Doesn't AOL care? That's the question Brian Lund found himself baffled about last week. Here we've got a company that has dominated the Internet service provider (ISP) market practically forever, yet its customer satisfaction ratings trail those of its industry mates. How does America Online (NYSE: AOL) get away with it?
Brian pointed to a recent J.D. Power and Associates ISP customer satisfaction study in which AT&T (NYSE: T) WorldNet and EarthLink (Nasdaq: ELNK) led the pack with ratings well above average, while AOL came in below. "To stay competitive in the U.S. Internet industry, companies must offer a consistent level of service across all drivers of customer satisfaction," said J.D. Power analyst Kirk Parsons. "Both AT&T WorldNet and EarthLink clearly meet this requirement."
It seems correct that competitiveness and customer satisfaction ultimately rest on offering consistent service. Reasonable as it is, though, I find Parsons' comment about AT&T WorldNet and EarthLink off target. As Brian said, the opposite seems closer to the truth. As a measure of competitiveness, the gap between their subscriber numbers and what AOL has amassed (more than four times their combined total) clearly shows there's more to this picture. So, how do we reconcile this? I'd like to poke at the AOL riddle from a slightly different angle.
AOL keyword: consistent
"Consistent" is the keyword in Parsons' comment -- "companies must offer a consistent level of service." That word needs to be taken literally. Additionally, "all drivers" of customer satisfaction should be considered, not just those that are obvious and easily measured.
I believe the mistake in Parsons' and in much AOL analysis is how it equates, if only implicitly, a consistent level of satisfaction with a high level of satisfaction. Parsons compounds his mistake by trying to compare directly AOL to other ISPs, which generally have a relatively limited number of features in common with AOL. Other ISPs might indeed deliver those few things better than AOL, but that is not the whole picture.
In fact, the flagship AOL service offers far more customer satisfaction drivers than AT&T WorldNet, EarthLink, or any other conventional ISP offers, or even attempts to offer. That's why it's so easy to rattle off things about AOL that beg for improvement. Some of AOL's most basic features (email, anyone?) have been slapping us in the face for years -- that's also why it can be such fun slapping AOL back, even though I'm personally long the stock.
It's true that, by some measures, conventional ISPs offer a higher quality of service than AOL. But, it's at least as true that AOL simply offers a higher quantity of features and services that engage the customer directly, and that quickly become familiar and expected. Consistently meeting customer expectations is what produces customer satisfaction. AOL's been doing it for years. How well they've been doing it on a feature-for-feature level is an altogether different question.
You gotta remember, we're talking mainstream, everyday use here. Yet, even for demanding and experienced users (the opposite of the stereotypical AOLer), there are just two things ISPs need to get right: access and email. I've had several ISPs over the years, but never once used them for more than that, and actually stopped using my ISP for email some time ago and use a portal instead. On the other hand, there are dozens, probably hundreds of things AOL can get wrong as it probes the minimum standards of customer satisfaction.
Still, if AOL does nothing more than package things that regular ISP users would consider "extras" and offer them in an inviting, coherently laid out, and branded environment, it more than meets J.D. Power's criterion for competitive longevity: a consistent level of service across all drivers of customer satisfaction.
Brian said that marketing trumps service. I agree. The two can't be fully separated, though. Marketing can create awareness and lead us to the garden gate. But, once we're on AOL -- make that, once we enter AOL's environment -- the service continues to market itself by creating a sense of place that, online or off, is a condition of community.
The branded environment of AOL's much-maligned interface and the nut-and-bolts online service are essentially one. No ISP or portal has duplicated that experience -- not Microsoft's (Nasdaq: MSFT) MSN, not Excite@Home (Nasdaq: ATHM) with its remodeled browsers and extensive media properties, not the free ISPs with their persistent navigation banners, and certainly not EarthLink and AT&T WorldNet with their high satisfaction ratings from customers who visit the companies' home pages three, maybe four times a year.
Welcome to the machine
I'd like to believe that AOL will pay the price if it ignores product quality, but I don't currently have a lot of confidence that the company will eventually get its comeuppance.
The size and scope of the AOL machine gives it a great margin for error. It can get away with things, like missteps or overly ambitious reach, that less-extensive companies can't and wouldn't dare try. It's a luxury AOL shares with Microsoft. AOL users can feel as though the company ignores quality and takes them for granted. AOL critics have been consistently harsh, AOL's product quality has been consistently mediocre, but neither has cropped AOL's market share -- at least so far.
So again, how do we reconcile this? I believe that, by and large, what appear to be problems with product quality that AOL ignores actually are product attributes that AOL carefully manages. It might not seem this way as we're banging our heads against it, but there's little accidental about that garden wall. In the end, AOL doesn't succeed in spite of how badly it sucks, but because of how well it sucks.
Can 25 million AOLers be wrong? Would it matter if they were? Why not share your thoughts with other Fools on the Rule Breaker Companies discussion board.