RSS Is It Good For Business?

Every relationship has limits, and those limits are especially tenuous when communication problems lead to a loss of respect and trust.

It is interesting to see the changes taking place at Netflix, the DVD rental and movie-streaming business that has developed a strong following over the past several years. For those of you who may not be aware, Netflix announced in mid-September a change in their business approach that would separate the DVD-by-mail and internet streaming media services from each other, as well as increase the cost of both services. An explosion of customer outrage was heard almost immediately on Facebook and Twitter, with many customers cancelling their Netflix subscriptions. As a result of this significant miscalculation, the company ultimately reversed their strategy. On October 10, 2011, less than one month after the split, Netflix announced it would be keeping services together on one website.

It’s not my place to speak about the focus of the company and the vision of its leaders to adapt their business model in the face of an ever-changing economic and technological landscape. While the strategic advantages to Netflix of creating two distinct services may indeed create more value for their customers, I am surprised by the lack of transparency from Netflix company leadership to fully disclose their plans prior to such a major announcement.

What I find interesting is this acknowledgement by Netflix CEO and Co-Founder Reed Hastings: “It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming, and the price changes.”  It is astonishing to me that this acknowledgement wasn’t followed with an expression of regret, an apology, or some comment that might otherwise assuage the concerns of a passionate customer base.

Now, having recently announced their strategic reversal, a Netflix spokesperson simply said, “We underestimated the appeal of the single website and a single service.” Again, I do not fault the leaders at Netflix who embarked on a strategic direction they felt would benefit various constituents, but rather that the leadership took their most important constituency for granted – the customer base.

I've said before that it is most important during times of change that you “fix the person” first, before providing justification of any change. Customers want to know— and frankly need to know —how changes are going to affect them. If they are educated about the changes beforehand and are given an opportunity to be heard, they will feel respected and be much less likely to abandon ship.

I am sure that given the scope of their operations and, possibly, a heightened sense of urgency to improve internal efficiencies, Netflix management embarked on a path they felt was necessary. The good thing is that they have appeared to learn a very valuable lesson in the process, one from which we can all benefit.

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Home About Archive Mitch HagstromMitch Hagstrom
Executive Vice President
Chief Banking Officer
Pacific Continental Bank

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