Ok, so there’s no way around it. Losing a million customers in a few months is not a good thing. That’s what has reportedly happened to Netflix after they announced that they planned to separate their DVD rental business from their online streaming business.
It wasn’t so much that customers didn’t like the idea that they’d have to pay separately, or that they’d have to use two websites for what they used to be able to do in one. What really annoyed customers was how the situation was handled.
Instead of introducing the idea to customers gently and then transitioning slowly into the change, Netflix announced the change abruptly — Netflix would now handle only DVD rental and a new company, Quickster, would be created for streaming content. Period. Done deal. Customers felt unconsidered and a surprising number canceled their subscriptions as a result.
It’s an interesting lesson in branding and an interesting argument for the use of social media. Had Netflix put out into the social media sphere that all this was being considered, they would likely have had feedback and warning as to how it would be received and they might have known to handle it differently.
Netflix could even have used social media to “sell the case” to their customers first, giving them time to understand it and time for the media to report more fully on the challenges Netflix was encountering providing both services for its one low price.
Ironically, Netflix did think to use use social media and email to try to mitigate the damage with their customers. They sent out apologetic emails through Google+ explaining their decision, and then retracted the decision. Yikes! It made them seem like they had no idea what they were doing. Wasn’t anyone driving this train?
All that aside, I personally, am sympathetic to Netflix. Perhaps it’s because the media has come down so hard on them, and I know that things are never as obvious in the foreground as they are in the background. But I also have Steve Jobs on my mind.
Steve Jobs was famous for not listening to customers. One of his most famous quotes is “You can’t just ask customers what they want and then try to give it to them. By the time you get it built, they’ll want something new.” So, what’s a company to do? Is this all really as black and white as the media looking at the situation now makes it seem?
Lesson: Use social media correctly
There are a few things that can be learned here. But one of the most topical lessons relates to how companies use social media. Many companies use it as a way to distribute announcements and press releases, to talk about what they are doing. But we have to remember, social media is primarily a vehicle for dialog, and for engaging the customer on a deeper level.
Using it as a vehicle for dialog opens up opportunities to learn more about what customers are thinking. I suppose, Steve Jobs is right — you can not just listen to customers in a literal sense, but must take a broader view. Listen for inspiration about what customers want that doesn’t exist yet or isn’t being offered yet. It’s more about meeting a need customers will have in the future.
Netflix didn’t do that. In fact, Netflix violated what they already knew about their customers — movies were movies. Customers didn’t distinguish between the forms they received them in. And clearly the trend was for more of it. Perhaps if Netflix had used social media correctly, they might have been able to pull off their original plan more successfully and would be breaking records in sales, rather than sales losses.
— Chris Quinn, principal and brand strategist
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