The One Big Mistake Netflix Made

Earlier this month, I received the infamous Netflix email, telling me that they were increasing fees and separating their streaming package offering from their DVD-by-mail package offering.

I read the rants by infuriated customers on Facebook and Twitter.

But there was one glaring mistake that Netflix made that could have circumvented the whole drama: they should have told us WHY.

Social psychologists have studied this phenomenon: when you tell people why you’ve made a certain decision, why you’re asking for a certain favor, or why the traffic is backed up for 10 miles, they accept it and it decreases their anxiety about the situation. When you don’t keep them informed, they resist change.

Netflix, in later news reports, indicated two reasons why they changed their pricing:

• first, because the cost of streaming those movies has gone up compared to what they used to pay (a nine-fold increase over the same time last year),
• second, less people are choosing the DVD-by-mail route, seemingly preferring the streaming option (75% of new subscribers choose streaming-only).

Of course, they didn’t tell us that when they sent the email a few weeks ago. They only talked about it in an earnings call in late July.

When you look at their reasoning and their statistics, as a business owner you can see that it makes perfect sense to split the DVD-streaming combo into two separate offerings. Even a non-business-owner would have “gotten it.” But by not telling us in the first email they sent, they allowed imaginations and emotions to run wild. Stupid, stupid PR mistake.

A lot of business owners didn’t raise their fees during the Recession because of the backlash that would have arisen. NOW they’re thinking, “Hey, I haven’t raised my fees in 3 years.” Just tell your customers why your’e doing it.

Next time you’re cancelling a class or changing a program offering or moving a project start date, make sure you tell your customers why. It will save you a lot of headaches and backlash later.