CASE STUDY: The Broadstripe Service Guarantee

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COURSE : SERVICE MARKETING

Broadstripe, a small provider of cable, Internet, and phone services in four States (Michigan, Oregon, Maryland, and Washington) faced a difficult situation. Tony Lent, Chief Commercial Officer at Broadstripe, was convinced that the company had to dramatically improve its customer service. However, how does a small cable company differentiate itself from better-known industry giants and establish a best-in-class customer experience? Should a company at the edge of bankruptcy invest in customer service altogether?

THE CABLE INDUSTRY

Traditionally, cable companies tried to appeal to customers with discounts for bundles of TV, Internet, and phone plans. Customer service, however, had mostly been disregarded. As a consequence, customer satisfaction ratings in the cable industry had been the lowest of any industry. Results of the American Customer Satisfaction Index (ACSI) showed that the largest providers (Comcast, Timer Warner Cable, and Charter Communications) only had an ACSI score average of 59 on a scale from 1 to 100 over the past seven years, compared to an average of 82 for Internet retailers, 75 for banks, and 65 for airlines. Importantly, the cable industry was also lagging behind their satellite TV or telecommunication competitors with DIRECT TV and DISH Network scoring an average of 68.

As competition from satellite TV and phone companies intensified, an increasing number of consumers disconnected their subscription TV services in favour of online video services such as Netflix and Hulu. Responding to these competitive pressures, cable companies turned to customer service to try and improve their negative reputation. Several cable companies began to develop customer-oriented policies. For example, Time Warner Cable offered an on-time guarantee that promised that a service representative showed up on time for installations and service appointments. The company claimed that it was the first company in the industry to introduce the on-time guarantee. Comcast, the nations largest cable TV provider, had begun to offer a 30-day money-back guarantee and a $20 credit if a technician was late.

THE IDEA OF A SERVICE GUARANTEE FACED INTERNAL RESISTANCE

In early 2009, Broadstripe filed for Chapter 11 bankruptcy protection due to competitive pressures, shrinking subscriber numbers, and a high debt burden due to acquisitions that had been made before the financial crisis. The subsequent restructuring cut operational costs and the firm divested a number of its holdings. At the same time, Lent saw the necessity to dramatically improve the customer service experience, and he was convinced that a powerful service guarantee would be effective in driving service level improvements internally and in communicating its commitment to service excellence externally. Lent explained: As a relatively small cable company, I knew we would have to do something to break through the noise. There are over 900 cables companies in the USA. Of the top 25 cable companies, two-thirds had money-back guarantees. Most of these guarantees were for 30 days. All of these guarantees were only for new customers. Many of these guarantees were soft guaranteesthey were in place but nobody told prospective customers about them. My ah ha moment was when I saw GMs May the Best Car Win campaign. I saw a lot of parallels between GM and Broadstripe. For example, we were both bankrupt, both had perceived quality issues, and both needed to change customers perceptions in a hurry

However, the question was, could Lent persuade the new management to approve his ideas? There was no lack of resistance to investing into a service guarantee. Lent recalled: I was concerned that there was a lag effect from the time we had put service improvements in place and getting credit for the improvements we made in the marketplace. For example, we invested heaps into adding more staff, improving the technology in our call centers which included a workforce management system, recording calls for training purposes, instituting post install surveys, and adding a call-back service, but it took time for customers and prospects to realize that we had become a much better company. I also wanted to institute a 60-day money-back guarantee [MBG] to instill pride, a sense of leadership, and as a forcing function for all employees to drive customer orientation. In December of 2009, I got into a heated argument with a member of our executive leadership team over the 60-day MBG. He took the position that the timing was not good. I disagreed. My exact words were, If not nowwhen? Ultimately, we agreed to disagree and I took my case to the senior leadership team of Broadstripe and ultimately prevailed.

BROADSTRIPES SERVICE IMPROVEMENT EFFORTS

Broadstripe started a grass-root approach to improve its customer experience. For example, the Northwest region traditionally had been a problematic area. The company invested significantly into upgrading its network, overhauling customer service, and implementing a number of customer[1]focused initiatives. Key consumer concerns addressed issues such as rate increases and call center responsiveness. Tamara Shelman, Senior Vice President of Customer Care, and her team decided to dramatically increase staffing levels, extend call center hours, and require all service representatives to undergo extensive training.

THE BROADSTRIPE SERVICE GUARANTEE

To support its service initiative, Broadstripe launched several service guarantees over the past years. Initially, the company introduced Broadstripe Forever VIP, the first lifetime price guarantee in the industry (see Exhibit 2), which offered new and existing customers the opportunity to lock in one price for life for (V)ideo, (I)nternet, and (P)hone service. In February 2010, the company launched a 60-day MBG (see Exhibit 3) offering both new and existing Broadstripe residential customers 60 days to test the cable providers services. This was followed by the Broadstripe Challenge in May 2010, which was a total satisfaction service guarantee that invited customers to take advantage of the existing 60-day MBG and test the service. If customers were not totally satisfied, Broadstripe paid for the subscriber to restore the service with their previous cable provider.

According to Lent, Broad stripes 60-day MBG went beyond any money-back guarantee program in the industry: We took the industrys best satisfaction guarantee and made it better. From a service operations perspective, implementing the service guarantee enabled Broadstripe to identify and focus on closing service quality gaps. For example, the company noticed an increase in refund requests in the Pacific Northwest. As it turned out, problems were traced back to nodes of the network infrastructure affecting high-speed data services. Once the company identified the cause, it decided to improve the infrastructure by adding new CMTS1 while temporarily stopping its direct mail campaign in this area. Lent argued: We did not want to make a difficult situation worse. Since then, the situation improved, which led to the companys decision to continue again with its direct mail campaign. Overall, service failures were lower since the introduction of the service guarantee. According to Lent, the number of trouble tickets2 was down approximately 30 percent from when the company first instituted the 60-day MBG. In addition, customer churn had experienced a step-function decrease since the first launch in January 2010. In fact, by the end of 2010, Broadstripe actually started to grow its subscriber base for the first time in over five years. The service guarantee and the service improvements it had driven helped to change the publics perception about Broadstripe. In July 2010, Broadstripe was recognized by St. Louis Small Business Monthly as one of 14 Best Telecommunications Companies in the Business.3 Yet, probably the most significant indicator of Broad stripes successful service improvements was the companys recent announcement that its rating from the Better Business Bureau (BBB) was changed from an F rating to an A+ rating.4 According to the BBB, Broadstripe met the accreditation standards, which included a commitment to ethical business practices and to resolving any consumer complaint. From a marketing perspective, Broadstripe saw increasing response rates to its direct mail campaigns. Response rates of non subscribers improved to 0.7 percent compared to an industry average of 0.5 percent, and response rates of current subscribers to cross-selling offers reached 0.7 percent compared to an industry average of 0.3 percent. In addition, Broad stripes customer service representatives reported good success in utilizing the guarantee as a tool to close deals with prospective clients (see Exhibit 5 for sample customer responses). As a result, sales from technicians have doubled over the last two years, now accounting for 45 percent of total sales compared to an industry average of 12 percent. The improvements in service operations, public perception, and marketing effectiveness were reflected in an improving bottom line. Lent noted: Since January of 2010 we have recorded approximately $162 million in revenue, since then we have refunded some $38,000 or about $1,700 per month. This is only 0.023 percent of our revenue.

Our operating margin runs at 26.7 percent, much higher than 2009. Moving forward, there were a few challenges that Lent had to address. He had just received an e-mail from his colleague Ancy Vue, Customer Service Supervisor, who felt that there were issues with customers taking advantage of Broad stripes MBG. She had prepared a list of a few recent customer claims (see Exhibit 6) and wanted to discuss her proposed handling of those claims. This e-mail was timely as Lent had already planned to analyze the MBG in more detail. He wanted to spend time thinking about how he could redesign the MBG and develop a policy on how to deal with potentially opportunistic claims (see Exhibit 7 for the terms and conditions of the guarantee). Then he thought how the policy could be better communicated on Broad stripes website. Currently, the MBG was only promoted on Broad stripes product category pages, for example, Digital TV (see Exhibit 8). However, there was no specific link in the Help Desk tab that allowed customers to access the terms and conditions quickly or to invoke the MBG online. He wondered if making the MBG more visible and allow easy invocation of the guarantee online would potentially increase customer claims. Finally and most critically, his senior management committee wanted an update from him about the performance of the guarantee. Lent was asked to present on (a) the financial performance of the MBG program, (b) how competitors had been reacting since its launch, (c) how the MBG program had affected Broad stripes service culture, in particular among employees in the call centers, and (d) the extent subscribers were taking undue advantage of the service guarantee. Lent was thinking through these questions while starting to look through some key data in his spreadsheet

1. Evaluate the design and communication of Broadstripes service guarantee. Would you recommend any changes?

2. Can the guarantee be successful in creating a culture for service excellence within Broadstripe? What else may be needed for achieving such a culture?

3. Do you think customers might take undue advantage of this guarantee and stage service failures to invoke the guarantee? If yes, how could Broadstripe minimize potential cheating on its guarantee?

4. Imagine you are in Lents position. How would you conduct the analysis and what would you present to the management committee?