Why Netflixgate Is More Interesting Than Google+ (To Me)

12 Jul
2011

Made you look, didn’t I?

I actually didn’t come up with this title to get clicks. I was feeling genuinely bored of “How to set up your Google+ Circles” and “Whom to follow on Google+” blogposts. I was counting down the days until we have lists of top 10 people to put in your circle. And then Netflixgate happened, at the best possible time. What the heck is Netflixgate? Have a look at this lovely blogpost — apparently our beloved Netflix decided that it loves us so much it will give us the “lowest priced plan ever”.. For streaming.. Double that price for a DVD plan. Needless to say, there are several thousand comments across the blog commenting system and Facebook. Add to that the Twitter avalanche… Yikes, I’d hate to be their social media person right now — trust me, I emphasize as someone who works in this space. However, my pity and understanding only goes so far, since Netflix committed some pretty obvious faux-pas, at least to a trained eye.

Before I go into an obligatory list of “what went wrong”, I’d like to explain the title of this blog. I do think that how businesses act in a situation like Netflixgate is actually much more impactful to the future of this whole social thing. Google+ is a tool. Tools are operated by people. When people from a company tweet and blog, they engage with people, regardless of the tools they use. As a social business, your job is to build an organization-wide process that allows and empowers these people to act in a way that adds value all around. This kind of business wouldn’t let Netflixgate happen. It is painfully obvious to a trained eye that social isn’t part of the business fabric at Netflix. It’s an afterthought and a silo that happily tweets at people.

Ok, now time for the obligatory list of what went wrong:

No crisis response:

Let’s start with the low-hanging fruit. It’s very clear that Netflix wasn’t prepared to handle what just happened. Unfortunately, things like these happen time and time again to companies large and small. Fortunately, things like these happen, so the next companies can watch and learn and think through a crisis response. For some reason, Netflix did not learn from the likes of Nestle, BP, Marc Jacobs and others that came before it. A crisis response doesn’t mean that the poor social media person is running around crying and dusting off the good ole’ resume. A crisis response  plan has to be truly cross-functional, where the right people are alerted, and up to the highest ranks. Then they get together and think through a response — and a fast one! As of the time of this writing, the last tweet from @netflix and @netflixhelps is from 6 hours ago and happens to be the actual announcement of the price hike.

I’m sorry, Netflix, but did you not expect this? Did you think you were going to send your tidy little tweet about how awesome your prices are and that everyone was going to cheer you on? You should’ve known this was going to be contentious. The old adage still holds “if you fail to plan, you plan to fail”.

Basically, what Netflix says to us is that they like Twitter as a one-way broadcast mechanism, but if someone says something back, they will not engage. I understand that the volume of things to respond to is staggering, and it would be pure insanity to expect this poor social media person to respond to each one. What could work very well, though, is a tweet saying “We hear your feedback loud and clear and will be in touch with next steps”. What comes after this tweet really depends on what your business intends to do: if you intend to make changes, say you are sorry and say you will be backtracking or making new decisions. If you don’t plan to take critique into account, still say you are sorry, but you are sticking to your guns because X, Y and Z. Whatever you plan to do, don’t bullshit. Opaque PR spin serves no one. This brings me to my next point…

Don’t spin and don’t insult your customers:

I’ve been watching Twitter and Facebook reactions for a few hours, and one thing is clear: more people are offended by the smug blogpost full of PR spin than by the actual price hike. I know I am. Hey, we get it — business is tough. Many of us, consumers, have lost or are losing jobs, and our dollar is getting squeezed everywhere. We get it, you have to raise prices.But please don’t insult our intelligence by saying “here’s the lowest price ever!” only to find out in the next paragraph that we are actually paying twice now. We are smarter than you think, and spin doesn’t work in social. Just don’t do it. I’d rather you not tweet or blog if you can’t be at least somewhat honest. Ah, yes, everyone’s favorite topic of transparency. I’m not saying you should publish your financials or proprietary / competitive info, but treating us like we can’t do math is insulting.

Please see the screenshot below for verbiage of the blogpost:

Please note how different the voice in the blogpost is different from email. In the email, Netflix is honest about raising prices due to costs. Nice and honest, and to the point!


Raising prices is fine, with caveats:

See above: we get that you have to raise prices. However, there are a few caveats:

  1. Find a way to grandfather in your existing customers. A gripe that I have with many businesses is that they value new customers more than existing ones. I get it: customer acquisition, blah blah blah. But because an existing customer has been giving you money for years, doesn’t make him / her less valuable than new customers. If you expect loyalty, you need to learn how to give it.
  2. Stagger your increases. It’s much easier to swallow when you increase prices little by little. Personally, I’m not very price sensitive; I can afford this increase. But what about those who can’t? What about the hardworking blue-collar family that’s scraping by to survive with skyrocketing medical costs? Do you really want to spring a 40% increase on them? Unless that’s the customer segment you are trying to eliminate. Then go right ahead.
  3. Offer a bundle price. Here’s the biggest gripe about this development: because the streaming service has a vastly inferior movie selection, people have to get both services. I like the convenience of streaming, but it’s hard for me to cancel DVD, because I like movies that came out in the past 5  years. If through your product, you make me buy two, please also allow me to bundle the price.
  4. Improve your service so people don’t mind paying more. Enough said :) I wouldn’t mind paying Netflix more for streaming or for streaming-only plans if I was getting a decent product. The way it stands right now, I have to also get DVDs. Improve the product, then tell me how awesome it is and ask for more money. I’ll give it to you.

Don’t treat social as an afterthought:

I know the blogger / social media person is usually just relaying the message from the company to the customers. And here’s the kicker: social should have a seat at the table and not be an afterthought in a company’s operations. Rather than making product decisions and thinking through a PR plan, only to loop in social after the fact, why not make social part of the conversation from the beginning? Hey, we are thinking of raising our prices by 40%? What do you think will happen on Facebook? Or should we not even say anything and just “surprise” people? You need to think these things through and make social a part of every conversation that will impact the external audience from the beginning. Clearly, folks at Neflix didn’t work together to hatch this plan. Personally, I know I’d never approve a blogpost that took this tone. How you say something matters. See above point about spin.

And this is why I think it’s a far more important and complex conversation to talk about the processes that govern our use of tools than features of tools themselves. This is why this fascinates me more than Circles on G+ (which are really cool by the way!)

  • http://twitter.com/IreneKoehler Irene Koehler

    Well said, Maria. While it is about price, it definitely is not *only* about price. Netflix’s ill-conceived plan left loyal customers feeling dismissed as not intelligent enough to see through the spin. And, then when all hell breaks loose, to have no plan in place to respond only allows anger and frustration to build unchecked. At least, I’ll give them kudos for not deleting the many thousands of negative comments on their Facebook page, as others have done in similar moments of PR crisis. Still, that’s having to dig pretty deep to find something they’ve done right. 

    • http://about.me/themaria themaria

      Thanks, Irene! I still don’t understand why their blogpost couldn’t resemble the email more. It was honest. It didn’t go too deep, I’d still like to know more. But at least it didn’t insult the collective intelligence of the community. I always say: be honest and give people some credit — they just may understand you and side with you. Who knows, maybe your fans may even come to your rescue :)

      • http://twitter.com/IreneKoehler Irene Koehler

        I take back my earlier comment. They are deleting comments from their Facebook page. Nice touch!

  • Guest

    I go by a RedBox every day going to and from work. Considering the streaming was just a bonus feature (older movies) I can take the money and use it more wisely. Netflix will go under soon!

    • http://about.me/themaria themaria

      Yeah I may have to check out redbox! :)  

  • http://www.fliknotes.com Adam

    Their plan was implemented poorly. As such, I’m likely to reduce my subscription as well. Much like I did with the bluray surcharge.

    I understand costs and that. I also understan I vote with my dollars.

    • http://about.me/themaria themaria

      Agreed. I’m fine with a higher cost as long as I get a better product, and as long as the brand doesn’t insult my intelligence in a blogpost :)

  • Bob

    It’s extremely naive to think that Netflix didn’t anticipate this response. Of course they did! You don’t raise your rates and think, “Our customers will love giving us more money!” The price increase was going to happen no matter what, and clearly they are trying to push people toward steaming only. All of this is anticipated and planned. If they were to respond right now, they would only be throwing fuel on the fire. It makes much more sense to wait till emotions have cooled and brains are once again thinking before issuing a response- if they even issue one. Why would they? They have nothing to gain from it. The only thing that will change opinions is to change the plans again, but that’s not happening.

    To put $15 against medical bills is a bit over dramatic, $15 buys a bandage in a hospital. Outrage!

    • http://about.me/themaria themaria

      Thanks for the comment, “Bob”! I agree that price increases happen, and that’s fine. I do think there should be a bundle, and that existing customers should be grandfathered in or at least given a discount. This is not going to push people towards streaming, as their catalog is pretty poor right now. It’s going to push people right out the door. I’m thinking of going to 1 DVD without streaming, and just streaming Hulu.

      This post wasn’t about the business necessity of raising prices. It was about the poor execution of the communication on the side of social. That blogpost was terrible. And yes, I do think that they should’ve responded sooner. Responding tomorrow is too late. They could’ve softened the blow by being more honest and responding sooner.

  • WrongfullyEntitledBastards

    Its economics and I guess they should have said look people…

    Cable TV is $70 to $150 (per mo.)
    Satellite is $80 (per mo.)

    A newly released DVD is $12.50

    A Redbox costs $1.50 to $3.00 per DVD rental.  Yet you cant newest released for a month or two.

    While Netflix is $8 a month for unlimited content.  The content isnt bad it’s pretty good, from Cable TV series I once had to pay thru the nose to watch to some decent movies & fringe content. 

    Overall shut the fuck up all you whiny consumers who think you are entitled to what you exactly want.  This is a business and revolutionizing Hollywood is not going to be overnight and ITS GOING TO REQUIRE LOTS OF MONEY.  The cost is going to increase – DUH!

    So again shut the fuck up and keep watching Netflix, as you know, I know and Netflix knows  you will continue doing so!

    • http://about.me/themaria themaria

      Nice use of the F-word :) If you wanted to actually debate your point and be taken seriously, you’d share your name and approach this thread with respect. No one is disputing it’s a business and prices have to go up from time to time. I was writing about their communication strategy, which as a social media practitioner I just can’t agree with.

  • http://twitter.com/JillN JillN

    Agree!  Most everyone I know is now downgrading.  The message was delivered poorly, and the rates went up too much.  I’d be interested in the numbers, but I suspect they would have had more true gain by leaving the plans as is, and upping the price a smaller amount.  Frankly, I feel that their “Stream it Now” service is not yet robust enough to stand on it’s own.

    • http://about.me/themaria themaria

      I agree that streaming option is not a standalone option. I am sure Netflix has thought through attrition rates when making this decision. Either way, they could do a lot more by communicating better and acknowledging that their customers exist.

  • http://twitter.com/Logik007 Andrew S. Baker

    Well said, Maria.  Poor delivery with no grandfather option (or at least reduced combo) makes for irate, vocal customers.

    • http://about.me/themaria themaria

      I’m still baffled by lack of acknowledgment of these customers. No one said they have to back down and refund the money. I’m simply advocating the “hey, I hear ya!” type of conversation.

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    I am having a RedBox every day to and from work. Given the current was a bonus (old movies) that can take the money and use it more wisely. Netflix will soon!
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