The Ace Up Netflix's Sleeve: Excellent Customer Service

Netflix is investing in superior customer service to differentiate themselves from Blockbuster as the two rental giants remain locked in a vicious price war. The company has completely shunned email-based support, instead relying on 200 friendly Oregonians to answer calls around the clock. Netflix CSRs, unlike most, are not given target call durations, and are encouraged to “err on the side of generosity” when dispensing compensation. They have one shockingly simple goal: satisfy the customer.

From the New York Times:

The Hillsboro operation, which occupies about 30,000 square feet of a low building in an office park, is intended to keep the red envelopes coming. Michael Osier, vice president for information technology operations and customer service, said he rejected cities like Phoenix, Salt Lake City and Las Vegas, which are known as call-center capitals, because of their high employee turnover rates. He settled on the greater Portland area because of the genial attitude on the part of most service workers.

“In hotels and coffee shops and the airport, it’s amazing how consistent people are in their politeness and empathy,” said Mr. Osier, who is based at Netflix headquarters in Los Gatos, Calif. “There’s an operational language in the industry that people are so jaded about — phrases like ‘due to high caller volume.’ We’re very consciously trying to counter that mentality.”

Netflix’s decision to eliminate the e-mail feature was made after a great deal of research, Mr. Osier said. He looked at two other companies with reputations for superb phone-based customer service, Southwest Airlines and American Express, and saw that customers preferred human interaction over e-mail messages. “My assessment was that a world-class e-mail program was still going to be consistently lower in quality and effectiveness than a phone program,” he said.

When Mr. Osier presented his findings in January to fellow executives, Reed Hastings, the Netflix chief executive, sent an enthusiastic message, BlackBerry to BlackBerry, from across the room. Mr. Hastings quickly became a supporter of the e-mail elimination project.

The company has tried to give the service representatives more discretion in deciding when to assuage disgruntled callers with bonus discs and account credits — and they are allowed to err on the side of generosity. More often than not, a month’s credit will be issued or a missing disc marked simply as lost, and the customer will not be charged. Netflix places no particular requirements on call duration, preferring that customer service representatives take the time they need to keep a customer happy and loyal.

This is an exceptionally prescient move by Netflix. Price wars help attract new customers, but superior customer service staunches customer turnover, and has been proven to improve a company’s bottom line. Blockbuster has parried each Netflix move so far, except this one:

In contrast, Blockbuster outsources a portion of its customer service, and when people do call, they are encouraged to use the Web site instead. Its call center is open only during business hours, said Shane Evangelist, senior vice president and general manager for Blockbuster Online, because the majority of customers prefer e-mail support, which is available 24 hours a day. “Our online customers are comfortable using e-mail to communicate,” he said.

At Netflix, Victory for Voices Over Keystrokes [NYT]
(Photo: Getty Images)