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The Netflix price increase social media firestorm: A case of too little customer intimacy?

On Tuesday, Netflix announced price changes and a change in the structure of their DVD-by-mail and movie streaming plans. For all intents and purposes, the “changes” were increases – separating the delivery methods and making customers pay almost as much for each as they were previously paying to get both.

Right afterwards, the universe exploded.

There are over seven thousand comments on the Netflix blog, not to mention the firestorm it is facing on Twitter and Facebook, nearly universally decrying the changes.

These range from the unhappy:

Unhappy customer blog comments about Netflix price increases.

To the appallingly rude:

Rude social media comments about Netflix price increases.

But it was this comment that really stuck with me:

Social media comment about truth and transparency in Netflix price increases.

It illustrates that many Netflix customers might swallow the increases, if they knew the cause behind them. By and large, commenters believed the price increases came down to one thing: greed. What these customers don’t understand, however, is that the move may be a case not of greed; but of survival. In the next year, studios may increase the fees Netflix needs to pay to stream content to its customers from $180 Million in 2010 to $1.98 Billion in 2012, making pricing a live-or-die issue.

Netflix customers—even when announcing their intentions to go elsewhere—overwhelmingly talk about how loyal they have been to the company for a decade. From where I’m standing, Netflix’s mistake wasn’t raising prices – they don’t seem to have had a choice. The mistake was spinning the story…and not being honest with their customers about the causes behind the increases.

Netflix clearly had a tremendous amount of customer loyalty and social capital built up. Their customers may have stood by them much more vocally if they were given the straight scoop. Instead, Netflix seems to have extinguished a massive amount of goodwill in one fell swoop by not trusting their customers to understand.

Additionally, comments like this one show that some customers don’t even believe that the company knows how they use different components of the service:

Blog comment about Netflix customer experience.

As we’ve seen time and time again, organizations that understand not only their customers’ pain, but also the unique relationships their brands have with their customers can be hugely successful even when difficult decisions need to be made and shared. The firestorm that Netflix is finding itself at the center of seems to be a case of lacking that understanding.

As a longtime customer myself, I hope Netflix survives and emerges stronger than before. It may need to—in the words of one commenter—treat its customers like adults to do so.

Communispace has delivered game-changing customer insights to the world’s most admired brands for over ten years. To receive a free bundle of three exclusive reports that show what it means to truly understand your customers online, click here.

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