Subscribe_128x128_red

Netflix Failures And Lessons From Betrayal Of Brand Loyalty

Imagine if you will for me, one day Apple decides to separate into 2 company’s. One company for computers, the other for iOS devices. Your iTunes would be separated into 2 different accounts and companies you’d have to sign into. Two different iTunes websites. Sounds crazy huh. People would be angry. Apple has the same type of brand loyalty that is/was inherit in Netflix. Netflix’s reversed gears today to not split up the company, reversing its horrible decision of creating two separate companies from one.

Netflix started out as a cult Brand against the behemoths of Blockbuster and the Movie Companies. Just like Apple in the early years its customers where its biggest supporters and advertisers. Its customers had a huge loyalty to it.

Somewhere recently Netflix got a bit too egotistical and started making moves that customers felt betrayed their loyalty. No sooner had Blockbuster stores closed and liquidated then Netflix effectively DOUBLED their pricing. Doubling even over what Hulu Plus is offering for Streaming alone. Most consumers dont feel Netflix’s instant streaming library is up to snuff and are angered they would pay top dollar for a lackluster service.

The bottom line lesson is few companies if any can survive an instant doubling of the price of anything. Imagine any product you buy, if suddenly its price doubled. you would be incensed. If I called all of my customers today and told them I was doubling their price they would all quit. Netflix obviously thought they could get away with anything on their customers loyalty.

Further this egotistical attitude proved itself, when after much customer anger and an exodus of customers who felt betrayed, Netflix’s CEO PR video showing little remorse, states that “he’s sorry” for the price increase but they will still remain. Thats like punching someone in the face, telling them you’re sorry, but that the punching in the face will continue daily. To take their Narcissistic level to new heights in the video, they announce they will split the company that everyone has been so loyal to into 2 parts. Customers will have to work twice as hard dealing with 2 companies to get the same results. To consumers, splitting the companies seems like a ploy to retain a greedy price increase.

A big problem with Netflix is none of their communications really says to customers that they are truly sorry. Users have found them offensive and company interest centered. Not even the recent Press Release. All the PR has been offensive saying “‘we’ll get new customers over time.” It shows Netflix didnt value the loss of those loyal people.

Now Netflix has lost 1/2 its stock value in a month and who knows how many customers. At least over a million. Brand loyalty has been trashed not just once but many times over. They emboldened and enriched their competitors as even Blockbusters online service reached out to Netflix’s ex-customers.

What Netflix should have done was recognized consumers didnt find value in its Streaming service. It should have either worked to increase that value or do an incremental price increase with the promise of working to add streaming value. When it doubled prices and got the first back lash it should’ve have rolled them back or half back. It should have initially listened and responded to their customers. Instead it kept showing its ego and indifference making things worse.

I asked my Social Media bases to weigh in on what it would take to get customers back. Most said their loyalty was gone and could never be won back. Companies nowadays have to work so hard to earn Trust. The customer trust in Netflix seems largely gone because of many gaffs, not just one. Once you lose Trust, you may lose everything. The loss in revenue from lost customers I’m sure has impacted the value of doubling those prices in a big way. The company likely lost 1/2 its customers, so now it will need the price increase.

We used to have this saying around my office that was very true of employees. “Once you start thinking you’re indispensable and annoying everyone by acting like it, its likely that’s actually the time when you have become the MOST dispensable.” Way to go Netflix. Never betray the value of your customers trust and loyalty.

Netflix Announcement: http://blog.netflix.com