Serving and satisfying customers is a crucial part of value creation in any business,but U.S. communication firms continue to struggle with the very basics and are being heavily criticized for poor service, price gouging, billing problems, and generally poor customer relations.
40 percent of the top 15 companies that most dissatisfy customers are communications firms, according to the latest data from the American Consumer Satisfaction Index.
The companies American most dislike include Facebook and cable systems, which operate as near monopolies and consumerss have no real competitors to turn to for better service. The scores for the companies are:
Direct TV: 68/100 Facebook: 66/100 Comcast: 61/100 Time Warner: 63/100 Cox Communications: 63/100 Charter Communications: 59/100
These are failing scores on any grading system. The companies have little incentive to spend time and money to improve service and relations with customers because there is no real competition that can discipline the market and promote consumer benefits. The problem is compounded because cable services are largely unregulated and there are no watchdogs to demand better behaviour in the absence of market-imposed sanctions. That means the only thing that can drive improvement is company pride, but it is abundantly apparent that these firms have no shame and really don’t care what their customers think.
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Cable firms and Facebook Continue to Disappoint their Customers
Facebook’s business problems are symptomatic of many large digital firms
Facebook is wrestling with a business challenge more traditionally found in legacy media: how do you translate consumers that don’t think they have a commercial relationship with you into relationships that that other firms will pay for?
Despite 955 million active users and increasing revenues, the company has lost a third of its share value since its IPO in the spring. The exuberance that surrounded its IPO and overpriced its shares has worn off and investors are realizing that being big isn’t enough to ensure business success. Its latest earnings reports show the firm lost money, $157 million, in the second quarter on income of $1.18 billion.
Facebook’s challenges are symptomatic of a long line of “successful” digital firms that are experiencing monetization problems, including Yahoo, You Tube, AOL, and Twitter. Despite large numbers of users globally, they still lack effective business models to generate revenue levels congruous with their size. They may provide great communication functions for users, but they are not transforming very well from innovative users of technologies to highly profitable commercial enterprises.
Part of their challenge is that they have to focus so much effort on non-paying customers and those customers think of the services as personal communications—making them resistant to many efforts to monetize them. This problem has long plagued traditional media, but they are conceived as mass rather than personal media and have been around so long that many people are now used to a certain level of commercial exploitation. They also have a proven track record of return on advertisers’ investments that digital media have not yet been able to deliver for many types of advertisers.
Large digital players will continue to evolve and can be expected to improve their financial performance over time, but it will take a good deal of innovative thinking about the business rather than about the technologies and social value of their services.
The Daily’s rocky performance shows legacy brands create digital advantages
The News Corp’s launch of the tablet newspaper The Daily in February 2011 was heralded as the future of news and revealing opportunities for major new entrants in the news market. After a year and a half of operation, the digital newspaper has lost more than $30 million, managed to gain only 100,000 subscribers—not a trivial amount but low for a global player, and has just announced that it is cutting 1/3 of its editorial staff and ending original production of sports news and commentary.
Journalistically The Daily is not a bad news product and its app is facile and effective. So why hasn’t it been more successful? The fundamental problem is that the digital-only paper has been overshadowed by the success of legacy print newspaper brands in the market for digitally delivered news.
The Daily has never been so brilliantly written and edited that it could gain the significant attention and acclaim needed to overcome the brand advantages of legacy news providers. Major newspaper—such as The New York Times, The Guardian, and The Financial Times—have used the strengths of their reputations and brands to make the largest inroads in digital subscriptions. Concurrently, larger local and regional players have also been grabbing paid digital customers in their markets and providing additional competition to the digital startup.