Tuesday, September 30, 2014

Is Low Customer Satisfaction a Result of Deliberate Strategy?

Sean Bergin, a founder of AP Telecom, just related a story that might explain why consumers rate their Internet service providers and video service providers so harshly. He explained that he used to spend $4,500 a month on his own phone, each month. That went on for years.

Finally, he found an alternative provider with a monthly recurring cost about half that much. That isn’t the point of the story, though. The point is that “not once” did his former service provider ever reach out to him to suggest ways to reduce his bills, offer a small token of recognition, or anything else, for a consumer account that big.

To be sure, anybody with knowledge of the economics of the consumer business would understand how difficult it is to create touchpoints of any sort with the “best” consumer accounts, to say nothing of the typical account.

Still, that anecdote probably explains why Vodafone is losing 100,000 customers a month in Australia, Bergin says. In 2011, Vodafone lost 500,000 customers. In 2012, Vodafone lost 500,000 customers in six months. In the first half of 2013, Vodafone shed a similar number of customers.

For whatever reason, suppliers of video services, phone services and even mobile phone services have tended to rank towards the bottom of consumer rankings in “customer satisfaction.” That was true of the May 2013 edition of the American Customer Satisfaction Index (ACSI) index, for example.

A separate analysis confirms the basics of the issue. Some firms do better than others, but as a class, video entertainment providers and telcos, and now telco-owned ISPs as well, rank in the bottom 10th percentile, according to an analysis by Temkin Group Research.

In fact, the bottom three industries were the mobile, Internet access and video entertainment categories.

Not much had changed in early 2014. Internet access service was the lowest ranked industry--last out of 43 industries--in the American Customer Satisfaction Index. Just above it--at position 42--is consumer satisfaction with video subscription services.

The old joke about outrunning a bear--you don't have to be faster than the bear, only faster than the other guy being chased--likely applies here, as the rankings show significant differences between contestants in the ISP and video markets.

But the latest J.D. Power round of surveys might suggest ISPs and video service providers are doing better.  

For video service providers, Satisfaction with performance and reliability has improved to 743 in 2014, an increase of 17 points from 726 in 2013, according to J.D. Power.
DIRECTV and Verizon FiOS (738) rank highest (in a tie) in TV customer satisfaction in the East region; AT&T U-verse (750) ranks highest in the North Central region; Verizon FiOS (751) ranks highest in the South region; and DISH Network (739) ranks highest in the West region, J.D. Power reports.

Satisfaction with ISP performance and reliability has improved to 700 in 2014, an increase of 37 points from 663 in 2011.

Verizon ranks highest in ISP customer satisfaction in the East (712) and South (725) regions; WOW! (Wide Open West) scores 728 ranking highest in the North Central region; and AT&T (704) ranks highest in the West region.

To be sure, to the extent that customer satisfaction is directly associated with customer loyalty, the rankings show relatively high unhappiness with most of the providers, and with the industry products compared to 41 others, according to the ACSI studies.

It might be unreasonable to suggest that customer satisfaction in the video and Internet access or mobile businesses is lowish because of rational decision making on the part of service providers.

Service providers, rightly or wrongly, might have concluded that the investment in additional customer service, recognition or other soft processes is not justified by the consumer customer lifecycle, lifetime value of an account and profit margins for such accounts.

That isn’t to say the situation is any way optimal, only to suggest service providers have made rational decisions.

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