offer big brands like Movado, Sony and Samsung. And we will continue to build new product categories with notable brands and intellectual properties. Recently, we launched Ted Gibson hair care, Vapour color cosmetics and Via Spiga handbags. Ed Hardy is very timely and profitable and we’ve been very successful with that brand. It’s about offering different products that are meaningful and relevant to the customer.

ER: So, with a lowered average pricepoint of $98, you’re not going after a completely different customer but broadening your customer base?

Beauty is just one of the product categories that ShopNBC intends to expand by offering top name brands.

Stewart: That’s exactly the point. We’re broadening our customer base and in fact, our customer base in 2009 grew 36 percent amid some very difficult economic times for retail. Our new customers grew over 520,000–that’s 60-percent growth in 2009. When we hit the milestone of 1 million customers at the end of December, it was an immense change in the overall structure of this organization. So, we’ll continue that torrent customer growth as we continue to successfully turn this company.

ER: The jewelry category was once a mainstay of the company’s overall product mix. Going forward, will this still be the case?

Stewart: Jewelry is still an important part of our business and will continue to be, but it won’t be the only business in which we operate. We’ll be a general merchandise retailer offering many different product categories to our customers. As I mentioned, we’ve gotten very serious in the beauty category with hair care and color cosmetics. We’ll continue to grow our apparel business. We’ll continue to expand our home business with our domestics and textiles. We’ve been very successful in launching gourmet foods. As we continue to launch different product categories and expand our existing ones, it’ll be a complement to jewelry. But we certainly aren’t planning at all on doing anything but growing that business and making it productive.

ER: Prior to you joining the company, ShopNBC was plagued by high return rates on merchandise. What changes have you made to reverse those numbers?

In 2009, Suzanne Somers joined ShopNBC with her full product line and loyal legion of fans.

Stewart: The first thing we had to do was change the culture. We had to say our high return rates were bad because the customer didn’t want to keep the product, and thus, returned the product. Now that may sound over-simplified but it’s something you really have to look at as a culture of an organization. We started with customer centricity. What does he or she want from ShopNBC as it relates to product and services? Second, once we changed and accepted that, we had to install systems that allowed us to measure the business results specific to cancellation and return rates, productivity and the like. We did install those systems and put in place benchmarks for each product category. We also installed rigorous QA and QC standards and systems in our business process. Now we have total transparency as it relates to our overall goals and targets. Again, these goals and targets are not merely financial. This is all to benefit the customer and it’s not only about creating customer centricity, but connectivity to the customer. So, our goal is to offer that customer a meaningful and relevant product that she likes. If she opens the box and we exceed her expectations when the product arrives at her home, then we’ve done our job.

ER: Given your vast experience in the international marketplace, are there plans for global expansion?

Stewart: This is in our future without question. However, we have much to do domestically before we start to lay the plans for global expansion. We are focused on driving shareholder value, growing our customer accounts, improving our customer service metrics, leading connectivity with our customer, and delivering consistent results each quarter. And as this business continues to be more consistent and predictable, we will start to lay the foundation for additional, organic growth opportunities.

ER: What is your personal stake in ShopNBC?

Stewart: I think the more important question is: What is the insiders’ stake? And, that means the management, the employees and the board. Of the total economy, insiders are 12 percent. So, certainly you can see this organization is very much aligned with the shareholders and the stakeholders like our vendors. As it relates to my personal stake, it’s a little less than half of that.

ER: You’ve set a goal of three to five years in which ShopNBC will double its sales. Given that the economy is still struggling to recover, is this a realistic timeframe?

Stewart: The economy does not control our future. This is an 18-year-old startup. If you look at the productivity, we are about $7 in sales per home. That contrasts with others that are $58 in sales per home. So, there is a lot of opportunity with our existing distribution to become more productive. I would say certainly, a three- to five-year time period is more than reasonable.