by Dana Blankenhorn
Volume IV, No. XXXIV
For the Week of August 21, 2000

This Week's Clue: Customer No Service

This Week's Clue: Customer No Service

SSP (Shameless Self Promotion)

Amazon's Choice

A Guilty Pleasure - The Dot Com Deadpool

Why Prince Likes Napster

Clued-in, Clueless

Big Clueless companies find a recession to be the perfect time to cut back on customer service. Clark Howard , who makes his living exposing bad service and teaching people to demand good service, delights in referring to these departments as "customer no service." 

There's a reason for this. The biggest companies know they'll survive because they have lots of capital. By cutting all costs (including customer service costs) they maintain their short-term profits and keep that capital. Then they can buy the firms that have maintained their goodwill, add that to their balance sheets, cut the customer service costs again and move on. The fault here lies with the stock market, which values physical assets but doesn't value goodwill.

The solution is for big customers to refuse to be pushed around. Last week Rebecca Blumenstein of "The Wall Street Journal" detailed how this is hurting AT&T. (The WSJ hasn't pushed the story in front of their firewall, unfortunately, so there's no link available.)

Big businesses are deserting AT&T in droves, she wrote, because chair Michael Armstrong tried to milk them for profits to buy and upgrade cable companies. In response, Armstrong is beefing up the sales force, which won't work either. The winners in this case are outfits with new gear that take advantage of Moore's Law. The new stuff costs less, works better, lets them do more business with fewer headaches (lowering customer service costs and raising profits) and gives those with older plants a headache. 

The same thing is happening in the consumer space. United Airlines is being hammered for bad customer service, putting its merger with U.S. Airways in doubt. The strike against Verizon Wireless is all about customer service - the people delivering it are tired of being hosed. 

It's unfortunate, but in the short run Wall Street does not properly value good customer service. Earthlink is a great example of this . This company has the best customer service in the consumer ISP business (at least among the publicly traded outfits), yet its stock chart looks like Nixon's nose. They deserve a lot of credit for staying the course. They just gave me some free firewall software for my DSL line, before I asked for it. Most companies would see this as a chance for an up-sell, but Earthlink should benefit from lower churn among its DSL subscribers. It already pays less for marketing per new subscriber than its rivals do. Unfortunately churn is measured over years, and if the Street doesn't see it on the bottom line right now it won't credit it. Frankly this is the street's fault - not Earthlink's.

Retailers understand that customer service can be a matter of survival. Comp USA once had the best customer service in its industry. When that disappeared so did the company. Even here, however, the street's premium for goodwill is very small, as you can see in this chart comparing the price of Federated Department Store stock (bad customer service) with Nordstrom's (good customer service)

If you're not publicly traded you can freely use what I'll call Earthlink's Clue. Don't use customer service as an up-sell - use it as a chance to thrill your customer and build goodwill. Let your customers become your fans and they'll do your selling for you. It's true that some will "hose" you - grabbing benefits and returns they don't deserve. But most people are good, and even the bad customers can do you a lot of good. 

A decade ago my late father came to visit for a few days, and we took him to a seafood restaurant. He didn't like the lobster and although it wasn't their fault the waiter gave him a free slice of key lime pie. It was one of the best evenings of his life - he told everyone he knew about it. The restaurant is still in business. 

SSP (Shameless Self-Promotion)

You can now hear your weekly Clues online at KenRadio. I'll be spending a few minutes each week there, and hope you'll find the time to spend it with me.

I'm still making myself available for consulting to a limited number of clients, with an eye toward assuring their long-term success. If you're interested give me a shout at 404-373-7634.

Also, please pass this along to friends and urge them to join our list. And don't forget our new e-mail address .

I write daily for ClickZ, and weekly at Andover.News. I write monthly for  NetMarketing, Boardwatch, and  Intellectual Capital. I've been in Advertising Age and the Chicago Tribune . Once every other month I'm in CLEC Magazine. Twice each month I'm at OneChannel.Net  and I've recently joined the staff at ISPWorld. You can always buy my book . Subscription instructions are at the bottom of each issue.

Remember that it's journalism that keeps the Clues coming...

Takes on the News

Amazon's Choice

I've been puzzling all week over Amazon's deal with Toys R Us , asking myself whether or not it makes sense.

It's clear this was a deal Amazon was forced to make. Analysts have been hammering the stock, and its fans have been at a loss to explain why . The fact is that Amazon's plan to become a fulfillment company was always risky. It invested ahead of sales growth, and when sales growth slowed (as it had to) the stock got hammered.

With this deal Amazon starts putting that fulfillment capability at the service of others . In some ways this is just like its Zshops. Amazon handles the fulfillment and customer service. The partner (in this case Toys R Us) takes the inventory risk. Amazon gets paid either way. The big risk on Amazon's books was unused capital. Measuring a warehouse's fulfillment capability against actual sales is a lot like those "factory utilization" numbers manufacturers talk about.

How can this go wrong? What can an Amazon customer service rep do if Toys R Us doesn't have the next Pokemon adequately stocked this Christmas, preferring the higher margins it can get in its own stores? So you see there is a risk, but it's a risk Amazon must run. If Amazon can work out similar deals with once-burned retailers in other sectors this could be the beginning of its comeback.

A Guilty Pleasure - The Dot Com Deadpool

I shouldn't admit this, but I have gotten a big kick out of FuckedCompany.Com (http://www.fuckedcompany.com), the dot-com deadpool.

It's not that they deliver real news. Other sites are much faster in describing such big-time blow-ups as the disappearance of Value America or lay-offs at Kozmo . Sometimes the site even makes mistakes - who cares that Mapquest is cutting staff since they're owned by AOL ?

No, it's the attitude I enjoy, like a headline describing trouble at iVillage's Kewlminds.com (http://www.kewlminds.com/) - "Let's Get Mikey - He Clicks Anything." It's the unalloyed cynicism, the feeling of "yeah - they deserve it" that resonates. There's a lesson here for all of us. The same dudes you misuse on the way up, you might meet up, on the way down.

Why Prince Likes Napster

The artist once again known as Prince Rogers Nelson is no David Bowie, no techno-buddy. He is ill equipped to make big money outside the recording industry.

So why was he making approving noises over Napster to Reuters? It's because he knows, as few contemporary artists do, just how venal the industry is toward the work. He changed his name to protest Warners' ownership of his recording masters, and only changed it back after his contract with the company expired.

Further evidence can be found in Wired, which reported recently on a little-known change to copyright law, passed just last year, that gives record companies total eternal control over the recordings of artists. (It makes their recordings work-for-hire, so the copyrights never revert back.) The industry claims it is now working with Congress to change the law again, but that's not the point. Greed is the point. Anyone who continues to side with the industry needs to look carefully at the links in this story before opening their mouths. Seen in the context of this ongoing exploitation, even humor on the subject starts to look unfunny.

Clued-in, Clueless

Clued-in is VA Linux for committing to custom software configurations on its Linux boxes . In the name of full disclosure I recently acquired 106 shares of this company through a stock option. But it's hard to get a jump on Dell (which my IRA also owns) and these folks have done it.

Clueless were those who hyped the Internet's coverage of the political conventions. Traffic at news sites was down, few people tried the polls, and hardly anyone wanted the silly extra camera angles. If there is a Bush revolution this year, it will be televised.

A-Clue.Com is a free weekly email publication registered with the U.S. Copyright Office as number TXu 888-819. Subscribers can receive either a .txt file or .htm file. The .htm version features links that become active from inside a browser. To take your name off the list, simply write REMOVE as the subject, or content, of a message replying to any issue. To request your free copy, write us at Dana@a-clue.com  or +A_Clue . To subscribe you can also write to mailto:a-clue@list.audettemedia.com with the word "subscribe" in the subject. (Address your request for the .txt version to a-clue_textonly@list.audettemedia.com .Problems with unsubscribing? Contact our Postmaster: We're on the Web at http://www.a-clue.com/and http://www.ppn.org/clue.