When Netflix first started, their business model was simply genius. The company offered its users an easy way to rent DVDs with a subscription service through the mail. People no longer had to worry about taking movies back to the store, scratched discs, or dealing with a limited selection, because Netflix brought your selections right to you. When they launched their streaming service to accompany their DVD business, the company couldn’t gain more positive press. You could now watch movies on devices like tablets, laptops, and the Samsung Galaxy S2.
Over the course of a couple of months, Netflix has gone from a consumer darling to a heavily criticized blunder machine. Missteps by upper management and horribly researched new business decisions have taken Netflix down from their perch as an entertainment beacon.
Consistency is the most important thing Netflix forgot when they decided to reposition their company. At first they decided to separate their streaming service from the DVD-by-mail service and charge extra for the combination. This angered a lot of users so CEO Reed Hastings decided to change the name of the company to Qwikster, which was just a pile of confusion. On October 10th, Netflix sent out an apology to customers and decided not to go through with the name change. This state of confusion has caused Netflix’s stock prices to plummet and users to drastically unsubscribe.
Netflix also failed to properly research their new business strategy on account of their social media crisis with a teenager named Jason Castillo. Controlling your brand’s message on Facebook and Twitter is a huge part of marketing for large corporations, and Netflix totally dropped the ball on this. Instead of owning exclusive rights to the @Qwikster account, it now belongs to some marijuana smoking kid who doesn’t possess a good grasp on the English language. People who looked up @Qwikster before Reed Hastings decided to change back probably got a good laugh at the expense of the company.
When it comes down to it, Netflix just looks like a sloppy company with horrible control over their brand’s image. Blockbuster is running ads that criticize the pricing and management decisions of the company in order to get people to user their service. When a store that copied your original business model because theirs was failing comes at you with attacks, you should probably take a step back and analyze the situation.
Where did Netflix go wrong and what can we learn from their mistakes?
First and foremost, they became arrogant in their success and forgot about their customers. As their CEO, Reed Hastings said in their apology, their customers felt that they lacked the humility and respect towards their users by the manner in which they announced their price increase. Netflix forgot how they got to the pinnacle of their success. Their customers carried them to success and they forgot that simple lesson: The customer comes first.
The second lesson is that they missed out on an opportunity to communicate with their customers. They could have strategically discussed with their customers the repositioning of their streaming service. If they had communicated with their customers early on to promote their streaming service and indicate their dedication to making their streaming service their first priority, they would have made great strides towards gaining the loyalty of their customers. Instead, they made this incredible blunder by simply announcing a drastic price increase of their mail service and then the split over to Qwikster.
Finally, Netflix just demonstrated a poor execution of their overall strategy. From loosing the exclusive rights to the @Qwikster account to losing their Starz contract, Netflix has just gone from one blunder to the next. The overall effect is that people are losing confidence in the company.
Can they pull out of this dive?
The question is whether or not Netflix can recover back to their former prominence. It all starts with communicating with their customers. When Netflix first started out, they demonstrated that they had a great service and dedication to their customers. They have to get back to their roots. It all starts with the customer experience and goes from there.
If they can demonstrate their commitment to their costumers, Netflix still has a tremendous market share and can still regain its former prominence.
For now, we can all take a lesson from their mistakes.
Guest post by Susan Daniels
I totally agree with you Susan. Any company remains successful when they meet customers’ needs. I’d also like to add that it might help if they’d put a new face on the company. That would send a message to customers, but to shareholders as well, that Netflix is trying to recover.
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We are aware that netflix debacle is used in the past when it comes to watching movies on big screen. I am sure there are still some who are using it and good thing they were able to share this to us. This is nice because we have another new knowledge to cherish.
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