4 lessons your business can use from the mistakes of Netflix

October 11, 2011 By Digital Operative,

Lately Netflix has been making mistake after mistake, and we are here to help your business learn from their troubles. As Netflix attempts to keep up with the times and stay ahead of the market, it has found new ways to fail and cause extreme customer disapproval all over the internet. First, CEO Reed Hastings decided to raise subscription prices, at an almost 60% increase. Then a few weeks later he decided to split the company in two: Netflix (remaining for online streaming) and newly announced Qwikster (continue the DVD-by-mail service). On Monday October 10th, Hastings decided to take back his decision of splitting the company. Netflix is now attempting to stabilize and return back to normal, however it has had to deal with lower stock prices, subscriptions, and customer perception. Here are 4 mistakes Netflix made, and how you can avoid them in your business: 1. Not asking customers their opinion or taking them into account when beginning a large change. Customers will appreciate if they are included in or at least considered when making a large change within the company, especially is that change will affect them. Customers can also give back important feedback that only they can offer as they are the users of the product/service. 2. Forgetting about the usability of a service, and the user experience. The idea of splitting the Netflix service into two companies, where subscribers would have to use two websites to either stream or rent DVDs was a major inconvenience. Customers want what is easy, and after already having used and understood the single Netflix site to do both services they would be unwilling to learn a new site and do twice the work from before. This would result in a loss of subscribers overall. 3. Not being genuine or explaining your actions to customers. Its important to always keep customers informed. Of course price changes occur but explaining the reasoning behind it and being sincere may ease the reaction. Customers are more likely to be understanding of the change, and would result in less of a negative drop. 4. Making yourself irrelevant in the present because you are so concerned about the future. CEO Hastings knows online streaming is the way of the future for movies, TV shows, and gaming. He wanted to focus his attention on the streaming aspect of Netflix while the Qwikster company would handle the DVD-by-mail aspect. Although in theory this seems to make the most sense, the demand has not reached a level where this makes sense in the mind of the customer. Subscribers still enjoy both services and want both of them to stay as they are. As right as Hastings may be about the future, the market makes the decisions about the present. For now, Netflix has raised its prices, kept its business structure and has been stung by criticism of their flip-flopping ideas. Hopefully they can return to being a leader in the movie/ TV show viewing industry that we have enjoyed, and we in the digital industry have all learned a lesson.