AOL Case Points to a Trend: Breaking Up Is Hard to Do
The Internet service firm is not alone in making it difficult for customers to move on.
America Online Inc. agreed Wednesday to pay $1.25 million to settle
allegations that its customer service representatives ignored
cancellation requests in a case that highlighted how far companies were
willing to go to keep customers.
AOL, the world's biggest Internet service provider, withheld bonuses
from "retention consultants" who could not change the mind of nearly
half of those who called to cancel, according to a settlement agreement
between the company and New York Atty. Gen. Eliot Spitzer. With
thousands of dollars in monthly bonuses at stake, some customer service
agents who couldn't persuade a customer to stay simply didn't process
the cancellation order, Spitzer said.
Although AOL's case was extreme, aggressive tactics for keeping
customers are becoming increasingly common, say consumer advocates who
field complaints from people frustrated with how difficult it can be to
cancel a wide range of services.
Providers of phone and Internet plans, credit cards and cable TV as
well as newspapers and magazines do everything they can to keep
customers from leaving. Stiffer competition and the national Do Not
Call list, which blocks more than 100 million phone numbers from
telemarketers, make it harder for many businesses to win new customers
— so they're trying harder to hold on to the ones they have.
Their tools: pushy customer service agents, hidden charges and early-termination fees.
"It's very clear that these are blockades keeping consumers from making
competitive choices to move to another company," said Morgan Jindrich,
who runs a Consumers Union website dedicated to airing gripes about
telecommunications industry practices.
Jindrich, for instance,
said she tried to cancel her cable TV service because she was moving.
The automated phone prompts eventually led to an instruction to leave a
recorded message with her name, address and date she wished to have her
service suspended.
Five months later, she's still waiting.
However difficult it might be, even being able to switch to a company's
rival is a relatively new phenomenon, the result of explosive growth in
a host of services. For instance, when phone service was a monopoly,
the only option that disgruntled customers had was to go without a
phone. Before satellite TV, unhappy cable subscribers were left with
dusting off their rabbit-ear antennas.
Long before Wednesday's settlement, AOL had earned a reputation as
notoriously difficult to cancel. Frustrated members have dubbed its
customer service "AO-Hell."
AOL, owned by Time Warner Inc., has
reason to fight for every customer. Although still the largest online
service, AOL has lost nearly 6 million customers in the last three
years — falling to 20.8 million subscribers in the U.S. during the
second quarter from a peak of 26.7 million in September 2002.
Spitzer's office launched the investigation after about 300 New Yorkers
complained that AOL kept charging for service after they had requested
a cancellation.
Dulles, Va.-based AOL did not admit wrongdoing
in the Spitzer case, nor had it in previous settlements with the
Federal Trade Commission and Ohio's attorney general over similar
allegations. The company agreed to provide refunds for as many as four
months of service to New Yorkers who file claims. It will also change
its customer service practices nationwide, including an end to tying
bonuses to minimum "save" rates and use of an independent company to
verify cancellation requests.
AOL spokesman Nicholas J. Graham
said that many Internet companies designate certain employees to field
calls from customers intending to cancel and that those employees can
often allay members' concerns by suggesting new price plans or services.
"We have provided them with a compensation structure that provides
incentive to help them solve members' problems," Graham said.
But in their effort to keep customers, companies sometimes just tick them off even more.
Technology magazine Wired faced a backlash last month when collection
agencies began sending threatening letters, seeking $12, to subscribers
who had let their subscriptions lapse. Editor in Chief Chris Anderson
said those customers had signed up for an automatically renewing
subscription, but he said the practice was "a poor way to treat
customers" and promised to stop it immediately.
Although
perfectly legal, the tactic that rankles consumer advocates the most is
the early-termination fees imposed by mobile phone providers.
Phone companies say they charge these fees — generally $150 to $240 —
to recoup the costs of providing lower monthly fees and free or heavily
discounted phones. They also note that customers could choose plans
without such early-termination fees but that clients often don't want
to pay the extra monthly cost.
"The different industries have different ways to do it," said
Mierzwinski, referring to customer retention. "The cellphones have a
bigger hammer than a lot of others do: the early-termination penalty."
Most companies that offer subscription services deliberately make it
much easier to sign up than to cancel, said Charles Golvin, a principal
analyst for Forrester Research who follows consumer telecommunications.
Financial analysts and investors closely watch the rate at which
companies' customers cancel their service each quarter.
"I
won't necessarily ascribe evil intent to this," Golvin said, "but if
they make it a little more difficult for you to get out of that
service, even for a month or two, then that's better for their
financials overall."
America Online Inc. agreed Wednesday to pay $1.25 million to settle
allegations that its customer service representatives ignored
cancellation requests in a case that highlighted how far companies were
willing to go to keep customers.
