It's easy to see why Netflix has been a best-loved service: their price is good, they pick up on your preferences and try to customize choice lists, and (when my kid experienced a DVD delivery mishap) they're quick to respond and remedy. They were "reasonable" in every positive sense of the word.
That was 24 hours ago. Right now, Netflix's blog has capped out at 5,000 irate customer comments in response to their 7/13/11 price change. Their Facebook page has roughly 1,000 "likes" and over 50,000 irate customer comments ranging from "Cancelled" and "U Suck" to "How dare you treat your loyal customers this way; we helped you build your business."
"It's only entertainment," you might say. This is true. But it's really a story about relationship.
Consider the context in which Netflix made this change:
• The recession. Enough said.
• A general confounded public frustration with politics, especially as party leaders and Obama try to negotiate on the debt ceiling with — so far — a profound lack of progress. With this change, Netflix just joined the ranks of those inchoate external forces who, in perception if not reality, is making life harder for the consumer. Perception becomes reality.
• The state of Minnesota is in shutdown, months after the same thing nearly happened to the entire nation. Just when we thought we'd narrowly skirted that disaster, Minnesota's plight reminds us it's entirely possible still, especially as debt ceiling talks stumble on.
At the very least, instead of sending out stoic messages explaining a far more complicated price increase, Netflix could've tried to look pained at even having to make the change at all ("We know this will hurt but here's why we too have felt the economic times in which we all live"). If it's going to pain your customers, it had better pain you twice as much. And if it doesn't, at least try to fake it. Bring them on board as sympathetic partners.
In the end, this 60% increase is still less than $20/month, but Netflix forgot a few things:
• In a recession, people not only invest loyalties in but maintain affection for organizations that provide flexible, understanding solutions. Customers deserted Blockbuster and went to Netflix in droves, in part because of the recession's pinch, but also because Blockbuster's policies felt punitive by comparison.
• Movie escapism got Americans through the Depression; all we did was change technology and modality, but the emotional reasons are still the same.
• In a recession, people will keep searching for alternatives. If they find you objectionable, they'll settle for "good enough," rather than maintain a relationship in which they feel badly betrayed. Real or perceived, Netflix is coming off as motivated by simple corporate greed, and after years of corporate calamities like the BP oil crisis, the Fannie Mae debacle, bank failures, company bailouts, and stories of happily overpaid CEOs, the U. S. public is sick and tired of corporate and legislator greed.
Netflix wore the white hat — until now: No matter how well-justified this new plan, they were asking for a 60% rate increase. It doesn't matter if you're shining shoes or providing electricity: a 60% increase is going to raise comments, and those are only the customers who feel like speaking up. Only 20% usually do; the rest simply change, walk away mad, and talk bad about you behind your back, not to your face (partly why I repeat this credo to my clients — "a complaint is a gift") ...
Potential Netflix customers will be asking colleagues, neighbors, fishing buddies: "So, Joe, you were with Netflix. Did you like them? You don't? What are you doing instead?"
The fact is, with this debacle, all the negative reporting on Netflix's poorly handled price increase has given free and positive word-of-mouth to their competitors, at their cost.
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