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Old July 13 2011, 09:51 PM   #101
Temis the Vorta
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Re: Netflix shoots itself in the foot... aka no more free streaming

Christopher wrote: View Post
I've always taken "The customer is always right" to mean that you don't actively confront and correct a customer even when they're wrong, because that's likely to upset them and maybe cost you a sale.
Oooooh no. People don't like to be "confronted" and "corrected," even if - especially if - they're wrong! That approach will just make people madder and cause the situation to spiral wildly out of control (especially given the gasoline-on-fire nature of social media).

Here's how you do it. 1) figure out what you want/need to do (raise prices because of greedy Hollywood) long before you need to do it; 2) predict how people will react (Facebook rampage - that's an easy call for anyone passably familiar with the internet); 3) start building up a brand-image campaign to counteract 2) when you do 1).

This is not a customer service issue so much as a brand maintenance issue. Netflix should have been building a brand image like this: "We're a cool Silicon Valley tech company, and we're just like you! We're not like those soulless greedy bastards in Hollywood who want to screw both of us over. We've got your back. Let's fight them together!"

WHY didn't they do that? It would be the easiest brand building exercise ever! They would simply be tapping into already widespread resentments against Hollywood - it's always nice to have some hated entity to aim the customers' ire at, and away from you - and they wouldn't even have to lie, at least not very much (which generally is a large element of brand building).

Oh well, too late now. They need to go into crisis management mode. The executive level at Netflix is very much asleep at the switch.

LL Bean is a great example of a company like that. Their return policy is, in a word, stupid. They'll take back anything they ever sold, no questions asked, will fix it for you, give you a new one, or give you back what you originally paid for it. You'd think that would crush a company, but people will spend more money there knowing they stand behind their things, and the stuff is usually good enough quality that you never return it anyway. A few people will return boots that are 20 years old and worn down, and they'll take them, but most people won't ever use the policy, but just buy another pair after time. Doesn't hurt their bottom line to be on the customers' side, and probably helps them more than anything.
GREAT example of successful brand building. Through that return policy, LL Bean communicates "we are a solid, old-fashioned, honest-to-a-fault, down-to-Earth New England company that has the same values that you do." That is vastly more valuable than the cost of the few items that might be returned. Who knows what the company is really like? They could all be depraved party animals who spend the off-season in Fort Lauderdale, spending the vast profits they make from the brand image they're selling: solid, boring, plaid-flannel-shirt-wearing throwbacks to a nostalgic "better time" when companies took pride in quality, which of course, practically nobody does nowadays.

Brand image is the most valuable thing any company owns. Netflix needs to understand they are not a company that rents DVDs or streaming video. They are a company that sells a brand image to people. They are selling a brand image now that a lot of people don't want to buy. In fact, they're not in control of their brand image and as far as I've been able to determine, never have been. That's the first problem they need to solve. They can't let outside factors like balky studios and rampaging Facebookers define their brand image for them.

PS, this is what Netflix should be doing! Some other company is doing their brand-building for them. Why are these metrics not on everyone's Neflix page? "Here's our value, here's what the fraking cable companies charge, here's how you can get even more value from the service."

Here's the explanation for FeedFliks. Some variation on this app should have been part of Netflix all along, that gives a credible comparison between Netflix and other entertainment options: cable, DVD purchase, movie tickets. And to head off disgruntlement, the app could advise customers on how to optimize their account. That kind of transparency could go a long ways towards creating a brand image that "we're on your side." Netflix needs to give people good advice before they even know they need advice.

But now they're being compared with - brrr! - cable companies!

CNET article.

Many of the company's 23 million subscribers are outraged over the money issue and they're just plain disappointed in the way Netflix is behaving. Dumping a 60-percent price increase on customers and casually announcing the move in a blog post without warning isn't what Netflix is supposed to be about. There's no doubt that Netflix's brand is suffering. Good will and trust is being drained, and quickly.

...

Take a look at Wall Street's mute reaction to the pricing move. The company's share price went up after Netflix announced the increase yesterday and in afternoon trading today the stock was up 2 percent and just under $300 a share. Analysts that cover Netflix have predicted price hikes for a long time because there were few other ways the company could afford to expand its library--which customers are discovering is lacking in some important content areas.

When confronted by the argument that Netflix must raise prices to pay for content, one of my CNET colleagues, Maggie Reardon, may have succinctly sized up what many Netflix users are saying: "Who cares? That's their problem. Paying for content is the excuse that cable companies have used for years to justify price hikes."

The longer Netflix waits to respond to customer outrage, the more likely it is that negative attitude will be set in stone.

Last edited by Temis the Vorta; July 13 2011 at 10:56 PM.
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