Netflix Takes a Deep Breath

Neflix CEO Reed Hastings announced today that Netflix has retreated from its strategic move to spin off its DVD mail business under the Qwikster moniker.  Netflix shares immediately rose 6% in premarket trading following blog post.

 

In his blog post, Hastings admitted that customer complaints were the driving force.  “This means no change: one website, one account, one password... in other words, no Qwikster,” Hastings wrote.

 

Presumably, this also means that the reconstituted Netflix is less attractive as an item in Amazon’s shopping cart - if Amazon was even seriously looking at the Netflix streaming business.

 

Is Netflix out of the woods?  Not by a long shot.

 

Following the July price increase (60% if you wanted both the streaming and DVD options combined) and last month’s surprise announcement of Qwikster, customers were furious.  They felt betrayed and confused, given voice to their anger through subscription cancelations that topped 1 million - or 4% of Netflix’ subscriber base.  This move is not likely to quiet them down.

 

It takes considerable time and effort to build a loyal customer base.  Customers must acknowledge the promise of value, experience that value, and come to trust the integrity of that promise.  Isolated situations can cause a customer to experience a letdown with a company (a poor service experience, or a billing dispute); but companies can, if on top of their game, restore the customer’s confidence.  When a customer feels betrayed by the company (a change in policy or offering that sharply “breaks the promise of value”) though, it is more than a matter of a poor customer experience; it is severing an implicit bond of trust.

 

Companies don’t consciously seek to unravel customer confidence, but when they fail to understand the nature of their value proposition, they risk taking actions that later prove reckless.

 

Netflix needs to do something significant this quarter to restore that confidence and re-establish the value promise that many customers believe to have been broken.  Dumping the Qwikster option won’t cut it.

Customer Service Tanks Even Further

Whether you're a sales manager, a marketer or run a business you owe it to yourself to read the report on customer service in July's issue of Consumer Reports.

Based on a nationwide CR survey, it chronicles the frustration leading to searing rage experienced more and more often by customers attempting to be serviced by the companies with whom they deal.

Among the gripes and statistics (some eyebrow-raising):

• The inability to get a human on the phone is the top-rated blood pressure generator, garnering an 8.9 our of 10 on the annoyance scale (10 = tremendously annoying)
• a not-surprising 64% hung up on customer service reps without having their problem solved, though a whopping 64% walked out on a store salesperson
• 65% have dealt with rude salespeople at least once in the previous year
• when it comes to online, only 2% like live chat to resolve an issue ... still fewer prefer email
• It took 6 hours for on AT&T subscriber to cancel his landline service.

On the other side of the teeter-totter though, there are bright spots: Apple, L.L. Bean, Dillard's, Crutchfield.com and Sony, to name a few.

I've been belligerently consistent (annoyingly so, I'm told) about stating one thing for years: marketing is not what a department does, it's the process of how the company defines itself to its customers.  Good companies in it for the long haul court their customers, and see customer problems as the stepping stone to enriching their brands, building loyalty, and driving the top line.  Good companies view customer service as a differentiator, not a cost that must be bludgeoned into submission during economic downturns.