The Customer Service Hall of Shame

May 28, 2008

Four 'winners' from MSN Money's inaugural list are back -- 3 with scores even worse than last year's. See the 10 companies Americans love to hate.

By Karen Aho

The economy's in the tank. Corporate profits are down. Business owners are having just as hard a time getting loans as wannabe homeowners.

So you'd think that businesses would be treating their patrons like royalty, right? That this would be exactly the right time for businesses to coddle their customers?

Wrong. When the economic going gets tough, some companies apparently get tough-minded about customer service, squeezing out the last dime of profit by cutting back on critical customer-facing positions such as phone personnel.

"We've seen a fall in customer service as we've gone into a recession," said Richard D. Hanks, the president of Mindshare Technologies, a customer-service consulting company. "As the cost cutting occurs . . . they start to cut the wrong things."

That reality is borne out in the results of MSN Money's second annual Customer Service Hall of Shame, a ranking of companies with the worst customer service, based on a nationwide survey commissioned by MSN Money and conducted by Zogby International. The scores for our Hall of Shame companies are down from a year ago.

And the 'winner' is . . .
The company at the bottom of the customer-service heap is Time Warner's AOL. A remarkable 47% of people who had an opinion of AOL's customer service said it was "poor." Analysts said that rating may have something to do with its effort to transition from an Internet service provider -- where it still has more than 9.3 million paying subscribers -- to an ad-supported Web portal.

"I don't know what to attribute that to," AOL spokeswoman Dori Salcido said. "I just do know that we continue to improve customer service."

AOL fits squarely in the category of company that dominates our list: communications companies and banks that provide complex and at times highly technical products. Tens of millions of customers rely on those products almost hourly. And, should something go wrong, those customers get anxious and demand a fix -- now.

That's still no excuse, analysts say. In their zest for quarterly profits, these companies tend to favor acquisitions over beefed-up service staffs. They also lean toward confusing fees over straightforward price increases -- strategies that don't play well for the long haul.

"Most of these companies actually aren't thriving," said Michael Shames, the executive director of the Utility Consumers' Action Network, a California nonprofit that monitors business practices. People don't look at companies with poor customer-service scores and say, "Here's where I should invest," he said.

For the survey, conducted online in March, Zogby asked more than 7,000 people across the country to rate their customer experiences with 140 leading companies in 14 industries, including airlines, hotels, insurance companies and big-box stores such as Wal-Mart. Respondents could answer "excellent," "good," "fair," "poor," "not familiar" or "not sure."

The companies in the Hall of Shame were ranked by the percentage of people familiar with a company who answered "poor."

Although AOL didn't get ranked last year, corporate sibling Time Warner Cable did, and it made the top 10 then and now, receiving a 29% and 31% "poor" response, respectively. Time Warner Cable was one of four companies -- along with Comcast, Sprint Nextel and Bank of America -- to make a repeat showing.

The companies' explanations
Most of the companies chalked up the continued "poor" ratings, in part, to their sheer size. Not only are their products hugely popular, they said, but every year they field millions of calls from customers, many of whom walk away perfectly satisfied.

"I think we're the victim of our own success, in the sense that we're growing so rapidly," Rick Germano, the senior vice president of national customer operations for Comcast, said of the telecommunications giant, which ranked second in the MSN Money-Zogby survey. "People are choosing to get Internet and cable and telephone with us, and that's where we're playing catch-up on the customer-service front."

The exception was Sprint Nextel, which took full responsibility for its well-publicized poor record of customer service in recent years.

The cellular phone company led poor-customer-service surveys, including the 2007 MSN Money-Zogby survey, and late last year hired a CEO who vowed to make customer service a priority in an effort to stop customer drain. The company posted a $29.6 billion loss over the past 12 months.

"We've had higher-than-desired churn," spokeswoman Roni Singleton said. "We've had to overcome the hurdles, and that's been a challenge for us."

Sprint Nextel was also the only returning company to improve its score, albeit slightly. The other repeaters received greater percentages of "poor" responses than in 2007. The overall average "poor" rating for the top 10 increased from 27% in 2007 to 35% in 2008.

Hanks, the consultant, said that before the current economic woes took their toll on customer-service opinions, those opinions had been getting better in recent years.

When talk turns to recession, companies tend to cut where they think it will hurt the least: in customer service. "Fears of a downturn start to get into the psyches of senior managers in this country," Hanks said.

High-ranking companies
Companies at the other end of the survey, with few marks for poor service, also came as little surprise to experts. In particular, Nordstrom, American Express and Marriott were cited as three that routinely earn high marks.

Companies such as these try to weather the tough times by continuing to invest in customer service, Hanks said. In the end, they earn lifelong, loyal customers who tend to cost less and pay more.

By contrast, companies that turn off the charm in search of immediate profits risk long-term success, Hanks said.

It's common for companies criticized for bad customer service to defend themselves by pointing to their legions of satisfied customers or by citing averages, Hanks said. But ignoring the unsatisfied customers catches up with them eventually.

And as research has shown, satisfied customers equate to happy shareholders. Conversely, unhappy customers may lead to unhappy shareholders. Just ask Time Warner (the parent company), Comcast and Sprint: Their stocks are down 26%, 18% and 55%, respectively, over the past year, compared with an 8% drop for the S&P 500 Index.