Is the New AOL? (Part 2 – Customer Satisfaction and Lock-In)

I’ve been thinking about this thing a bit more, and have a lot of thoughts…I won’t pile them up here….rather I’ll try to spread them out to give a good amount of thought and explanation to each.

But as I said in the past, the first thing to recognize is that while there are downsides to these companies from both a Street and customer use angle, they were both highly innovative companies that have performed at length when all is said and done.

But one reason for extended growth and performance was the culture of lock-in that I believe both these firms foster. AOL made a few acquisitions and at the time, was the only name in the game for families and small businesses looking to hop on the information superhighway (back when that term was not yet beaten to death). Salesforce spent more than $100 million of investors’ cash (according to the company) building a huge SaaS infrastructure that prior to Salesforce was simply not available in the web-based application world.

So, once both these firms built up the capacity to lock-in customers, the game became volume. AOL built up a huge number of subscribers, as has And again, at the onset, what the user experiences is new, exciting and in some ways very useful. Many times, the customer is/was unaware of an alternative. So, even when the proverbial honeymoon is over, both companies made it hard, in my opinion, to leave. AOL had several reported continued billing of canceled accounts, while Salesforce users have reported difficulty regaining their data when they try to leave.

Lock-in at its finest.

So, what happens to customer satisfaction when you’re playing a volume game where you feel that once you hook ’em, you’re set?  Well, the trite answer is to say “it doesn’t matter, they’re hooked!” But the case is this – once you start moving away from providing a consistent and valuable service – the customer loses faith.

AOL started losing subscribers by the millions once people realized that there were alternatives (for less money) and that AOL was less about building online communities and more about ad revenue and content (or whatever AOL Time Warner ultimately became).

What will mark Salesforce’s ultimate disconnect with its core customer base?  Many have posited it will be the whole concept. The constant pushing of a “platform” (which in my mind signals even more lock-in) could very well alienate the small businesses that made what it is today. Once the plankton leave, the whales go hungry.

The odd part is, helped solidify the subscription model as the next generation of the software sales model. It would be ironic if the basic tenant of the subscription model – the imperative of consistent service – is what becomes an achilles heel.

More on this in my next installment…