Tuesday, September 20, 2011
Netflix Responds to Customer Outrage with New Thing for Customers to Get Outraged About
Months ago, Netflix faced vocal customer opposition to some very modest changes to the pricing and features they offer in streaming and DVD-by-mail. Their response today was to compound the problem by splitting their services into two separate brands in a move that further alienates and risks losing an already unhappy customer base. While an official announcement explains the decision in accounting and management terms, which may be reasonable and justified, it is impossible to view this change as anything but one of the biggest PR and marketing blunders of the year. This move has “New Coke” written all over it. (Read the full statement http://blog.netflix.com/2011/09/explanation-and-some-reflections.html)
How does all this controversy shake out from a PR point-of-view? And, in any case, does an aggressive PR strategy have any chance of success, when the news is met with such widespread resistance? I’ve identified what I think are four things that Netflix did wrong in the situation and analyzed them below.
1. Over-React, Make a Bad Situation Worse
In the case of Netflix’s recent changes to their fees, customers responded negatively. The last thing a business in that position should do is to ask, “how could we possibly make this situation worse?” But, that’s exactly what Netflix did, announcing a split between the net-streaming and DVD-by-mail services into two distinct companies, with separate websites, member accounts, and fees. The DVD-by-mail service is set to be spun off under the name “Qwickster,” with Netflix retaining the online streaming market.
Customers on the official Netflix blog, on Twitter, and in countless other sites were absolutely railing against this announcement. The changes are clearly unpopular, and no amount of messaging could have turned the bad news into something else.
2. Tone and Word-Choice, Missing the Mark
Another aspect that clearly turned customers off was the awkward, touchy-feely tone of the email from CEO Reed Hastings. Short version: “Yeah, we screwed up, and now we’re going to screw up further.” Hastings apologizes and recaps the blunder of the pricing announcement a few months ago before jumping into the new serving of bad news. While Netflix clearly thought they would be perceived as contrite, many comments assessed it as over-the-top. Compounding the previous blunder further with a strange, personal message, Hastings proceeds to announce the next unpopular blunder of an idea in a text-book example of the maxim, “the treatment is worse than the disease.”
From the online response, customers seem to see through the new solution, perceiving that it was really about solving Netflix’s internal corporate management problems than about meeting customer demand. From a PR standpoint, the message seems trite and self-serving. In responding to customer outrage over the changes in fees, Hastings first apologizes for not explaining the changes more effectively before making the announcement. As if the company’s PR messaging was what upset customers, and not the fundamentally unpopular changes they were making to a popular, market-tested service.
3. Hiding Your Motives with Messaging, Customers See Through It
In the most egregious mistake of this monumental PR blunder, Hastings explains that the changes were prompted by shifting cost structures of mail delivery versus online streaming. Presumably, Hastings wants to dump the more costly DVD delivery service from the more robust profit margin of the low-overhead streaming service, eventually phasing out or discontinuing the DVD-by-mail business entirely. Through a forced, narcissistic, wordy ode to the “joy” of the service he helped found, Hastings labors under the misconception that customers have pity for a profitable company mismanaging their routine fiscal challenges. “[W]e need to let each grow and operate independently,” Hastings writes, citing the “need to focus,” and a vow to “regain your trust.” Don’t worry, he assures customers, the envelopes will still be red!
Many customers are asking if Netflix was really incapable of managing both services under one roof, or if they just didn’t want to anymore.
4. Make Customers Work Harder without Giving Them More
This one is as much about the product as it is about PR, but the sentiment online indicates that customers saw the writing on the wall. Hastings tried to spin this announcement as a new stage of growth for the company, customers were left wondering why they will now be forced to login and manage two accounts, pay two bills, and potentially face increasing charges from, not one, but two separate companies. That alone was the most common complaint, and for Hastings to not address it directly in his announcement showed a clear lack of respect for the customer. More than 1,000 words of carefully crafted PR copy couldn’t hide the fact that customers would need to work harder, and probably pay more, to get the same level of service.
So, what are your thoughts? Did Netflix make the right move, or are you ready to cancel your membership? What do you think of Netflix’s handling of this controversy from a PR and marketing perspective? We’ve started a discussion of this topic on LinkedIn here. To participate, you will need to be a member of the PRWise discussion group on LinkedIn: find out how to join the group here.
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