A Return to the Basics, Courtesy of Netflix


The Hall of Fame (or Shame) of companies guilty of ill-fated product re-designs has a new member. In response to customer complaints and subscription cancellations, Netflix recently decided not to divide its streaming video and DVD-by-mail services. Instead of offering two separate subscription-based services sold on distinct new websites, Netflix will continue to offer customers a package of online streaming or DVD rentals (or both) at one website under a single account. 

Netflix’s initial decision and later reversal let us play armchair manager and analyze what went wrong. Of course, it is easy to criticize with hindsight, and we don’t know the details of Netflix’s decision-making process. However, we can use Netflix to illustrate the reasons why fundamental marketing and customer service principles should guide your future product decisions.

Trust Your Customer.  Market research is often used effectively to develop a picture of the most profitable customer. Gathering information such as income level or television viewing habits is useful when making a variety of decisions, including choices for new products and advertising. In terms of timing, research may take place prior to a new product launch, or following a recent ad campaign.

If market research is so valuable, why didn’t Netflix learn that its customers did not want to set up two different accounts and use two distinct websites before announcing the change in procedure? Perhaps the decision was a gut-level one that relied on the instincts of the CEO. Or, perhaps the right question wasn’t asked during the research phase. Regardless of the quality of Netflix’s research (or instincts), learn to listen to and trust your customers. If you ask them their opinions of a new product, a current product, or any potential changes to that current product, your customers will tell you their likes and dislikes.

Emphasize Value. Value lies in the eye of the customer. Most customers understand that your prices may rise and delivery methods might change. Customers continue to expect exceptional value from your product, especially with a higher price tag and potentially less convenient mode of delivery. Companies aware of a product’s perceived high value will weather a modest change to pricing or delivery. However, a significant, simultaneous price increase and delivery change tips the scale toward lower value.

By implementing a price increase of more than 50 percent and making customers work twice as hard to get delivery of the same services, Netflix wrongly assumed that its customers would still see enough value to remain subscribers. Maintaining product value, from the perspective of your customers, will lead to continued product sales success, even if you have to make changes to prices or delivery methods.

Deliver Great Online Service. Every website visitor is a potential customer. Therefore, your website must serve as a digital customer service representative. You should be able to answer the same questions about your website that you would about your in-store personnel. In other words, does your website contain enough information to answer most customer questions, and is the information presented in a clear, friendly way? If customers can make online purchases, is it easy for customers to find, select, and pay for your product, and is delivery easy to schedule?

If, as Netflix attempted to do with the creation of a second website, you make your customers work harder to find information or the products they seek, the less likely you are to make a sale. Outstanding customer service delivery means engaging customers in a friendly, informative manner. Your website should be held to the same standard you would expect every person in your company to meet.

If you are fortunate enough to be in business for years or decades, mistakes will be made. Profitable companies understand that risk is a central tenant of business growth. Failure, while not the preferred outcome of risk, does provide a learning opportunity.

What can we learn from Netflix? We can’t entirely avoid making mistakes, but we can eliminate many of them by returning to the basics of marketing and customer service, and using that knowledge to inform our future decisions.
Michael Hansen is a business instructor at COCC with a background in marketing and customer service.  You can reach him at 541-383-7710.


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Founded in 1994 by the late Pamela Hulse Andrews, Cascade Business News (CBN) became Central Oregon’s premier business publication. CascadeBusNews.com • CBN@CascadeBusNews.com

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