How you do it matters

There's a big brouhaha over Netflix raising the price of its DVD+streaming option almost 60% a couple of days ago (read one view here).  From a business perspective, a lot of people actually believe that it is a smart, and possibly necessary, action for Netflix if it wants to remain as uber-successful as it is now.   But the customer reaction is mostly due to how the price hike went down - it was steep and there was no evidence that the higher price offered any customer value, which in turn caused customers to believe that the action was purely for financial gain, 'greed'.  Many feel that a couple of more modest price increases tied in to some service improvements and spread out over time would have caused barely a ripple in the Netflix base.

Once again it is all about the customer.  I've written before about 'knowing your customer' and how a company that was adamantly true to its mission of customer satisfaction could be super successful, but the reverse is true.  Companies that lose their customer focus stumble and it takes a lot to recover.  I'm personally a long-time customer and big Netflix fan, mostly due to how well they delivered on the customer experience, even through occasional problems.  But Netflix insisting that customers shouldn't complain about the price increase because it is only the cost of a latte (and hence not a big deal) seems surprisingly insensitive.  I'm sure there are many customers like me who'd happily pay twice that if they felt they were getting something more for the premium.  All that Netflix needed to do was think about the customer - in advance - and ensure the price increase was done right and, more importantly, presented right.  Or, if the reaction caught them by surprise, Netflix could/should quickly do some damage control and smooth those ruffled feathers.

Many Netflix customers were also fans of the company so this is an uncomfortable time for them.  For entrepreneurs, Netflix, with its most impressive founder/CEO Reed Hastings, is a shining example of how a company should be built.  Here's hoping it will make its customers happy real soon and wipe the smudge off its halo.

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