Review of the MCCA Direct Marketing Model Code of Practice Discussion Paper

3 Background

To assist those making submissions to this review, background information concerning the market in which the Model Code has been developed and currently operates is provided below.

3.1 What is direct marketing?

As defined in the Model Code, direct marketing means `the marketing of goods or services or the seeking of donations through a means of communication at a distance where:

• consumers are invited to respond using a means of communication at a distance; and

• it is intended that the goods or services be supplied under a contract negotiated through a means of communication at a distance.'

Direct marketing is a highly competitive industry comprising large numbers of firms, both Australian and international, using a wide range of direct marketing techniques to market a wide range of goods and services.

Direct marketing, whether in the form of direct selling, direct mail, telemarketing, direct response advertising or electronic shopping, involves the use of a database of contact details for potential customers. More sophisticated databases can be used, extending beyond merely containing customers' addresses or telephone numbers and including information on customers' previous purchases, their preferences and financial and demographic status.

3.2 Size of the market²

The direct marketing industry was examined in detail in 2000 by Tasman Asia Pacific, a consultant to the Taskforce on Industry Self-Regulation. The Tasman Asia Pacific Report is available at www.selfregulation.gov.au/taskforce.asp.

The size of the direct marketing industry is illustrated by the following:

• expenditure on direct marketing in Australia exceeded $9 billion dollars in 1998 and is currently growing at 15 per cent;

• 550,000 people are employed in direct marketing related activity in Australia;

• loyalty programs have been responsible for a two-thirds increase in the value of credit card transactions since 1995;

• telemarketing is currently growing at a rate of 25 per cent annually and employs 50,000 people;

• 1.3 million Australians made purchases using the internet in the year to November 2000 (ABS Cat 8147).

The above figures illustrate that direct marketing is a growing industry.

Further information is sought from participants on the size and growth characteristics of the direct marketing industry. As well as information on the size of the market, information is specifically sought on the nature and extent of problems in the market.

It should be noted that many businesses which engage in direct marketing practices, some on a large scale, in their submissions during the development of the Model Code stated that they do not consider that they are direct marketers. This is particularly the case with, for example, organisations in the finance sector. This points to the importance of defining the scope of the Model Code.

Discussion Points 6. Is the definition of direct marketing in the Model Code appropriate? 7. Do you have any information as to the size of the direct marketing industry? 8. What are your experiences with complaints in relation to direct marketing? Do particular types of activity raise more complaints than others? Does direct marketing cause particular problems for certain groups in the community (for example, older consumers, disabled people)?

Footnote:
2 Unless otherwise specified, statistics in this section are drawn from the Tasman Asia Pacific Report.

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