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Interesting piece in the New York Times about how Netflix, the DVD rental business that pioneered the use of the Internet by consumers but that is now under attack by Blockbuster, has created a call center in Oregon with 200 customer service representatives “as a strategic weapon” in its competitive battles.

Netflix chose Oregon, according to the story, “avoiding other lower-cost places in the United States and overseas, because it believed that the Oregonians would present a friendlier voice to its customers. Then last month, Netflix took an unusual step for a Web-based company: it eliminated e-mail based customer service inquiries.

“Now all questions, complaints and suggestions go to the call center, which is open 24 hours every day of the week. The company's toll-free number, previously buried on the Web site, is now prominently displayed on the ‘help’ page.

“The decision to invest heavily in its telephone customer service was an expensive one for Netflix, but it may be one of the advantages that the company with the red envelopes so familiar to American consumers has over its rival with the blue ones, according to analysts.”

The Times also notes that Netflix “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 not 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.”
KC's View:
I’ve been a Netflix customer for years, but I had to go to the site and check this out when I read the Times story – because I’ve had so few problems with Netflix over the years that I haven’t had a lot of reason to go to its “help” page.

Now, I’m not sure that I would have eliminated the email functionality entirely; Blockbuster still has it, though it only opens its call center for prime business hours. But you have to give Netflix credit for what it believes is a critical consumer insight – that even in the e-commerce wars, the greatest differential advantage will be people.

I tend to agree with that. I think that Netflix can get a lot of traction from the fact that its call center is in Oregon and not overseas. I think that the right customer service representatives can do the business a lot of good during a time of heightened competition (especially because I’ve never met any workers at a Blockbuster store who seemed to know anything about anything other than when their next break is).

This is an important fundamental lesson for all retailers, I think. At a time when so many stress efficiency over effectiveness, and when everybody is looking for ways to cut costs (and so often these ways result in the elimination of personnel), it is important to keep in mind that such cuts can also undermine a business’s ability to accomplish its mission. And there’s another lesson here, as well – you have to hire the right people, and put a premium on their importance to the business.