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Gini Dietrich

Communication Tips for Netflix

By: Gini Dietrich | July 25, 2011 | 
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I think we can all agree the way Netflix handled the communication of their price increase was a PR disaster.

But before we get to the communication lessons, let’s get this out of the way.

It sucks they had to increase their price. This economy sucks and, in the U.S., it could very well get even worse.

But you know what? We all have to increase our prices.

As Jay Dolan so aptly points out, $16 for DVDs and unlimited streaming is still A LOT cheaper than cable. In fact, if you order three movies on OnDemand, through your cable service, you have just spent as much as your monthly Netflix charge.

Now that we have that out of the way, I hope we can all agree this blog post is NOT about the price increase. 

It is about the way they could have handled this so much differently, still had the price increase, and not taken a beating on the web.

One would think they’d have learned their lesson when they planted actors in Canada during their launch…and got caught. But it seems they’re too arrogant to figure out how this whole social thing works.

You see, they have 93,000 Twitter followers, nearly two million Facebook fans, and 118,000 blog readers. The size of that community makes me envious.

But they have not, not once, asked anyone what they think.

It could go something like this:

  • Facebook update: The big boss says we have to increase our prices. How would you prefer to pay for your subscription?
  • Twitter: If we were to separate DVD rentals from unlimited streaming, would you prefer two prices or one bundled price?
  • Blog: A few hundred words about the need to increase the price and ASK people how they would like their subscription.

The thing about handling it this way is you are asking the questions in a very strategic manner (because you already know what needs to happen), but you’re involving the gigantic community in the decision.

At first, Netflix said it’s going to increase the price and you have to pay $16 for both. Then, after being under fire for a week, they announced two prices for separating them.

They could have avoided that second “announcement” altogether.

But what’s even more bothersome? They still haven’t responded to Twitter, Facebook, or the blog comments.

Shame, shame.

How would you have advised them to announce the price increase?

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About Gini Dietrich


Gini Dietrich is the founder and CEO of Arment Dietrich, a Chicago-based integrated marketing communications firm. She is the lead blogger here at Spin Sucks and is the founder of Spin Sucks Pro. She is the co-author of Marketing in the Round and co-host of Inside PR. Her second book, Spin Sucks, is available now.

84 comments
Elias26
Elias26

Gini, I am with you on this, 100%. The price increase, though I wasn’t happy about it, isn’t even what it my decision to cancel was all about (though it WAS a part of it). It’s everything. The lack of respect and communication to customers was one thing, their selection was another, the fact their own customer service was close to being non-existent in my experience, was another part. But for a while it seemed my only choice. A few months back I learned about Blockbuster@Home through my job at DISH. I switched over, pay less, and get more services: Not just streaming and DVD delivery, I also get videogames, so I cancelled Gamefly, too. On top of that I get a bunch of movie channels. Now I hear Netflix is forming a PAC to support another SOPA-like bill? No thanks, Netflix.

timjahn
timjahn

This move by Netflix has nothing to do with price or communication. It has to do with business.

DVDs are VERY expensive for Netflix, and less and less people are using that plan. Streaming is cheaper for Netflix and more and more people are using that plan.

The content on Netflix streaming sucks though. But if Netflix can get more people using streaming and less people using DVD, the studios will (eventually, after somebody hits their thick skulls 7,000 times) realize that they need to improve streaming rights for Netflix.

This move by Netflix is all about getting you to use streaming, not DVDs. And since I already use streaming (solely), this move did absolutely nothing to me. In fact, I applaud Netflix. Kill the DVDs. Bring on a better streaming library.

Now.

KRLRose
KRLRose

It is all so 20th Century. Businesses have the tools and communication channels to turn customers into raving advocates for their products and services but they just don't seem to be able to grasp the fundamental problem that people are tired of just having a companies priorities pushed down their throats with little thought as to how their latest initiative and drive for profitability will impact the relationship in the long term. Yes. They get the short term wins and the ROI improves but in the end gradually very few companies manage to survive long term because customers will vote with their feet as soon as a better alternative comes along and usually the competition see it before they do and take advantage of the gap.

kikilitalien
kikilitalien

@deirdrereid I've missed you lately, where have you been? Haven't seen you on #assnchat or #sweetspot... #assnchat

rachaelseda
rachaelseda

Ahhh I knew it wouldn't be long before you wrote a post about this. I don't think it's about the price one bit. They could have easily followed what Verizon did and kept their current customers happy while raising the price for new customers. They could have received feedback from customers first just to see what push back they were looking at and to make the customers feel like they had some say. Beyond all of this, I think the worst thing (like you said) is that they aren't responding to people online. Why not? I'd rather you politely respond and still tell me that there's a price increase than not respond at all. My peeve with it is....don't have Twitter, Facebook or a blog if you're not going to respond, you might as well not have it at all. Last time I checked you have a phone so you can talk with people? Would you just pay your phone bill and customer service employees just to have them sit around and NOT answer the phone? Well that sounds silly!

thelance
thelance

I'm a bit surprised there hasn't been more pushback on the post. Happy to oblige though.

First of all, I don't think you can separate communication from business purpose. And in this case, I think it was critical. Sean McGinnis is dead on: Netflix needed to shed bad fit customers. When they are negotiating with studios, they need to know how many subscribers actually use the streaming service (and are willing to pay for it on its own right). Many people who have complained about the price increase say that Netflix doesn't have a great online streaming selection. Encouraging those customers to drop (instead of placating them with a bargain) is actually better for Netflix in the long term. Subscribers who watch one movie a month versus the 20+ some people watch count the same to the studios. Other than cleaning up the language in their communication a bit and despinning it, it seems like they did what was necessary.

Second of all, I love crowdsourcing as much as the next guy but when you're talking about a decision that impacts your company's strategic direction for the indefinite future, I think you have to be a bit arrogant and be educated but confident in your solution. I think the situation would have been much worse if they asked for suggestion (having already known what the business objectives were going to demand) and then not use a single one of them. That doesn't placate me at all as a consumer and as a business strategist, it seems like a waste of time. Netflix knew what it needed to do, it needed to rip this bandaid.

Lastly, I will agree with you here: they should have spent time on their post-announcement PR strategy. Who knows if this is it (don't stoke it, let the outrage die) but at the very least, if they knew the decision was unavoidable and they knew that a certain number of people wouldn't like it, they should have focused on what they could do to put out the story more quickly. Certainly tough to predict reaction as a whole but they had to expect something, right?

BiztudioTeam
BiztudioTeam

@seanmcginnis It is said that the price increase is for paying the european landing... anyway, totally agree with the article! Thanks sean!

MSchechter
MSchechter

It was such an overall mess. It wasn't just the communication (which was insanely bad), but the actual tactics they used. Simply assuming that I was willing to spend more money pissed me off. They could have compelled me, they could have explained the situation beforehand, but I simply arrived to an email telling me what had happened and explaining that they could have changed it.

I have no issue with the fact that they needed to raise prices, I have no issue with the fact that they wanted to split DVD and Streaming, I just hate that they didn't value me as a customer enough to give me a heads up. And I'd love to vote with my wallet here, but the wife loves Netflix and you don't screw with someone who just had a kid... not matter how much more it costs a month :)

DemLaura33
DemLaura33

@afirmin hi alan.. just wanted tofor you. touch base and say hi. hope your week will be terrific :))--

Justicewordlaw
Justicewordlaw

It's a shocker that I just cancelled my @netflix subscription two weeks ago and then they roll out with this. I feel as you suggested Gini that they could of leveraged their social accounts to announce a change and really get the customers opinion. Yes, they might have taken it into account or not but just giving your customers a voice in your company does say a lot about the growth that they would have taken in social media.

mediasres
mediasres

While I agree that communication was horrible, I'm not sure it was a mistake per se. I see this in the very same model of non-communication as Facebook and Google who have regularly shut down any impression of customer influence. Have a problem with a Facebook Fan page and see how "social" FB is. I take that lack of communication to be a strategy.

alexwood15
alexwood15

Havent responded to TW or FB comments? Seriously? With 2million+ fans, followers, whatever, that's a disgrace. Gini, I love and use the ol' 'what do you think?' post on TW for one of my clients and it works exceptionally well. In fact, we're implementing a few of the suggestions made by our followers because... well, I thought a few of them were better than ours! I think companies forget they don't know everything and whilst you may have a tribe in the millions, the purpose of the tribe should still always be to work together and engage that community in any way possible. Sure it may be a big decision ie procung new product, but you have the best focus group sitting there - use it!

PS. Aussie land was pumping the other night with Cadel's triumphant ride! How good is he!?

Brankica
Brankica

I use Netflix for streaming only so my price is the same for now, as far as I know, lol. I do rent movies on Cable because Netflix doesn't have many new movies. And of course, I love the Red Box just because of the simplicity of it and the fact that my home is like a light year away from it so I count is as one of the advantages of America, lol. But that is not the subject as you said, and I do agree with you. they could have handled it better and I think they will losing customers by thousands. Because of the anti-social side of their company, if they raise the streaming price I will be canceling just for the sake of it :)

And like @glenn_ferrell said, how many movies do you really watch. I think in 8 months that we had the subscription, I saw like 5 movies. And I am talking about those oldies-goodies. cause like I said, there is nothing new and cool on it.

dc2fla
dc2fla

It's hard to escape the irony of a company which so embraced crowdsourcing a better algorithm has stopped communicating with the people they wanted to "know better" in order to predict their product preferences. So confident they've mastered the complexity of Big Data, they've lost sight of the simply obvious fact that their fans, their customers are more than statistics. The potential is envious, ignoring it is arrogance. Feet on the ground, you lay out 3 simple steps. But you can't program community.

ginidietrich
ginidietrich moderator

@timjahn Ah...but I look at everything from through a communication lens. And I definitely think there is a way they could have communicated the business decision more effectively.

timjahn
timjahn

@KRLRose Sometimes it's better not to communicate at all. Look at Apple, one of the most successful businesses around these days. They don't tell us shit. Steve Jobs' angle is that he knows what customers want and they don't.I don't see their bottom line hurting because they don't talk to people on Facebook or Twitter.You know who gets fussed up when companies "screw up" on Facebook or Twitter (or don't use them the "right way")?Social media gurus. That's it. Nobody else gives a shit.

deirdrereid
deirdrereid

@kikilitalien I know, I feel the same. Timing hasn't worked out. I'm in high gear gettng work done ahead of weekend away & then vacation.

ginidietrich
ginidietrich moderator

@thelance I don't think any of us can really know what Netflix was doing or what their strategic outcome can/should be. What we do know, though, is that they used to engage their community in a big way and they screwed up badly in Canada. Their new ownership/leadership is to blame for this. Like I said to Sean, if their intent is to reduce their subscribers, so be it. But there is a MUCH better way to communicate that, which I think you and I agree with. That's why I didn't want the blog post to be about the price hike, rather in the way they completely botched the communication of it. They created their own PR disaster. It could have been completely avoided with some engagement, not crowdsourcing, but actually listening and talking with their customers.

ginidietrich
ginidietrich moderator

@MSchechter And if they really wanted to split DVD and streaming and get people to drop DVD, why did they wait to announce that piece until after the outcry of the public?

afirmin
afirmin

@DemLaura33 Thank you Laura, hope you have a wonderful week as well, take care

ginidietrich
ginidietrich moderator

@Justicewordlaw They used to give their customers a voice. That's what kills me. If @deleted_91832_Sean McGinnis and @thelance are right about the strategic direction of the company, there are SO MANY better ways to communicate the changes. And while not everyone agrees with me that they should have engaged their customers, what's the point of having a blog, Twitter, and Facebook if you're not going to use it to discuss changes with your community?

ginidietrich
ginidietrich moderator

@mediasres If it's a strategy, it's a very poor one and not something we would ever advise our clients to do. Sticking your head in the sand is a very, very poor communication strategy.

ginidietrich
ginidietrich moderator

@alexwood15 It's pretty disappointing they're making decisions in a conference room. Like you said, the customers might actually come up with something NO ONE in the office came up with...and it could be better. Maybe you don't get anything you want, but at least then you can say you engaged and listened to your community.

I'm VERY proud of Cadel. I'm very happy with the whole podium, in fact. It was a really fun race to watch and watch them ride all over cry baby Contador. Cadel has a hero's personality - humble yet strong.

ginidietrich
ginidietrich moderator

@Brankica My point really is in that they have these gigantic communities and, instead of leveraging them, they sent an email that said, "We're raising our prices and, if you don't like it, there's the door." It's a very command and control leadership decision...one that doesn't belong in the digital era.

JohnMTrader
JohnMTrader

@ginidietrich Thanks GD...wonder if under previous ownership they used an Agency? I need to investigate that.

timjahn
timjahn

@ginidietrich Maybe. Maybe not.

At the end of the day, does it really matter? I vote no.

ginidietrich
ginidietrich moderator

@timjahn @KRLRose The problem is that Netflix started out communicating and then, when new leadership came in, they dropped engaging their communities. It's one thing to NEVER communicate. It's completely another to communicate and then stop.

KRLRose
KRLRose

@timjahn Short term people don't give a sh*t but clearly you do and that is my point. People like you give a sh*t that is why you are commenting. I don't care about social media guru's or whatever you want to call them. I care about 21st Century businesses doing the right things for the right reasons. No amount of technology will solve the basic business problem people want great products, service and they want to be treated with respect. Technology can enable that process. Its a choice and businesses choose they just rarely make choices that focus on making a profit while building a business with customers authentically at the center as advocates.

In true Luddite Style Time to burn you're Mac :)

MSchechter
MSchechter

@ginidietrich I don't know that they were looking to have people drop DVD. I think they were hoping that existing users would stay on at the higher plan and that their best bet was to rip the band aid off (a stupid and misguided strategy).

Splitting the two seems more like a reaction or perhaps it was a long term strategy that was moved up in order to try and (unsuccessfully) alleviate consumer pain.

mediasres
mediasres

@ginidietrich Have you noticed how Google and Facebook do the same? Netflix has always had a kind of "you cannot contact us" kind of monolithic facade. It seems to be a simplification through minimization thing on all their parts. I'm pretty sure they calculated a rate of loss on this move, and the numbers all added up. But perhaps they are surprised by the backlash.

When I ran into technical problems with how our Fan Page was operating, I was completely stunned that there is absolutely zero Facebook support.

Brankica
Brankica

@ginidietrich I could not agree with you more. I am so tired of those big companies that don't care about that one little customer. It is like they keep forgetting that all those millions of customers ARE the one little customer just multiplied, lol. It would not be the first time for someone to lose business because they mistreated their customers...

ginidietrich
ginidietrich moderator

@timjahn It does as a great case study for a blog about communication. And it does for a blog that showcases how we think so people who are like-minded want to hire us. That's the goal of my talking about my opinion on how companies can communicate differently...so prospects know how we think.

timjahn
timjahn

@ginidietrich @KRLRose Who the hell cares?

What matters is the advancement of their business. Is their subscribership going to drop all of a sudden because all the communications and social media gurus throw a fit because Netflix didn't do things the "right" way?

Hell no. Why? Because Netflix has a great product and provides great value with that product. They understand that this "communications blunder" is a blip on the radar, and tomorrow, you and others will find some other PR crisis to shout from the rooftops about.

Netflix is focused on their business. As we all should be.

KRLRose
KRLRose

@timjahn

No argument. Just dialogue, your opinion is your opinion. :) And you responded so presumably you wanted to make a point and communicate. We all have needles to push and opinions to voice back to the world. :)

timjahn
timjahn

@KRLRose You're right. I give a shit. I give a shit about Netflix and I support wholly what they've done. DVDs won't be around 10 years from now in the capacity they are now. Streaming will be. Netflix is working for us and our future.

I also give a shit about the communications industry and how much time we waste blithering on about things like this. Are we really doing anything productive right now, discussing this?

No. And your argument might be then why am I adding to the conversation. Because I feel like once in a while, that needs to be pointed out.

But that's as far as I'll go. Back to getting some actual work done. Moving that needle.

deirdrereid
deirdrereid

@peggyhoffman No, it's our beach week. Unfortunately the 2 events coincide every few years. I wish I could clone myself, I'm really bummed.

deirdrereid
deirdrereid

@kikilitalien I won't be at ASAE, it's our beach week. Bummed to be missing it but the weeks coincide every few years.

MSchechter
MSchechter

@deleted_91832_Sean McGinnis I agree that they will. In fact I've used the DVD option twice over a two year subscription. They just set themselves back in the customer confidence realm with how they handled the shift.

ginidietrich
ginidietrich moderator

@mediasres The problem is, before their leadership changed, they did engage their communities. So they've gone from really awesome communication to really poor communication. Google and FB have always had really poor communication so, as a customer, you really don't expect more. You're disappointed, but you've never had it better.

Trackbacks

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  3. [...] you hiked your prices and alerted customers by an email that arrived in the middle of the [...]

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