survey of 400 customers during the last week of February and the first week of March put the attrition rate at 58 percent.
04/08/97 America Online to Begin Pushing Subscriber Growth
Dulles, Virginia, April 9 (Bloomberg) -- America Online
Inc., after halting customer growth at 8 million people in
January because of problems with access to the service, said it
now plans to add subscribers.
In a monthly letter to subscribers, AOL Chairman and Chief
Executive Steve Case said AOL will begin marketing its service
again. The company stopped seeking to add customers in February
after a $19.95 unlimited-access rate in December brought so many
new subscribers that the network slowed down. Many people trying
to connect to the service got busy signals for hours on end.
``We will begin marketing on a limited basis, slowly ramping
up over time so we can measure the impact of each incremental
increase in marketing,'' Case said in the letter.
AOL has underestimated demand in the past, particularly when
the flat-rate fee was introduced. Customer complaints led to
class-action suits and intervention by states' attorneys general
offices.
In January, the No. 1 online service settled with 45
attorneys general, agreeing to customer refunds for December and
January and halting marketing in February. Last week, the company
settled a class-action suit, extending the refunds it will pay
for two more months.
Because of continued high demand, AOL also decided to hold
back marketing in March. Still, the company never totally turned
off its marketing, running TV and print ads and distributing free
disks, although not at past levels. While the company had set a
limit at 8 million, it needed to add subscribers to replace the
ones who left, analysts said.
Estimates of the number of customers who leave AOL range
from 30 percent to 40 percent a year. A recent Forrester Research
Inc. survey of 400 customers during the last week of February and
the first week of March put the attrition rate at 58 percent.
``My guess is they are seeing a lot of attrition,'' said
Kate Delhagen, a Forrester analyst. ``They are probably also
feeling a lot of pressure from Wall Street about subscriber
growth.''
AOL plans to begin marketing almost at a test level to judge
the impact that added demand will have on the service, said Bob
Pittman, president of AOL Networks, the unit that runs the online
service.
``The news here is that we aren't just turning on the
marketing machine one day,'' Pittman said. ``We're turning it on
slowly and incrementally.''
AOL has been working to improve its network and is spending
$100 million through June, on top of the $250 million already
budgeted, to improve connection speed and the customers'
experience while they are online, Pittman said. The company is
also leasing about 50,000 additional modems.
``Everything that has to do with the network is getting
better,'' Pittman said. |
