AOL members threaten to walk
An Internet user's wish list is short: efficient access, reliable email, and quality customer service. But providers just can't get it right.
According to a new study, America Online (AOL) may be losing its cream-of-the-crop customers, as they walk away from the online giant in search of more reliable access with better customer service.
Nearly half of AOL members interviewed by the Find/SVP consultancy, said that they are "somewhat likely" or "very likely" to leave the service in coming months; 8 percent of them said they will "definitely leave."
And much to AOL's chagrin, the members who said they were most likely to leave represented some of the most demographically desirable users of the service: young family members with multiple incomes, according to the report.
AOL discounted the report's findings. "Their research was conducted during the height of our access problems, and old data leads to irrelevant conclusions," said Wendy Goldberg, a spokeswoman for AOL.
"We had a situation during the winter, and it is no secret how angry our members got. But they did not desert us, and we did everything we could to resolve the situation and are still working on it," she added.
But analysts say that turnover remains a problem, although it is not unique to AOL. Kate Delhagen, senior analyst at Forrester Research, said the constant churn of users is rampant in the industry. "The industry sort of shot itself in the foot. There are readily available free-trial offers so it doesn't cost anything to try other services."
Delhagen added that consumers also have increasingly high expectations from their ISPs--and, when those expectations aren't met, users are ready to try something else.
The good news is that Internet users aren't leaving the industry; they are merely hopping from one service to another. Customers are turning to local providers, from mom-and-pop ISPs to large telephone companies, because these are perceived as more reliable and better at customer service, according to Delhagen.
Name recognition is another big factor in consumers' decisions to switch services. "One of the biggest winners would be local phone companies and long distance companies," said Stuart Gibbel, a spokesman for ETRG, who conducted the study. He said consumers are likely to flock to companies they are familiar with because "they feel more comfortable using those companies."
Keeping them is another matter. Delhagen said ISPs need to provide 100 percent conductivity: access needs to be efficient and fast, and they must offer reliable email. Providers must also work on the intangibles such as customer service and loyalty incentive programs.
Gibbel noted that AOL was the target of the report because it is the largest consumer provider and because of the high number of customers who said they have experienced access problems. The study was conducted from February to April.
Analysts, however, don't buy it. Although AOL has admittedly had access problems in the past, which locked out users and fueled lawsuits, Lehman Brothers analyst Brian Oakes said this past April and May represented AOL's highest customer-retention rate in its history.
"People aren't leaving quickly. AOL is in a very healthy position in terms of usage and retention, new members, and demand in service," he said.
By the end of June, AOL will have spent $350 million building up its network. They have been adding 25,000 modems every month since January, Goldberg said.
"We will be done with the $350 million expansion by end of June, but this does not indicate that the buildup is finished. We will continue to add modems because we will continue to add customers," she said. AOL expects to have 8.5 million subscribers by the end of this month.