Sorry, Right Number

By John Greenwald

Dr. Elizabeth Orsay was hard at work in the trauma center of Chicago's Lutheran General Hospital when she was called away from a patient to answer the phone. To her anger and dismay, the caller was a telemarketing pitchman who was touting a special buy on film. "He managed to get through by deceiving the secretary," the still steaming physician recalls. "I told him that what he had done was totally unethical."

That kind of thoughtless assault on privacy has helped put telemarketing high on the list of industries Americans love to hate. Whether you are just sitting down to dinner or anxiously waiting for your beloved to say, "I will," the phone pests always seem to call at exactly the wrong time. Often the despised intruder is not even human, but a recorded sales message delivered by a rapid-fire automatic dialing machine.

Yet, in defiance of its bad reputation, the business of peddling everything from cruises to credit cards by phone has become one of the hottest sectors of the U.S. economy and a bright spot in the job market. The value of goods and services sold over phone lines zoomed from $56 billion in 1983 to more than $300 billion last year. At the same time, employment in the business climbed from 175,000 workers to 5 million, and telemarketers expect to hire an additional 4.6 million people by the end of the decade.

The industry has flourished because companies find telemarketing a highly efficient way to deliver their spiels. With the price of postage rising faster than telephone rates, marketers can reach out and harangue people for less than a third of the cost of direct mail. "While a segment of people complain about telemarketing, it's still supereffective," explains Robert Blattberg, a marketing professor at Northwestern's business school. "You don't need a huge response rate to make these things work. You only need a 1% to 2% success rate for telemarketing to be effective."

Calls to consumers, as constant as they seem, are a relatively small part of the industry. Pitches to other businesses generate more than 80% of the revenues of telemarketing and account for some 90% of its jobs. Companies routinely sell one another computers, aircraft and other products by phone because it is far cheaper than maintaining large sales forces. Telemarketers can reach business clients for about $10 a completed call, in contrast to the $800 it might cost a firm to have a salesman knock on the door. Says Brenda ) Bazan, an IBM marketing executive in Northern California: "We simply don't have enough people to get new customers, and we view telemarketing as a support system."

It is the consumer end of the business that sparks the most complaints. Many pitches to homes are not only annoying but also criminal: phony offers of Florida real estate and other telescams bilk households out of as much as $40 billion a year. Both houses of Congress passed bills to enable regulators to crack down harder on such abuses after FBI agents raided 95 telemarketing offices and arrested 210 people on suspicion of fraud earlier this year. The measures will now go to a House-Senate conference committee, with a final version expected to reach President Clinton's desk this fall.

Regulations already on the books give consumers the right to have their names removed from telemarketers' lists. But an effort to ban recorded sales pitches has run afoul of free-speech protections. After Congress in 1991 prohibited the use of autodialers that delivered taped messages, an Oregon chimney sweep challenged the measure in federal court. Three months ago, he won a ruling that struck down the law; the FCC is expected to appeal.

For all the enemies the industry has made, it has been a boon to job-hungry small towns and cities, particularly in the Midwest. Omaha, Nebraska, became the telemarketing capital of the U.S. in the late 1980s by creating tax breaks and other incentives to attract the pitchsters. The policy has helped lure 27 telemarketing firms that use 10,000 local employees. "The industry grew up here and today represents a significant portion of our economy," says Rod Moseman, a Chamber of Commerce vice president.

In the hamlet of Schaller, Iowa (pop. 850), a firm called Schaller Telemarketing has helped ease the loss of two of the town's three popcorn plants. Lucy Huldeen, 69, pushes bank cards and auto-club memberships from Schaller's offices, but she is no fast-talking operator. Says she: "I understand that the last thing people want to do sometimes is talk to someone who is selling something, and I try to sympathize."

It takes more than sympathy to soothe telemarketing foes like Bob Bulmash, who runs Private Citizen, an Illinois-based group with 2,500 members. Bulmash puts his members' names on a "Do not call" list that he sends to more than 1,100 telemarketers. Firms that call anyway can expect to be sued. "If privacy doesn't exist in our homes," Bulmash says, "it doesn't exist at + all." The rapid growth of telemarketing promises to test the much maligned industry's respect for privacy over and over again.

With reporting by Elizabeth M. Brack/San Francisco and Julie R. Grace/Chicago