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Lessons In The Art Of Breaking Bad News (Netflix Edition)

In case you haven’t heard the news yet, Netlix is spinning off its DVD-by-mail business under the new brand name Qwikster. Following a poorly handled announcement of a price increase a few months back that separated the video streaming and DVD-rental fee structure, Reed Hastings – Netflix’s CEO – has decided to double-down on Netflix as a streaming movie service:

As a marketer, I find this move fascinating. I’ve always admired Netflix for their willingness to sacrifice their cash cow DVD business in the service of their long-term vision, but I think only the Netflix faithful would say that they’ve communicated the recent changes in an effective manner. Not that, in theory, the move is a bad one. Ostensibly, splitting the services will allow those who want DVDs an easier, more streamlined way to access them while freeing up cash flow for Netflix to improve the (often lagging) streaming catalog.

But What Happened To Being Customer Focused?

I’m sure if you asked Netflix they’d tell you that they’re making this move in the service of the customer, but they seem to have forgotten an important factor: Their customers don’t view them as a DVD or streaming service, they see them as an entertainment service. This is a critical difference and one that goes to the core of why customers love(d) Netflix – ease of use. You pay a reasonable monthly fee, get whatever movies or shows you wanted, and it was simple. Adding streaming to the mix only added to the value proposition. Now you could access your entertainment instantly and didn’t have to mess with the envelopes. Genius! Of course, the catalog was a little hit or miss, but who cared when you always had the DVD-by-mail option to fall back on?

Then somewhere along the way Netflix took on a “company” worldview instead of a “customer” world. What I mean by this is that they started to justify moves that they wanted the as a company – namely to get rid of the complicated logistics and expense of the DVD business – as being good for the customer. But they forgot to ask the customer… and you know what? Customers just want to have access to a wide catalog of movies and TV shows at an affordable monthly price. They don’t want a streaming service.

Company vs. Customer

That’s not to say that the customer is always right. Steve Jobs famously told BusinessWeek, “It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.” But notice that there’s a key difference between “show it to them” and what Netflix has done which is “ruin an otherwise good customer experience by making it more complicated…” and then not doing much other than apologize when customers express their unhappiness?

Furthermore, Netflix has done a so-so job at best of managing the public communications surrounding these changes. The above video is flat and lacks sincerity, as Reed himself admits they’ve too often been silent when they should have spoken and worst of all the result of these changes is the perception among a significant number of their customers that the “value” of the Netflix service has decreased.

With that said, I’m the first to admit that I’m still a Netflix customer and have been for nearly 10 years. I switched over to their streaming only option when it first became available and plan to stick with my subscription for the foreseeable future. However that doesn’t mean that Netflix has handled the situation well from the perspective of marketing.

Marketing Lessons Learned

At some point all businesses have to do something that their customers may not like. Perhaps your production costs have gone up and therefore your prices need or increase. Or maybe there’s a new government regulation that makes the customer experience more difficult. Regardless of the cause, Netflix’s predicament offers an interesting case study of how to manage the public when announcing an unpopular decision.

1. Before you say anything, frame your thinking in the customer perspective. Get outside of your head, go talk to a few loyal customers and get their input. Learn from this early group if the response is what you anticipate it to be. What does the proposed change(s) mean to them? How does the change impact how they think and feel about your brand and product? Are they frustrated? Do they understand? Why?

2. When you announce the change be prepared to empathize with your customers, frame it in their perspective and advance your changes slowly. There will be a period of time when your customers will gripe and you need to allow ample time for addressing their concerns. People tend to be resistant to change (just ask Facebook) and therefore you need to anticipate complaints and be prepared to address them proactively.

3. Demonstrate how the change benefits the customers. Unless you can clearly articulate how and why the changes you’re making will benefit the customer, you’ll lose business. Its just that simple. And if you can’t articulate this clearly then you need to revisit the purpose of the change in the first place.

4. Engage in discussion with your customers in an integrated fashion. In today’s world your customers hear from you in a variety of ways: via email, on social media, at your store front and through the media. If your announcement proves to be unpopular you have to have a plan that allows you to speak with your customers through every available channel. If you can own the news cycle then you have a much better shot at clearly explaining your company’s point of view and getting buy-in from your customers.

5. Be comfortable in taking a beating and then moving on. Do you remember when Nintendo announced the Wii video game console or Apple announced the iPad? Remember all of the jokes about the name and how they wouldn’t succeed in the marketplace? Both products faced push back initially but quickly found success in the years following release. Why? Because they were good products and neither Nintendo nor Apple dwell on negative feedback. You should do the same. If your product or service is fantastic your customers will forgive whatever changes or hiccups you face. But you have to quickly move on. Making new changes (like Netflix’s Qwikster announcement) are always bound to backfire.

Posted in Business, General, Marketing