AOL

[Steve]

The AOL Lesson: How to Get Ahead by Mistreating Customers

Jesse Berst, Editorial Director, ZDNet AnchorDesk


How's this for a success formula? Give the worst service in the
business. Mislead customers so flagrantly that you're sued by 44
states. Repeat for five years. 

Believe it or not, this is how America Online became the world's most
powerful, most important Internet portal. Consider, for a moment, what
AOL did wrong: 

Abysmal customer service. According to the most recent Inverse
rankings of ISPs, AOL is worst in reliability. AOL routinely finishes
dead last in surveys of this type. 

Misleading advertising. AOL has been sued three times in less than
three years over billing problems and access glitches.

Deceptive privacy practices. More than once, AOL has been caught
making unethical use of its members' names, only to back down in the
face of customer outrage.

According to business textbooks, these crimes should have sunk the
company long ago. Instead, AOL has become the dominant online service.
So let's look at what it did right -- so right it cancelled out the
company's mistreatment of customers. 

Focus on ease of startup. Others concentrated on ease of use. Or
quality of content. AOL focused on making it easy, easy, easy to get
started. That's because the company always knew it was going to... 

Aim at mainstream consumers. AOL targeted people who wouldn't know any
better. People who would be afraid and confused to switch once they
finally got online. And then it delivered simple, everyday services
those consumers could use and understand. Taken together, these first
two moves let it... 

Rely on customer lock-in. Mainstream consumers will put up with
almost anything -- poor reliability, bad service, higher prices --
rather than go through the pain of starting over again. 

In the early years, whenever Steve Case had the choice between
improving customer service or sending out more signup disks, he chose
the disks. Case understood the overwhelming importance of market
share. 

It's easy to believe new markets are about quality and customer
service. But look at previous media revolutions. Movies. Magazines.
Television. Yes, the content has to be good enough. But the battle is
won by controlling the distribution network. Movie studios. Magazine
distributors. Television networks. Those are the true power brokers in
those media. 

And America Online is the first true power in the Internet era.
Because it realized that it is much better to have lots of unhappy
customers than a few happy ones. 
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