Market Access Denied

Having access to customers and markets are a key ingredient to healthy businesses and economies.

Nohria, Joyce, and Roberson, authors of “What Really Works”, report the key strategic reasons for mergers and acquisitions are (1) to gain access to customers and (2) to leverage existing access to customers. Building new routes to markets or leveraging existing routes are fundamental aspects of individual business growth strategies.

Likewise, the US economy grew after building the railroad infrastructure, the highway infrastructure, and more recently the internet infrastructure. Each of these infrastructures helped the economy by enabling businesses to access their markets.

On October 1, when the FTC fully implements the “Do Not Call”, the route to market for many companies will be sharply curtailed.

I will agree that telemarketers can be an annoyance. When attempting to relax with my spouse or, more often, while conducting research for a business article, the telemarketer calls to pitch a new credit card or mortgage. I find the intrusion unwelcome.

However, we also have to consider the “Do Not Call” Registry from the perspective of our economy. Unfortunately, we should anticipate it will have large and negative effects.

With the recent announcement of the ability to list your number at the FTC “Do Not Call” registry, the $80.3 billion telemarketing industry that was growing at 6.9% per annum will soon shrink by a likely 30%. That’s a $24 billion contraction in one sector. While it may be small peas in comparison with our $10.6 trillion economy, it will be felt.

Furthermore, though telemarketing may be unpleasant, it grew because it worked. For some markets, telemarketing was the most cost efficient route to market. As this route to market is closed, industries that have relied upon it will soon face greater barriers to creating new customers. They will have to seek other routes to market that are less cost efficient.

For instance, tobacco and liquor companies are limited in their access to broadcast media. Rather than closing shop, they turn to billboards and magazine adds to communicate their message. Similarly, closing market access through telemarketing or firms that once practiced telemarketing will likely place greater emphasis on traditional advertising and direct mail. Perhaps it will force the creation of many small outlets and kiosks for the good and services that used to be sold over the telephone. These routes are either less effective or more expensive. The long-term result will most likely be a price increase to cover the added costs of alternative marketing efforts coupled with a demand decline.

Limiting market access is an odd choice for a free-market, capitalistic country. As for myself, I registered our household at donotcall.gov.