Tag Archives: Netflix bungles price increase

Netflix price increase brouhaha: unnecessary outrage amplified

Thanks to Matt Wilson of Ragan Communications for getting me to think about Netflix and the tempest they created with a bungled service change announcement:

Did Netflix just throw their entire franchise away by bungling a price increase announcement? As I write this “Dear Netflix” is one of the top trending topics on Twitter and the comments on Netflix’s own blog post about the price increase makes it clear that their customer base is not happy and may well be a former customer base.

What went wrong? And how could this have been avoided?

First, I think it is important to understand that the lens of social media does not necessarily reflect reality very accurately. While it appears that Netflix is in deep trouble over this, I’m not certain this is the case. At the same time, the social media reaction also colors the response of others who may not be so exercised over this.

As Netflix customers we also received the email notice about the price increase. My wife relayed it to me and we briefly discussed that this seemed excessive and whether or not we would continue. But when I looked at the online comments my very moderate negative reaction became more like outrage. Yes, how could they do this to me, a loyal customer! Not only that, I found out what others were turning to as alternatives.

So not only does social media reaction tend to give a distorted picture of reality, it tends to feed the outrage. All the people who are upset are telling why they’ve wanted to cancel Netflix for a long time—like limited selection, not having the latest and greatest, etc. What may be worse they are informing those watching the discussion as to the alternatives and creating a sense that this is where the herd is heading next.

Summary:

1)     Social media outrage gives false picture of reality. I doubt that the reaction we see on social media right now is at all representative. I doubt that Netflix’s customers overall are reacting as strongly as it seems by looking at the comments. That means in an event like this you have to keep your cool, not over react, and keep an eye on the big picture without allowing the lens of social media which gives a distorted picture to cause a distorted response.

2)     Social media outrage feeds outrage. While the picture may be distorted, the outrage reaction amplifies feelings. My moderately negative reaction is much deepened when I look at how others are reacting. We certainly have seen this in other events including the Gulf Spill when outrage fed outrage. That’s why these reactions or over-reactions are still very dangerous and very important to avoid and deal with.

3)     Social media greases the skids of change. By that I mean it makes it much easier for me as a customer to consider alternatives. Those who are angry are telling me all kinds of reasons for dissatisfaction with Netflix—reasons I never had before. Plus, they are telling me where they are going. Redbox is going to see some big increase in business, just like some hosting companies did after Godaddy’s CEO stepped on himself over the elephant shooting business. Social media tells people why to be unhappy and creates a herd mentality relating to where they are going now.

So, what went wrong and how could this have been avoided?

1) Explain yourself. Their email explaining the change was pitiful. Here’s how its starts: “We are separating unlimited DVDs by mail and unlimited streaming into two separate plans to better reflect the costs of each. Now our members have a choice: a streaming only plan, a DVD only plan, or both.

Your current $9.99 a month membership for unlimited streaming and unlimited DVDs will be split into 2 distinct plans:”

Their blog post does much better but still comes across as incomplete and perhaps less than completely honest. It starts out this way: “First, we are launching new DVD only plans. These plans offer our lowest prices ever for unlimited DVDs – only $7.99 a month for our 1 DVD out at-a-time plan and $11.99 a month for our 2 DVDs out at-a-time plan. By offering our lowest prices ever, we hope to provide great value to our current and future DVDs by mail members. New members can sign up for these plans by going to DVD.netflix.com.”

Once I understood what they were doing, unbundling their service, I realized that my price was actually going down because I will use only the streaming service. But, when we got the email we discussed cancelling because it looked as if they were doubling the price overnight.

2) Involve your customers. It is hard to believe that a company like Netflix, born on the Internet, would do something like this without involving the social media crowd. Something like this should not be sprung on an unsuspecting customer base. Politicians call it raising a trial balloon, but social media makes it very easy to engage customers in big changes like this. They could have said, hey, we’re thinking about doing this, what do you guys think? Here are our problems and challenges, if you were in our shoes, what would you do about it? That would have smoothed the way, given them important information, and created defenders of those people who participated.

3) Offer to grandfather those who want it to stay the same. For many, the change may be good and well accepted. But for those who strongly object, offering to grandfather for even six months would ease the anger. But they probably would have figured that out if they had involved the customers in the first place.
The upshot: Netflix will survive just fine. Competitors like Redbox will see some gains but will only really see long term if they offer significant added value and communicate it aggressively. But this will cost them, in loyalty, in brand value, in loss of customers—and from my perspective, unnecessarily because of failing to either understand or think through carefully the implications in the era of social media amplified outrage.