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A Few (Not Yet Learned) Lessons From Qwikster’s Quick Demise

• Author: , Management Supervisor

Can you picture that little boy who reluctantly acknowledges he did something wrong?  Head down, eyes on the floor, shuffling his feet behind him, wringing his hands, speaking in a volume so low you can hardly hear him? There is a piece of him that knows he is supposed to feel bad and is trying to be earnest in his apology, and yet, he can’t let go of the idea that he is not really wrong, he’s just misunderstood.  This is how my son might approach explaining a broken glass after doing a cartwheel in the living room.  Yes, a gIass got broken, but how about that AMAZING athletic prowess?

This is also the image I have of Reed Hastings, Netflix CEO, before he hit “SEND” on his latest communication to his customers. He’s reversing his latest plan to spin off his DVD-by-mail business as a new company (Qwikster) so the core brand “Netflix” can focus on its streaming services. This is a good thing, and while clearly it was the consumer backlash that pressured him to back off, I fear that Reed still doesn’t think he did anything wrong.

Netflix has been in the “don’t do this” spotlight all year for a series of moves that makes one wonder who exactly is minding the store. It’s not the first company to anger customers with a bold move, but ironically, Netflix had been a brand that was built on doing everything right.

When Blockbuster zigged, Netflix zagged.  Tired of having to wait weeks for an available copy of the latest release?  Plagued by late fees? Yearning for a classic “Young Frankenstein” laugh only to find out the store’s single copy was damaged or MIA?  Netflix solved all of these problems.  It was convenient. It was cost effective. It was satisfying – just like a classic retail relationship should be.

Oh, there were small grievances — failed Starz negotiations, limits on streaming — and then? A 60% percent rate hike this summer. When Reed sent his personal apology on that, it was really a thinly disguised rationale for his next piece of news: he’d be splitting his company in two, including two websites to order from, two bills to pay, etc. Works for him.  For everyone else? Not so much.

It’s not like I don’t get it. From a business perspective, advances in technology will radically change the Netflix business model and a continued focus on the mail order business would mean eventually joining the graveyard of 8-tracks, vinyl records and VHS tapes.  Streaming is the future, and I applaud the vision. As a consumer, though, I couldn’t help wondering if you meant to send your message to your board of directors, not me. Call me selfish, but I know I can’t be alone in asking, “Where does the customer stand in this new vision?”  Yes, it’s AMAZING athletic prowess, but I am still left with a broken glass.

Netflix would have been interesting to watch, even if I wasn’t a loyal customer. But since I am, and since Netflix is still trying to make this right, here’s my take on lessons (to be) learned and, hopefully, a positive outcome:

  • It’s not wrong to have an aspirational vision for your business, but it does require a cohesive plan.  At some point Dunkin Donuts realized it was making more money on coffee than donuts. Instead of spinning off the donut business into a lesser company, they migrated the focus to coffee, leveraging the brand equity they had to get new customers and encourage those donut lovers to add the cup-o-joe.
  • Speaking of brand equity, don’t mess with it unless you have a really good transition strategy.  If you start playing a shell game with multiple brands, you will undermine and weaken them all.  Must I really bring up New Coke?
  • Don’t lead your brand with a lesser quality product. Make sure your new favorite son can deliver on the brand promise already established. Young Frankenstein? Only available on DVD, not streaming. Selling me a distant promise of equality, let alone improvement, will force me to review other options
  • Listen to your customers. This seems obvious, but it never ceases to amaze me how few companies really listen.  Yes, some of us are irrational and hate any type of change, but every business has a core, loyal base that will patiently wait out the bugs in ‘new’ features, even if it’s due to inertia.  Cross that line though, and you risk alienating the people who helped you get where you are. (Remember Tropicana’s new packaging?  Nothing says “Hear Me Roar” like a 20 percent dip in sales.)
  • Understand personalizing a relationship with your customers is a door that goes both ways.  I had no idea who Reed was until he sent me a personal email with “An apology” in the subject line, and yet his next “I goofed” email was delivered by the “NETFLIX team.” This feels a little like saying, “My mother made me apologize.” Once bitten, twice shy and all, but don’t hide behind your team. If you’re gonna put yourself out there, you gotta be prepared to take the both the kudos and the heat. (See Kenneth Cole and the Egyptian riots tweet.)
  • Don’t forget the question: “What’s in it for me?” Not you, the business owner, but the consumer. Businesses spend way too much time extolling features, rather than benefits.  Make sure your customers know why this is a good thing.  I imagine if Netflix had included a little something extra for their loyal customers (free Blu-ray upgrade?), you’d be reading a lot less of these posts.

Here’s the good news: Reed (or Netflix team), I still haven’t canceled my membership. Never lose sight of the customer’s ability to forgive if you make it right. I challenge you to sit down tonight and actually use the Netflix service.  Browse your website, find a streaming title your family can all agree on, watch it on a less than state-of-the-art TV and imagine how you might go about expanding customer service.  If you can make company decisions from this point of view, I am hopeful we can recover the brand romance we once had.

In the meantime, I have pre-ordered a Kindle Fire, which comes with a free month of Amazon Prime.  Funny thing, that inertia! Any force can cause change in direction. I wonder how Jeff Bezos signs his emails….

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