Netflix, er uh Qwikster, I mean, Netflix
You know it’s bad when your company is being referred to as “New Coke.”
We all know what happened when Coca-Cola tried to reinvent itself back in the 80’s—complete and utter revolt in every sense of the word, perhaps one of the most memorable PR poo-storms in history. Now Netflix faced the same customer rebellion after they made one of the boldest corporate moves I have ever witnessed. They suddenly raised their prices by 60% and attempted to split their company into two separate services for their streaming videos (to remain Netflix) and mail-only DVDs (to be named ‘Qwikster’).
I am a Netflix customer myself, and joined the hundreds of thousands of others in boohooing over this ludicrous plan. Netflix CEO Reed Hastings gave no warning about the price changes, and the reason why was never acknowledged or explained clearly. The company set itself on fire by not listening to its stakeholders or taking suggestions or recommendations from its consumers.
It took 80,000+ Facebook comments and posts, dramatic market drops, and 2 million subscribers to threaten to abandon the company for Hastings to finally come to his senses and do some PR crisis damage control.
In a blog post, yesterday, Hastings said Netflix was abandoning its plans to create a separate DVD service called Qwikster, saying it was clear that the two services would make it more difficult for users.
“This means no change: one website, one account, one password… in other words, no Qwikster,” he wrote.
Finally, a smart move— Netflix’s s shares were up seven percent to $125.50 by midmorning trade.
The name of the game is LISTEN TO YOUR CUSTOMERS. Before you make some wildly unpopular decisions, consult the people who are paying your bills. Their feedback and input is vital in keeping your business afloat, and will prevent you from a costly PR poo-storm in the long run. Netflix’s negligence cost them customers, market shares and revenue when all they would have had to do is send out a survey to its subscribers or conduct a few focus groups to find out they were walking on thin ice. Even getting some feedback on social media (it’s FREE, people!) is useful in gathering information for you to make an educated decision.
This is another example of how qualitative data is just as important as quantitative—don’t skip this important step! It will be interesting to see how this sudden change of heart plays out for Netflix in the next few months.
Aaaand, just because it’s funny, check out SNL’s take on the whole situation.
-Danae Castellaw
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I love this piece! Great infographic and excellent points on the importance of listening rather than telling. This is a listening business world we’re in today. Netflix somehow got the idea that it was invincible at the top just because everyone loved it, and therefore they could simply request more money (without stating any actual reason for it) from their customers without reprimand, then make the outrageous move of unsimplifying the Netflix process for customers at the same time. Clearly he was assuming its myriad competitors were so far behind they wouldn’t be able to spot a chink in Netflix’s armor and go for the kill shot when the opportunity arose…something we still might see in the next year or so.
From what I can see, Hastings got caught in the technology speed trap. Which is to say he started seeing things moving way more quickly than they actually are and made hasty, irrational decisions based on his projections 5-10 years into the future rather than the reality of what is keeping his business alive today. I find this happens if you spend too much time reading Mashable and Techcrunch and forget to speak to regular people who think online banking and Skype are mind-blowing new technologies.
He also neglected the fact that Netflix is seen (at least by myself) as the poor man’s alternative to absurdly expensive cable/satellite subscriptions, and when used with a decent quality antenna, one can get virtually all of the news, TV shows and movies they could ever need for the price of a decent Internet connection and a modest $10/month or so (back when Netflix was at the right price). Through the recession and sluggish recovery I think Hastings was one of the only people in the country who hadn’t yet realized the enormous value of Netflix for those of us trying to save a big monthly bill without sacrificing much from our quality of life.
Having used many of these other services, plus the fact that Dish + anything is always going to suck (sorry, Dish), I don’t anticipate Netflix collapsing or anything of the sort. For now they just need to shut up, let the apology sink in and wait for Netflix subscribers to settle down and go back to their Netflix routine – one all of us still love. More turmoil (like Hastings stepping down) is just going to keep the thorn in the wound. Focus on getting more content on streaming at any expense and slowly rebrand the DVD-by-mail portion of their service as a library of sorts, for all of those classic titles, foreign films and TV shows that can’t make it to streaming for one reason or another.
Great writeup – way to capture the massive flop by Reed. I especially love the “New Coke” analogy – I always use “Crystal Pepsi”
I think it’s really awesome that all of this Netflix fury was dished out via social media, blogs, and the like – and I’m glad that they listened. I suppose for a publicly traded company whose stock has been getting hit hard lately, it’s important to follow those sorts of negative signals.
We threw together a video about this flop – curious to hear what you think. You can check it out here: http://www.youtube.com/watch?v=qqyZOJc_kn0