Posted by Tom Gable
Recent analysts reports, coverage in the major media and the Twittersphere are being less than kind to Netflix and its two recent corporate announcements: raising prices by 60 percent; and coming back two months later to apologize while announcing the split of the company into two (Netflix and Qwikster). In looking at it from a strategic planning and PR perspective, the best companies incorporate image as a part of corporate strategy, especially when one has built such a strong brand. They do things right and also do the right things. Netflix appears to have advanced toward bursting its own brand bubble through eight easy steps:
- Raised prices seemingly without much consideration for the existing customer base, its needs, wants, expectations
- Went for a big number rather than incremental increases
- Provided a rationale that didn’t ring true and made many long-term customers feel betrayed by the brand
- Did it all top down and one-way in a CEO voice rather than human voice
- Didn’t join the conversation; didn’t use social media to actively engage its many audiences
- Waited a couple of months to apologize and then do it with an amazing lack of sincerity
- Seemingly as an afterthought, changed a successful business model to confuse customers, analysts, and the stock market
- Gave competitors openings to attack, reposition the company, declare pricing advantages
And if you are really successful, here’s what you can expect: 50 percent drop in stock price and market capitalization, enmity versus admiration, lack of support in the financial community (buy and sell side analysts), a zillion Twitter and Facebook comments, a Hitler meme or two, and confusion among consumers on how to order and from whom when you split the company, create a new brand name and dilute the brand image.
David Pogue, columnist for The New York Times, parsed the apology:
“Ah. O.K., good. We’ve seen this movie before. Corporation bumbles, apologizes, makes things right. Business schools take note. Life goes on. But this time, Mr. Hastings did not follow the formula. He only pretended to. He goes on to say that the new higher prices will stick — and, worse, Netflix is about to break off its DVD-by-mail feature into a completely separate entity, called Qwikster.”
The PR and marketing blogs offered good insights. Mr. Media Training cited six reasons why the apology failed. Liz Goodgold, of Redfirebranding, provided four ideas Netflix should have used before going down the primrose path to greater profits.
In summary, another NYT story delved into the reasons for raising prices (to generate more income for acquiring content from the major studies for streaming). The “self-inflicted” wounds could have been avoided with better planning for an integrated and strategic evolution of what were in actuality major change initiatives at Netflix.