Netflix creates Qwikster and says sorry too late
Okay, tell your super-loyal customers that you are giving them two months notice, then you are doubling the price of the products they know and love. You get a choice to get streaming movies, which have a limited number of titles, or continue your DVD deliveries, which have just about everything. This is called a choice but it’s really a “take it or leave it” option. As we all know, this announcement during the summer caused an immediate uproar with the loyal followers and customers of Netflix. The result was thousands of negative emails and postings about the company, thousands of canceled accounts, and a drop in stock value for Netflix.
In my original blog back on July 14 – Don’t Mess with Customer Loyalty, Netflix! I stated that this is the one asset Netflix has that they should not mess with – passionate customer loyalty. No matter what “pricing model” or form of business they operate for financial reasons, they needed to keep the customers happy, loving them and eager for more. It’s branding 101. And with missteps like this you have very little margin to fix the messes you create. Now that Netflix CEO Reed Hastings attempting to backpeddle by posting a retraction and apology on September 18 (http://blog.netflix.com/2011/09/explanation-and-some-reflections) – three months later – it’s a bit late in the game to save face for Netflix, having already broken the trust of customers.
In this blog entry by CEO Hastings, he introduces two models of video rental: the rollout of Qwikster to handle their brick and mortar DVD delivery business and the retention of Netflix for streaming. But why not introduce the future first way back in July, keep the pricing the same with some offers and incentives and then do the pricing changes later! What was the management thinking? This is why you do not let CFOs run companies!Yes, Mr. Hastings, we realize these are two businesses but this branding bungle has cost Netflix customers and brand equity that they will be hard-pressed to recover. Why? Because there are numerous streaming competitors already taking the high ground from Netflix. Everyone from HuluPlus to Amazon Instant Video, which is FREE if you pay a once-a-year $79 Amazon Prime fee, are at their heels offering movies and TV shows. This is giving Netflix a run for their money. As a result, Netflix continues to lose ground and its brand continues to suffer, starting with its first bad move back in July.
The real question now is can they fix the damage they did with their new Qwikster launch, and what good deals can they offer to former customers and existing customers to love and trust the brand once again? It is hard to say if they can pull this off. The one bit of brand equity you never want to lose is loyal customers.