There is a very interesting drama playing out involving Netflix and their price increase the implemented a few months ago. When it first came out that they were separating the DVD mailing portion from the streaming portion of their product and pricing them separate, effectively raising the price on the combined services by 60% there was a big backlash from their customers. Instead of laying low about or trying to deal with it they responded with an arrogant reply:
Steve Swasey, vice president of corporate communications for Netflix said the timing of the price change was "appropriate" and that "$6 more is a remarkable value, a latte or two every month. For most folks it’s absorbable," adding Netflix was "sympathetic to those in terrible financial straits."
But, he said, the reaction was "expected." "We anticipated some folks were not going be happy with the change. It didn’t surprise us."
Swasey said, "30,000 or so is a sub set of 23 million subscribers. They're not speaking for the majority. But, their opinion is important and we value them."
"We would like those members to stay with Netflix, but the reality is people will leave. We'll make it up over time and the service will continue to grow. I don't want to sugarcoat this. We do expect a certain amount of people to leave the service," Swasey said. Besides, "Netflix members already go to Redbox, order cable, go to theater and Amazon."
Basically they said, here is the way it is, if customers want to leave, go ahead and leave. Well, they did, by the millions. In this day of tweets, retweet,s and links to articles their response spread quickly and people voted with their feet. Then their stock tanked and now the CEO has issued a public apology and an explanation of their plan to split off their DVD and streaming plans into separate businesses. It will be interesting to watch how this plays out and if his apology is perceived as genuine enough to win customers back. To me the bottom line is that they left their customers feeling like they were not valued and in these times where your budget dollars are precious, most people tend to prefer to do business with companies they feel appreciate them. Maybe they are able to recover from this, maybe they won’t, either way it is a pretty important lesson that you see on motivational posters all the time “take good care of your customers…or someone else will”.
Justin Himebaugh leads the accounting department at HRU, (or The Necessary Evil Group as he calls it). A Graduate of the Haworth school of business at Western Michigan University, Justin has specialized in systems implementations and streamlining the accounting function for the companies he has worked with. Besides having a well rounded skill set when it comes to accounting he can still hold his own in the pool if a game of water polo breaks out. You can follow him on Twitter, @necssryevil
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