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The Strategy Room

Poor Communication Takes Netflix from Hero to Zero

By: The Stanton Team

Until recently, Netflix, which provides DVDs by mail and access to streamed video content, seemed to be loved and appreciated by its loyal customer base. For a relatively low cost, customers have had access to hours of movies and TV shows, which they could choose by using Netflix’s easy-to-use online platform.

Things took a turn for the worse this July, however, when Netflix increased prices without warning. Its customer base was not impressed. In fact, a PCMag poll found that 55 percent of customers were ready to call it quits with Netflix.

But as good companies do when they make mistakes, the company issued an apology in the form of an email to customers from CEO Reed Hastings, which was also posted on the Netflix blog. The emailed apology started out with the three words: “I messed up.” Hastings continues, “I owe you an explanation.”

So, far, so good.

Now, as a reader and communications professional, I’m waiting for: “Here’s what we’re going to do to fix it.” Hastings, however, continued without explanation of what the company was doing to appease unhappy customers. Instead, the email provided a laundry list of more gut-punching items that changed the Netflix model even more. Changes included a new brand, called Qwikster, for its DVD-by-mail service, and the disclosure that customers would need to access and additional website to request videos by mail.

This salt-on-a-wound maneuver by Netflix proved to be a poor choice, as displayed everywhere from social media to Wall Street. While it’s too soon to say how much these business and communications mishaps will ultimately affect Neflix, there are already some lessons to be learned.

  • If it Ain’t Broke; Don’t Fix it. And if you realize you have to fix something with your company’s brand or product, don’t do it all at once (unless we’re talking about an emergency situation). Sure, it’s unrealistic to think that Netflix could go on forever and never increase rates. The swift increase in prices, however, shocked customers and made them feel duped.
  • Don’t Trick Your Customers.  Hastings’ letter gives the perception of a sincere apology at first. After the apologetic introduction, however, he throws some curveballs. Customers were caught off guard (again) as they were introduced to a new brand and method for ordering and payment. Netflix missed the opportunity to create positive feelings about its new brand…And about that brand…
  • Consider What’s in a Name. Without even considering the Postal Service’s pending shutdowns, mail is one of the slowest ways to receive anything these days.  Naturally, “Quick” doesn’t come to mind when you think of the Postal Service.  Netflix’s DVD-by-mail system, now called Qwikster, became an instant joke online. Oh, yeah, and making sure a Twitter account is available for your brand name (BEFORE you launch) is a good idea. Unless you want a drug-induced Elmo as the face of your company.
  • Consider How Your Investors May React. This Associated Press story has a full recap of what financial experts are saying about Netflix.  As the company opened at a 52-week low, it’s clear that investors are listening to those experts. While I’m sure Netflix considers investors in every business move it makes, they overlooked how customer communication would ultimately affect investors.

I don’t think these poor decisions will make Netflix the next movie-industry dinosaur (cough, video stores). After all, Netflix made these changes to ensure long-term sustainability. While innovation and projecting into the future is critical, so is cultivating the relationship with customers TODAY.  Companies evolve and adapt all the time, but they certainly don’t get acceptance for changes through an overnight email.

 

 

 

 




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