Netflix alienated a lot of customers when they announced a 60% price increase on July 12. They had previously offered a plan where customers could stream unlimited movies online and rent unlimited DVDs one at a time by mail for $9.99 per month. Starting in September, Netflix will offer a DVD-only plan for $7.99/mo and an online only plan for $7.99.
Subscribers found out via email but the story soon took on a life of its own online. Netflix was flooded with angry Tweets, Facebook posts, and blog posts. Several news outlets conducted informal polls of Netflix subscribers and reported that as many as 70% were thinking of cancelling or reducing their subscription. Investors haven't been too happy either as Netflix's stock price has dropped more than 15%.
Now that I have had a few weeks to calm down and weigh my options, I can see why Netflix raised their prices. I can also think of three things they should have done that they didn't.
Be honest and open.
It's important to be honest and open when you make a business decision that will adversely impact your customers. The economics behind the Netflix price increase actually make sense. so why not come clean? They chose to ignore the issue entirely by essentially telling customers, "Hey - here are your new prices." I still don't think many customers would be happy with a 60% price increase, but they might have been more forgiving if they knew why. (There's a great overview on Yahoo that explains the business drivers behind this decision.)
Share something positive.
Netflix should have timed their price increase around some exciting news, like an agreement to add more movies that are available for streaming online. Their strategy includes moving more customers online since streaming movies is much cheaper than shipping DVDs. Making more titles available online would let customers know where some of that price increase was going and get more customers to use the streaming service. A bit of misdirection? Yes, but we customers tend to focus on what you put in front of us. All I have to look at right now is an email says I'm have to pay 60% more for the same service.
Emphasize your strengths.
Netflix missed a chance to emphasize that they are still the best deal in town. Their announcement caused many customers like me to shop for alternatives, but the alternatives either cost more money or offer a much smaller selection. Why not point this out? Heck - why not save us the time and put a nice little chart together that illustrates how Netflix offers the best selection, service, and price even after a 60% price increase? Everyone likes to think they are getting a good deal and Netflix should have made this clearer in their announcement.
Assuming the price increase was a foregone conclusion, what else could Netflix have done better?