Parks Associates Blog

Friday, February 02, 2007

Great week for the Geeks

The Sunday, January 28, edition 60 Minutes reminds me of why I need to continue to watch with more regularity. (I'm also reminded that NPR's Marketplace is worth 30 minutes of my time when I'm lucky enough to catch it.)

One of last Sunday's 60 Minute pieces was on a subject near and dear to our hearts: "Get Me the Geeks: How Tricky Technology is Giving Rise to the Geeks." Steve Kroft's story centered on the growth of Best Buy's Geek Squad business, with an overall look at how technology complexity is both maddening to consumers and a business opportunity for companies willing to step up to the plate and provide installation, configuration, and troubleshooting services to a customer base more than willing to pay for it.
The statistics coming from The Geek Squad point to the pain consumers are experiencing and the opportuntity that this provides an enterprising customer care business:

  • Geek Squad processes 4,000 computers in need of repair in its facility near Louisville, KY, every day;
  • Geek Squad founder Robert Stephens says that more than one-third of wireless routers and modems that are purchased at Best Buy are returned because, "people think that they are just too complicated."

More troubling in the story was the admission from companies that customer support often is still more about passing responsibility on a problem than actually solving it:

"Software companies will try and convince you it’s a hardware problem and hardware companies will do the reverse. According to one survey, 29 percent of all callers swear at their customer service representative, 21 percent just scream. The rest presumably are too exhausted to do either."

In a time in which customers can churn from one provider of broadband or television services with little challenge, we'd assert that the time for finger pointing and playing "the blame game" has got to stop, certainly among the service provider community, but also manufacturers of digital home products. This year, it's going to be critical that companies not proactively addressing customer care and support put plans in place to do so. Not only is this a cost issue (our own estimate is that calls to broadband service providers regarding home networking problems may be a $200-$500 million burden every year), but there are real business opportunities (and dare we say revenue-generating businesses?) to explore.

  • Consider a service provider such as Bell Canada. In deploying a holistic Internet security suite from Radialpoint (about CN$10 per month), the telco still reports that this is among its biggest value-added services in terms of revenue.
  • Another interesting case study is BT, the British telco. Last year, it rolled out a service called Home IT Advisor. For about £10 a month, BT offers remote technical support to assist with home computer troubleshooting. A product manager with whom we briefed last week tells us that the service is selling incredibly well.

We kicked off our research in the area of customer technical support and help in 2004 with a consumer study titled Profiles of PC Usage. This was followed by a significant study last year titled Managing the Digital Home: Installation and Support Services. While both of these studies quantify some of the major technical hassles in the home, the 2006 study went even further, determing the market demand and willingness to pay for technical support services and additional customer care options - extended warranties and protection contracts, remote and on-site support, enhanced digital home advisory services, among many different options. The data helped us build the profile of the so-called "needy consumer" - the person or household likely to pay for these services.

Our industry reports are also focusing on the issue of customer care and support as a critical function of the sucess of digital lifestyle product and services deployment. These studies have mainly covered the space from a business and technical perspective, and previous studies have included Storage and Management for the Connected Home and Home Networks and Residential Gateways: Analysis and Forecasts.

Now, we're pleased to begin 2007 with the release of a freely-available white paper, Business Models for Managing the Digital Home. In this brief, we cover eight business opportunities - both short- and longer-term - that focus on digital home technical and advisory support. We published this brief after this year's CES, where these issues were brought up time and again during company one-on-one meetings and during panel discussions on which our analysts participated. This brief is a precurser to the release of our Digital Home Services: Carriers, Retailers, and the Customer, where we are profiling close to 50 companies and developing forecasts for revenue growth in these categories.

For both the industry and the consumer, getting these services and automated technology help solutions can't come at a more critical time. Digital lifestyle products and applications continue to grow in terms of penetration, and the job of "home IT support" is growing more difficult by the day for the intrepid bunch of do-it-yourselfers. Better yet, as the Geek Squad's Robert Stephens said, there's hope for even the most frustrated of customers:

"There's the do-it-yourselfers. There's the do-it-for-me. And what we're discovering is the even bigger market of ‘I-thought-I-could-it-myself’ crowd," Stephens told 60 Minutes.

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