The "Steve" Case - America Online's excessive marketing - Company Business and Marketing

Home Office Computing, April, 1997 by Nick Sullivan

What's Your Solution to AOL's Problem?

I wonder if they'll name a room at the Harvard Business School after AOL. Probably not, but it's sure fun to think up names for it: Markets Like Wolves, Way Too Busy, or perhaps Love It or Leave It. At any rate, you can bet your next 10 hours of uninterrupted access that the HBS will feature a case study on AOL. In a classic case study, the professor presents a business situation (like the Tylenol tampering incident), then asks students to complete the scenario. What would you do as CEO if presented with this dilemma? Craven apologies are not accepted. You must act boldly--or the business dies.

In this so-called "Steve" case study (named after AOL's venerable founder and CEO Steve Case), the details don't need to be presented. In fact, the situation was so out of control that 37 state attorneys general were persuaded to act in concert and threaten lawsuits. Suddenly, the much-maligned U.S. Postal Service appeared efficient and reliable. But enough kicking the dead horse--we need solutions to dislodge the logjam of cybertraffic Here's one: AOL and local Internet providers could set up traffic differentiations. There could be different pricing structures, and anyone who wanted to pay extra for them, say a businessperson, would get special access numbers that would work when needed (see "Look Who's Paying Now," HOME OFFICE COMPUTING, March, page 44). It seems to me that other service providers give their top customers (read: those who pay the most and provide the most business) "preferred" status. Believe me, if you've flown 750,000 miles on American Airlines in the last few years, it will upgrade you faster than Joe Blow who's trying to visit relatives in Florida in February. And if I've logged 7,500 hours on America Online in the last few years--and paid for every one of those hours, mind you--shouldn't there be a way for me to gain access when Joe Blow is sitting in a chat room trying to stretch his $19.95 beyond the bounds of elasticity?

AOL lets its marketing people run as wild as a pack of wolves at the expense of its customer service people. Customer service is cool these days and has been for a decade. So are loyalty and relationship-marketing programs. AOL figures that some of its prey will get torn up by the wolves, but the sheer amount of prey its marketing people have managed to gamer means the company will dine well for years to come.

I know, AOL has promised to reform. It has promised to reallocate marketing dollars into infrastructure improvements. It has promised to stop sending 10 disks to everyone who can fog a mirror. All this will help protect future prey from frustration--maybe. AOL has made these promises before, only to lapse back into a relentless marketing blitz.

The lesson to be learned from the "Steve" case? Don't let this happen to your business! Don't get so preoccupied with getting new business that you ignore your existing customers. Don't make an offer you know you can't fulfill. I just visited a friend who runs a bookstore and is developing a Web site to reach beyond his local clientele. It's not live yet because he doesn't have a system that's dedicated to fulfilling orders. He knows that if a new customer places an order that takes forever to deliver, that customer will look elsewhere next time. Sometimes, plain-old common sense equals good business practice. And he didn't even go to the Harvard Business School.

NICK SULLIVAN, who has used AOL since its inception--nd has had many more good than bad experiences--can be reached on America Online (snick7), CompuServe (76703, 744), or MCI Mail (nsullivan).