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Impact of Blog Storms on the Bottom Line?

I’m going to play devil’s advocate and pose a question that makes new media evangelists like myself wince. It goes something like this: What if blog storms were nothing more than a pressure valvea way for consumers to blow off steam, with no measurable impact on sales or valuation?

Which begs the more specific question:

Does the quality of an organization’s customer service have a measurable impact on sales? As a proponent of new media, scenarios like the Jeff Jarvis Dell Computers fiasco, or Apple’s decision to sue bloggers for leaking what they considered to be trade secrets, or more recently, Vincent Ferrari’s recording and release of his attempt to shutter his AOL account with a less than cooperative customer service rep — for us as marketing and public relations executive — repeatedly begs this question.

The challenge is this:

Free markets demand increased — or at least sustained — profits from publicly traded concerns, which in turn, drives large companies to acquire smaller companies to quench their insatiable thirst for earnings. As business concerns conglomerate, and a whole bunch of companies consolidate into a few monoliths, the result is eventually stifled competition, and the buyer is left with fewer choices. If the only remaining providers in a given category have poor customer service, how can that poor service impact sales if buyers have no where else to turn? If this is correct, then what we’re dealing with is an issue far greater than PR.

Randall Stross, who pens the Digital Domain column in Sundays NY Times zeroed in on AOL’s attempt to thwart one customer’s cancellation request, but the customer recorded the call and blogged it. The call got dug, the blog crashed and the customer was invited to appear on NBC’s Today show.

The article also says New York Attorney General Eliot Spitzer slapped AOL with a fine of $1.25 million last August for “continuing to bill subscribers who had called to cancel, and had thought they had done so, but who were marked as ‘saved’.” Now AOL has to have a third party verify all reversed cancellation requests, but accordingly to Stross “Mr. Ferrari’s five minue recording undid 10 months worth of public relations repair work.”

Stross also mentions (as did the Washington Post) a video of a Comcast installation technician who fell aspleep on a customer’s couch while waiting on hold for the cable providers own phone support.

He ends his piece saying that Netflix provides exemplary customer service to its subscribers by making it easy for them to cancel their subscriptions with one click online. The last line of the piece reads:

“Seeing as Netflix would be so protective of my time were I to leave makes me all the more unlikely to do so.”

I have been a Netflix customer, and yes, they do make it easy to cancel, which does keep me coming back, but it does not make me any more unlikely to cancel. When I get caught up on all the movies they have that I want to see, I cancel and wait until more new releases I’m intersted in stack up and and then renew my account. At the end of the day, there’s a lot more to customer retention then customer service.

Phone companies, credit card issuers and health care providers all have reputations for providing subpar service. In many ways, theirs is a faustian bargain. But you need them, so you have no choice.

Sure, one company sold fewer bike locks for a while, and AOL is in the wood shed this week, but with so much information coming at us from do many directions, do theseinstances really have a lasting effect?

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