Your company is about to walk into a PR firestorm. The management has the luxury of seeing it coming well before the controversy, so they work closely with their crisis PR counselors to implement a strong crisis management plan. A fire drill is run to make sure any flaws in the plan are fixed, and the company’s staff are briefed and trained on handling angry customers. All systems are go, says the management.
The big day arrives, and sure enough, the story dominates the media cycle. Customer backlash is bitter and persistent. Analysts mock the company, call the management idiots, claim that customers will flock to competitors, and predict the company’s demise.
Our advice? Don’t listen to them, Netflix.
Yes, that same Netflix that did the unthinkable in this slump economy and raised their prices by 60 percent. The horror! And they sprung the changes to their movie rental service plans out of nowhere. The online reaction was swift and nearly uniform. People were (are?) angry and unnerved.
The immediate reaction might be to view this as a big crisis PR situation. But if you take a deep breath and really consider the circumstances, we would argue that Netflix has actually done a stellar job on the public relations front.
First, even with the massive price increase, Netflix remains more or less the best choice cost and selection-wise. So the simple fact is the numbers speak for themselves. As David Pogue effectively summarizes, Netflix has “gone from an extreme terrific value – to an average one.”
Second, Netflix gave a thorough rundown of all the price changes, instead of letting customers find out the hard way with higher than expected bills in the mail.
Third, Netflix is sticking with its guns, and did so like a smart nightclub bouncer – polite, but firm. The pressure can certainly be tremendous to backtrack on very well-evaluated communications decisions. However, if a business has run the numbers and knows it has no choice, then you gotta hold your nose and go all-in. That’s exactly what Netflix did, and we’re willing to predict that this controversy will be quickly behind them.
You can certainly criticize Netflix for the many stinkers in its streaming movie catalog. But on the PR front? Not so fast.
Your point of view runs counter to just about every measure since Netflix’s announcement. While the business decision is certainly defensible (DVD by mail is clearly expensive and the company has long signaled it’s intention to redirect customers to streaming) and was well orchestrated to reach all audiences simultaneously, the poor handling of the announcement has taken a tremendous toll on the company’s value — and its reputation. It was not until the company released its earnings today, more than a week after the announcement, did they bother to provide true guidance about the real impact and start to address legitimate investor concerns. And for the short term, at least, it has not been received favorably contrary to Netflix’s “anticipation.” Speculation ran rampant about deals with the studios and other partners falling apart. To compound matters the company dug in its heals and, while admitting it expected a less than enthusiastic customer response, passed off the price increase as trivial. While streaming customers may have upward means to cover the expensive devices required for quality streaming, the DVD crowd that relies on their preexisting machines was up in arms, and rightly so. The high level of analyst confusion and media speculation did warrant at very least the CFO getting involved. I believe the CEO should have been available for interviews if not on Day 2 than certainly on Day 3. The sheer number of media calls overwhelmed the lone company spokesman. The became part of the story. Consumers seem to be willing to accept changes they are conditioned for along with transparency (it used to be called straight-forwardness) about business decisions, especially when there is a compelling rationale. The service and pricing may still be better than other services but the brand meaning has been broken badly. The best year of advertising can be demolished in one bad PR day — or in this case a bad PR week where lightning struck twice when the streaming service went down the following weekend, and again, no explanation beyond, “We’re working on it.” This is a crisis. One of the good guys showed a very dark side. And it has not blown over and when it does there will be a real toll that is measurable across the board. David Pogue’s piece was not favorable and certainly influenced the rash of bad media and vast volume of venomous comments and chatter that are continuing. I do agree with you on one point and that is the sad state of the streaming catalog — only 8 among the Netflix Top 100 are streamed. Sad commentary, indeed.
Ted
Thanks for your comment, Ted. You raise some good points, though one area of disagreement is whether Netflix ever treated the price increase as trivial. If that were the case they’d likely have ignored even commenting on it at all. The point of the blog post was, largely, that Netflix knew it had a tough call to make, and they did a very good job on handling the PR around it. You’re right that the online scoreboards lit up with many negative comments. But again, the hard part on the PR front is whether your company’s got the right messaging out there, particularly in a testy situation. And if that’s the case then you have to stand your ground, take your medicine, and let it all blow over. As Eric Dezenhall put very well, in crisis management “[t]he goal is not to get people not to hate them. It’s to get people to hate them less.” http://bit.ly/oJcW1p
I should have been clearer about the “trivial” nature of Netflix’s response. It was in reference to a comment widely carried about the price increase equivalent to “one latte a month.” The spokesman said later it was not a good analogy to have used — he gets a break for nonstop interviews battling a media onslaught for three days straight. Interesting to see speculation now about whether they will rescind the increase. Like you, I would advise them not to. But investors carry more weight on the issue– stock rebounded about 1% today, so maybe they are in agreement too. Thanks for the NYT link.