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Let’s start with the positive side.

Netflix customers passionately care about the service.

Every time Kellogg’s raises the price of Pop-Tarts, you don’t even hear a whimper.

But the Netflix customer base responded with the emotional fervor of a South American futbol match.

Why?

Take a look at the blog post announcing the pricing change.

After laying out the new pricing structure, the post hammers home the value message:

By offering our lowest prices ever, we hope to provide great value to our current and future DVDs by mail members.

and this line:

We think $7.99 is a terrific value for our unlimited streaming plan and $7.99 a terrific value for our unlimited DVD plan.

C’mon.

This isn’t about offering greater value to the customer.

This is about the company’s operating costs going up and needing to increase revenue to deliver the appropriate financial performance.

Here’s the piece that Netflix missed.

That storytelling works.

Just be honest and open with people.

No one rejoices over paying more money and undoubtedly some unhappy campers would defect.

But most people get the concept that if a company’s costs go up, the price of the product/services also goes up.

Observing Netflix from afar, I’ve been impressed with how the company has built its brand. I think it’s fair to say that transparency represents one of those brand attributes. What can be more transparent than the CEO posting a SlideShare deck on the company culture? As a second example, most companies would have disallowed posted comments on the blog post given the nasty tone.

That’s why this debacle surprises me.

With that said, there’s still time, say 24-48 hours, for the company to course-correct the situation.

I wouldn’t be surprised if Reed Hastings himself comes forward with some type of mea culpa.

We’ll see.


Comments

  • Ken Hong

    I’m with you, Lou. I was quite surprised by how poorly this was carried out. Eerily, I read this article one day before the pricing announcement — http://bit.ly/oBjCJ0. Coincidence?

    Reply
  • Lou Hoffman

    Ken,

    Now that PC Magazine article is very interesting indeed.

    I think it’s fair to say Mr. Ulanoff connected the dots before everyone else.

    If Netflix had conducted research, even a few focus groups spread across the country, I bet they would have crafted the announcement (blog post) differently.

    Reply
  • Suzanne Henry

    It really is too bad that Netflix failed to deliver a good story around its price hike, when it’s business is to deliver good stories to our doorstep in the way of movies. They could have even used that analogy. I’m waiting for the “retraction.” Still waiting…

    Reply
  • Lou Hoffman

    You’re right about that analogy.

    They could have even created a mini movie/video about the “agony” of the decision. A little levity never hurts.

    I do think we’ll eventually see a mea culpa out of Netflix.

    We worked with Reed Hastings a zillion years ago when he was CEO of Pure Atria.

    Based on this experience, I have 100 percent confidence is saying Hastings will ultimately make the call on the course correction.

    Reply

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