September 2011

Netflix to its customer: It’s not you, It’s me.

The apology on Sunday by Netflix CEO Reed Hastings reminds me of a long overdrawn breakup. Two months ago, Netflix announced a change in its pricing and has been inundated with unhappy customer response since. Then on Monday, Hastings made another announcement that stunned the marketplace. Its well-branded DVD services will be called Qwikster and Netflix brand will be reserved for its streaming service.

The company will separate everything into two different websites without any pricing packages or loyalty discounts for customers that want the combined service or integration between sites, making it even harder for customers to access their services. Talk about confusion. The lack of communication and now the half-hearted response is a PR nightmare.

Netflix has thumbed its nose at the first rule of running a business: it’s all about customer service.  This is a company that built its business and brand on making it easy for customers to watch movies. No need to go to a store or stand in line, it delivered the DVD of your choice directly to your home. And with the advances in technology, it moved into streaming content, which should make everyone’s lives easier. So why is everyone so upset?

Like my mom always said, it’s not what you say, it’s how you say it. After two months of no response, a blog post and letter to customers “apologizing” is too little, too late. There may be business reasons behind the splitting of the company (sell one division off?) but poor communications has created customer confusion and aggravation.

Netflix did not keep its most important audience – its customers – in mind when making and communicating its changes. It rolled out a pricing structure change without thinking about how it would affect their customers. With the economy still in flux and millions still out of work, increasing prices in an oversaturated entertainment landscape may not have been the wisest decision. But if it was a business decision and had to happen, then there should have been a comprehensive communication plan, including customer service support, in place to insure it was understood and ultimately accepted.  Had these steps been taken, we wouldn’t be seeing this apology two months later and Netflix probably wouldn’t have lost more than one million subscribers or 7.4% decline in its stock price.

I’m not sure if its too late, but if Netflix doesn’t learn its lesson and start to think more about its customers those very customers will continue to abandon this once novel company.

September 2011