It's not often a CEO of an established company issues a letter to customers that includes the phrase, "I messed up..." But it's also not often a company loses one million customers in a period of just a few months thanks to controversial pricing and service changes. But that's just what happened to Netflix and its much-touted leader Reed Hastings.
In July, Netflix announced a 60% increase for unlimited online movie streaming and one snail-mailed DVD at a time. Customer reaction back then was swift and mostly negative, but the company largely ignored their outrage. Now that Netflix shares fell 15% and they've lost customers in the seven figures, they decided to act. No, the company didn't roll back the price increase. Instead it split the DVD-by-mail service and the streaming service into two separate entities. More telling was Hastings' letter, which blamed his own "arrogance based on past success" as the reason for the poor customer communications.
Was this poor communications to customers from the get-go? Eric Dezenhall, of crisis consultancy Dezenhall Resources, says yes and no. "Could the up-front communications have been handled better? Sure, a little," says Dezenhall. "But it's not the communications that are really at issue here, it's the disruption of a business model." Dezenhall goes on to say that Hastings' mea culpa is a basic cost of doing business these days. "Self-flagellation and seeking forgiveness for 'miscommunication' is part of the dance," he says. "It won't buy him much, but imagine what would happen if he didn't do it."
Do you agree with Dezenhall's assertion that this was not a communications problem? What does this episode do to Reed Hastings' reputation as a top digital media innovator? And what can Netflix do from a PR standpoint in the near-term to get former customers back?