Jennah Mitchell's Musings

A compendium of thoughts, ideas, projects, and more

What We Can Learn From the Recent Netflix Fiasco

My husband and I are avid Netflix users – we love the streaming service they offer, and we also receive DVDs in the mail from them as well. As many people know, Netflix recently announced that they would be splitting their company into two separate divisions. Netflix would remain the locale for their streaming service, and their DVD rental service would be housed under the name Qwikster. Needless to say, this (in conjunction with recent price hikes) caused an uproar among many loyal Netfilx users – so much so that Netflix began a series of hasty backtracking steps in an attempt to win back the favor of their customers. One such step was an email sent out by Reed Hastings, the Co-Founder and CEO of Netflix; the email opened with the words,

“I messed up. I owe you an explanation.”

At least he cut straight to the chase here, although the email’s blunt and open approach should have come much earlier, before customers felt used and betrayed. The email went on to say,

“We realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.”

The company’s blog post regarding this situation, (http://blog.netflix.com/2011/09/explanation-and-some-reflections.html?lnktrk=EMP&g=62C94008A575B649F771017D7C3381B30AC0315E&lkid=netflixBlog) is fraught with angry and pointed comments, many of which bring to light valid questions and insights. Undoubtedly, this open hostility led to the email Netflix subscribers received today: NETFLIX IS ABANDONING THE CHANGES!

Kudos to them for listening to their customers, but as recent blog comments show, it may have come too late for many people who are fed up with the company’s lack of poise, customer service, and research. Fortunately, we can learn a lot from the whole debacle, and – hopefully – avoid making their unnecessary mistakes ourselves.

1. Market research is vital. Had Netflix taken the time to see how even a small pool of customers responded to their idea of splitting off the company into two sectors, they would have saved themselves many scathing comments and a lot of negative public feedback – something I am sure any business would be glad to do: to take the “pain now” for the “gain later.” Had Netflix done this, they would have saved time, resources, and a large portion of their customer base – instead, they put out a ton of effort, time, and money, only to end up scrapping the whole thing and ending up not back where they started, but several huge steps behind.

2. Good leadership is the next step. If the captain of the ship is not assertive, knowledgeable, and open to continued course correction, chances are that the ship will get into trouble in open waters. Additionally, those following that leader will be more tempted to jump ship when the going gets rough than they would if they believe in the course and in the underlying mission and purpose of the company. Where there is no clear vision, “the people will perish,” and the original vision along with them.

3. Consistent, meaningful communication is the final piece of the puzzle. When my husband and I were taking a pre-marriage class, our pastor said something we never have forgotten:” Would you tell your wife or husband I love you on the day you get married and then never say it again, expecting them to know that nothing has changed?” The answer is, obviously, NO! A loving and committed couple would absolutely tell one another consistently that they love and appreciate them. The same is true of a company that wants to keep moving forward with integrity and excellence: communication must be present! From the top to the bottom, CEOs, employees, and secretaries alike have to be willing to talk through day-to-day business happenings as well as big business moves and adjustments in order to stay on top of their game.

4. If it’s not broke…well, you know what that means. If you have a product  or service people love, at a price point that is mutually beneficial, DO NOT STOP OFFERING IT! Improve it and make it more efficient and user-friendly, yes – but do not change the heading of the ship if you are on a direct course for continued success.

Thank you Netflix, for this valuable lesson in business management and customer relations – hopefully it is one that we all take to heart and never forget.

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