Space Ramblings

Customer Service Wars Come to Netflix

The New York Times is covering Netflix’s adoption of US based call centers over outsourced Indian call centers and email communication.

Netflix set up shop here a year ago, shunning other lower-cost places in the United States and overseas, because it thought that Oregonians would present a friendlier voice to its customers. Then in July, Netflix took an unusual step for a Web-based company: it eliminated e-mail-based customer service inquiries. Now all questions, complaints and suggestions go to the Hillsboro call center, which is open 24 hours a day. The company’s toll-free number, previously buried on the Web site, is now prominently displayed.

Netflix is bucking several trends in customer service. Booz Allen Hamilton, a management consulting firm, and Duke University studied 600 companies last year and found a continued increase not just in outsourcing, but also offshoring, in which call centers are moved overseas.

The decision to invest heavily in telephone customer service was an expensive one for Netflix, but it may be one advantage that the company with the familiar red envelopes has over its rival with the blue ones, analysts say. “It’s vital in a world where they’re no longer growing their customer base,” Mr. Adams said.

It might be. Certainly customer service is one way to gain an advantage but it can quickly become an expensive one. That said email support has clear things in favor of it. Email support is far less time intensive. You can type up an email in minutes, get an answer that takes minutes to process. It is fast on both ends. Of course there is also less depth.

When the problem is minor email may be in theory a quicker way to resolve matters. But it’s of course also a remote and out of touch one. Email messages tend to feel colder and when your complaint requires actually getting action, phone tops email any day. It’s simply too easy for someone to kiss you off via email. It’s harder to manage on the phone… though plenty still do it.

Prioritizing an American call center is decidedly a major plus. I recently had my own technical problems via Vonage and dealing with an Indian call center dragged them out more than they had to be, made communication much more difficult and made me feel I was dealing with a disposable part of a corporation. American call centers are not necessarily the spots of sunshine and light that the New York Times article paints them as but they are easier to deal with.

The company has tried to give the service representatives more discretion in deciding when to assuage disgruntled callers with bonus discs and account credits — and they are allowed to err on the side of generosity. More often than not, a month’s credit will be issued or a missing disc marked simply as lost, and the customer will not be charged. Netflix places no particular requirements on call duration, preferring that customer service representatives take the time they need to keep a customer happy and loyal.

Which essentially turns Netflix into first class while reducing Blockbuster to third class service that gets you there but in no particular comfort. Of course the cost of first class service is also higher and that is going to be difficult to dodge in the long run.

Netflix has been successful but for now it seems to be orienting itself less at the early adoptees and more at ordinary Americans. How will that pay off only time will tell.

Certainly any company prioritizing customer service should be supported and that is obviously the message of the New York Times article, which Blockbuster can’t be very happy about. But at the same time Netflix is clearly adopting a tactic pioneered by a few executives and it’s unclear how long that tactic will last, particularly if Netflix continues losing customers.

More often than Netflix might like these days, people call to cancel their subscriptions. One reason for emphasizing direct phone contact over e-mail messages is that on the phone, a Netflix employee has a fighting chance of persuading the customer to stay.

Bingo. And that turns over the rock to reveal the real truth which is that customer service is also customer retention. And that consumers are leaving and consumer retention is a lot easier over the phone than it is via email. In other words Netflix is adopting the AOL strategy. It might be a kinder gentler version of it but it’s clear that the oregon consumer service people are playing an AOL game trying to coax Netflix customers to stay.

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