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April 06, 2005

Bad Service is Expensive to Deliver

Andy Abramson says he agrees with most of my rant about poor customer service at Vonage and goes on to suggest that tiered service charging more for good support may be the answer.  In principal I agree that customers should be able to choose how much support they want bundled into the price of a product just as they shouldn’t have to pay for six nines of reliability if they can make do with less.  However, there are many cases where bad service is more expensive to deliver than good.

I learned my lesson about the price of bad service when I was Secretary of Transportation in Vermont.  Reporting to me was a smart Commissioner of Motor Vehicles named Bill Conway.  When we were putting together our budget, I was pushing Bill to cut his expenses.  “Tell me what we can save,” I said, “if we don’t turn around license renewals almost instantly.”

“It’ll cost us more to do that,” Bill said.

“You’re just trying to protect your budget,” said I.  “How can that possibly be?  It costs you more to process more slowly?”

“Today,” Bill explained, “our rule is to turn around every application the day we get it.  If it is complete, it gets processed.  If it is incomplete, it gets sent back for more information.  If we are going to start queuing applications, then we have to build a queue management system to track the queue and make sure we don’t lose stuff that gets held or hold some transactions forever.  But that’s a relatively small expense.

“The greater expense,” he continued, “is in customer support calls.  For every day that we delay turning something around, a certain percentage of people are going to call us to ask where it is.  So we get more calls.  If we are managing a queue, then we have to be able to look in it to see where a particular transaction is.  We have to be able to predict when it’ll be handled.  We have to prepare for calls from legislators who want this constituent or that one given priority.  No queue, no problem.  When we turn things around fast, we get very few calls.  When we do get a call, the status is either ‘we didn’t get it yet’ or ‘it got mailed back to you on such-and-such a date.’  No requests to jump the queue because there’s no queue to jump.”

So he convinced me and I didn’t cut that part of his budget.  And notice he was only talking about direct expense.  He wasn’t even talking about the happy customers who get things back fast.

Now apply this to Vonage.  I learned while running AT&T WorldNet that it is much cheaper to answer an email than a phone call. For one thing, the CSR (Customer Service Rep) doesn’t get stuck chatting or holding the phone while the door bell rings or the baby cries.  For another, you can cut and paste.  But Vonage has stopped responding to emails within a reasonable period of time (not counting the robot replies that are not usually very helpful).  That means that everyone with an “interesting” problem has to call for support.

Text chat support is more expensive than email to provide but less expensive than live voice.  But Vonage doesn’t provide text chat as a fall back from email.

So, if you have a problem, you call.  You’re already mad because your email was never answered but we’re not concerned, at the moment, with the indirect cost in customer satisfaction – just direct costs.  Typical wait times are more than an hour.  Vonage pays by the minute for incoming 800 service on most of these calls because, if the customers’ Vonage connections were working, they probably wouldn’t be calling.  So the hold time costs money as well.

Now, finally, there is a CSR on the phone if you haven’t hung up.  The CSR has to listen to an earful of anger before getting to the problem because the caller has already waited a week in vain for an email to be answered and has now been on hold for over an hour.  Believe me, it takes a lots longer to resolve a problem for an angry customer than for a calm one.

There is some validity to the argument that, if customer service is too good, it will be overused.  At WorldNet we answered the phone within five minutes so we even got lonely users who just wanted to chat with someone.  A moderate wait for help does get customers to try a little harder to figure out their own problems.  But an hour just gets them angry.  It would not be unreasonable for Vonage or other providers to ration the amount of free phone support each subscriber is entitled to and, as Andy suggests, charge if more is wanted.  In this case the CSR (unknown to the customer) should be able to waive the limit if the problem is an interesting one to the service provider.

Of course, the indirect cost of bad support can be enormous, particularly in a subscription business.  Most technical support requests come from new customers – the ones Vonage just spent all the advertising dollars attracting.  If they “save” Vonage money by abandoning the support call, they are not likely to be Vonage customers for long. (In theory, you have to reach Vonage on the phone to cancel – you can’t do it on the web site.  But you can always stop your credit card provider from paying.)

The cheapest support is no support.  Good product design, which Vonage has by and large, avoids many support requests.  Outages, which Vonage also has, increase the requests.

The next cheapest is self-help on a website.  Vonage is only fair in this category but they’re getting better.

Next is email.  I think it is expensive not to answer it.  If you’re not going to, however, you should say so and not frustrate customers.

Next is text chat.  I recommend it as the customer escalation from email or website self-help.

Finally, there is phone support.  It’s certainly expensive.  If you are providing it, however, it is cheaper to have it be good than bad.  And you certainly need it in a new paid technology-based business where the customer is integrating an ISP, an adapter, a router, and some phones in order to use a service he or she feels is critical.  You need it more if you don’t provide good email and chat.

What is their about phone companies that makes bad support inevitable?  I use Skype-out and they have yet to respond to emails telling them that DTMF often doesn’t work for me.  I blogged last week about poor service at Verizon and also some other suggestions to CEOs on support.

I have also blogged about some excellent features which distinguish VoIP and are provided by Vonage.  And I am still a user of Verizon, Vonage, and Skype.

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