If you ever needed a case study on why customer satisfaction is important and what havoc lack of customer satisfaction can have on a company, look no further than the recent situation with Netflix.
In prior post Netflix responds to customer social media outrage, I told you about how Netflix had raised its prices significantly (60%). That led to consumer backlash.
Then the Netflix broke the company into two, Netflix and Qwikster, requiring their largest set of customers (over 50%) to deal with two separate companies rather than just one. More consumer angst.
Then the company backtracked on the break up, so consumers could continue to work with only one company (see `Customer Ire forces Netflix Business Model Change`).
But the customers were still unhappy.
800,000 Fewer Subscribers
According to article in the New York Times, How Netflix Lost 800,000 Members, and Good Will, Netflix “told investors that it ended the third quarter of the year with 800,000 fewer subscribers in the United States than in the previous quarter, its first decline in years”
Stock Price Plummets
The stock price dropped more than 25 percent in after-hours trading after its earnings announcement and even more the following day.
According to the New York Times
1. Part of Netflix’s business was growing quickly (streaming).
2. The cost structure for streaming was becoming more and more expensive.
3. The cost change to consumers was too much, too fast.
4. Management Overconfidence and hubris.
5. Netflix was out of touch with its customers.
6. There was a failure to communicate the rationale for the price increase (eg. wider selection of streaming movies). There was no perceived benefit for the customer for the price increase.
This will go down as one of the classic stories of how companies who fail in customer satisfaction are negatively impacted, both in sales and in its market valuation. The big question is whether or not Netflix can regain its customer base over time.
What is your opinion?
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