Don't Make These 5 Netflix Mistakes

Responding to the recent backlash over their price hike, Netflix released an apology and announced a new plan to separate its services, creating separate entities for its streaming video and DVD rental businesses, now known as Qwikster. Instead of soothing customers’ (and investors’) ruffled feathers, the announcement, sent via email late Sunday night to subscribers, created further havoc.

By Monday afternoon, thousands of customers had complained on Twitter, Facebook and blogs, with many subscribers threatening to discontinue service altogether. Perhaps more painful, Netflix shares dropped 7.3%, or $11.39, in a broad market sell-off on Monday, and tumbled all the way to $130.48 by Tuesday's closing bell.

Lessons Learned from the Netflix Disaster

The entire effort to raise prices and quell the subsequent backlash has been a debacle. Here are five lessons to be learned from Netflix’s blunder:

1. Don't make things more complicated 

Under the new structure, customers will have to visit two different websites to access both services, have two separate bills, and reviews and ratings made on one site won't show up on the other. Asking more from your customers while charging them more is never a good idea.

2. Don’t discount your current market position 

Prior to its price hike, Netflix was a no-brainer when it came to choosing a streaming and rental movie service. Now, disenchanted customers will take a second look at some of the alternatives like DVDInbox.

3. Don’t ignore the value of value 

Netflix not only raised prices, but now expects consumers to pay one fee for DVD rentals, plus another for a streaming subscription. In today’s economic climate, consumers are looking for value – they want discounts and great deals. They don’t want to pay a higher price for the same products they’ve been getting all along.

4. Don’t pick a really bad name 

The new name “Qwikster” makes no reference to movies, instead focusing exclusively on speed. Since getting DVDs by snail mail is actually the slowest method possible, building their brand on speed is not a smart move. Add to that the fact that Qwikster is so easily misspelled and is reminiscent of a discount mini-mart and this rebranding effort tanked.

5. Don’t forget to establish your social media presence

After receiving the email announcing the launch of Qwikster, subscribers clicked over to the new URL, Twitter and Facebook page to see what great things awaited them. They found . . . nothing. In fact, @Qwikster actually belongs to some guy named Jason Castillo who seems to have just rediscovered his Twitter account on Monday. A quick Twitter search for Qwikster reveals not the official Twitter feed, but a Blockbuster promotion. Not securing their social media real estate is a bad move that makes it look like Netflix put no thought, much less any market research, into this change.

Businesses change as they grow and that’s a good thing. But making arbitrary changes without any consideration for your customers and without proper planning is just bad business.

What do you think Netflix’s biggest mistake has been in the past 6 months? Raising their prices? Spinning off the DVD mail division? Not respecting their customers?

Don't repeat these mistakes by really knowing your customers - their goals, pain points and expectations. Creating buyer personas is the key step to knowing and connecting with your ideal customer. Use this free workbook to develop buyer personas for your business.