The Netflix price increase social media firestorm: A case of too little customer intimacy?

On Tuesday, Netflix announced price changes and a change in the structure of their DVD-by-mail and movie streaming plans. For all intents and purposes, the “changes” were increases – separating the delivery methods and making customers pay almost as much for each as they were previously paying to get both.

Right afterwards, the universe exploded.

There are over seven thousand comments on the Netflix blog, not to mention the firestorm it is facing on Twitter and Facebook, nearly universally decrying the changes.

These range from the unhappy:

Unhappy customer blog comments about Netflix price increases.

To the appallingly rude:

Rude social media comments about Netflix price increases.

But it was this comment that really stuck with me:

Social media comment about truth and transparency in Netflix price increases.

It illustrates that many Netflix customers might swallow the increases, if they knew the cause behind them. By and large, commenters believed the price increases came down to one thing: greed. What these customers don’t understand, however, is that the move may be a case not of greed; but of survival. In the next year, studios may increase the fees Netflix needs to pay to stream content to its customers from $180 Million in 2010 to $1.98 Billion in 2012, making pricing a live-or-die issue.

Netflix customers—even when announcing their intentions to go elsewhere—overwhelmingly talk about how loyal they have been to the company for a decade. From where I’m standing, Netflix’s mistake wasn’t raising prices – they don’t seem to have had a choice. The mistake was spinning the story…and not being honest with their customers about the causes behind the increases.

Netflix clearly had a tremendous amount of customer loyalty and social capital built up. Their customers may have stood by them much more vocally if they were given the straight scoop. Instead, Netflix seems to have extinguished a massive amount of goodwill in one fell swoop by not trusting their customers to understand.

Additionally, comments like this one show that some customers don’t even believe that the company knows how they use different components of the service:

Blog comment about Netflix customer experience.

As we’ve seen time and time again, organizations that understand not only their customers’ pain, but also the unique relationships their brands have with their customers can be hugely successful even when difficult decisions need to be made and shared. The firestorm that Netflix is finding itself at the center of seems to be a case of lacking that understanding.

As a longtime customer myself, I hope Netflix survives and emerges stronger than before. It may need to—in the words of one commenter—treat its customers like adults to do so.

Communispace has delivered game-changing customer insights to the world’s most admired brands for over ten years. To receive a free bundle of three exclusive reports that show what it means to truly understand your customers online, click here.

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7 thoughts on “The Netflix price increase social media firestorm: A case of too little customer intimacy?

  1. Great article, Chris! Haha, I love the witty comments customers left, especially the one about losing the blurays. Netflix may not deserve the price increases, but they asked for the backlash.

  2. I would be pretty upset finding out that a service I am paying for increased its rates by 60% and was not offering anything additional to the service. I work in the TV industry for Dish Network and I just recently got signed up with Blockbuster by mail. The selling point for me was that I could get movies, video games, and Blu-rays all for the same monthly rate. Right now Dish Network has a cross promotion where you can get 3 months of the Blockbuster by mail service for Free. Just go to http://bit.ly/lGG6HI and follow the instructions to take advantage of this offer.

  3. I’m not sure they deserve the backlash (or customers threatening to steal Netflix Blu-Rays, to be frank) – they just should have done a better job of assessing their customers’ reaction to the message with which they delivered the increases.

    They’re an example of a company that have customers who are willing to evangelize whatever they do – I think they would have come to Netflix’s defense if they were approached honestly. I love Netflix though, hope they pull through this!

  4. Jaycob,

    Just saw your comment. While the spokesman comments are interesting, I tend to (as a customer of Netflix) agree with his assessment:

    “Yes, 60 percent is a big number. But that increase is only $6 a month more. That’s a latté a month. We’ve gone from an extreme terrific value to a terrific value.”

    Not long ago, instant access to the amount of information Netflix makes available was unthinkable. Just a few years later, we take it so for granted that we’re almost unwilling to part with the cost of a Big Mac for it. I think the problem with the new pricing roll out was less about value, and more about perception and the management of consumer expectation.

  5. As a decade long customer of Netflix, have to tell you that this price hike not only upsets me it also makes me regret thinking that Netfilx was a perfect answer for not only myself but also everyone I know (friends and family).

    I am still waiting for Netflix to contact me to tell me that they are going to change me 60% more. I think I maybe waiting a long time…

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