Thursday, November 10, 2011

The Rise and Fall of Netflix

I first heard of Netflix back in 2001 when a client of mine from Silicon Valley mentioned that his wife worked there. He explained to me that Netflix was a company that allowed consumers to order movies online and have them delivered right to their mailbox.  I was intrigued and shortly after that time, I became a member. For many years, I  have loved Netflix for its convenience and great customer service.

A few years ago we started using the company’s streaming service and began depending on that more than the mail for our movies and TV series. Being in the tech industry, I had heard about the trend towards streaming and IPTV for years and as a consumer was beginning to see this become a reality.

Netflix was one of those media darlings, rising up from the ranks of start-ups to become a publicly-traded company with millions in revenue. The company enjoyed great success and brand appeal until they made a classic communications mistake. They significantly underestimated their customers’ reaction to a price increase and division of the company into two entities.

Since making this announcement, Netflix has lost 800,000 customers and its stock price has taken a nose dive.  While Netflix has since reversed its decision to split the companies, only time will tell whether this company can rise above this and win back the hearts and trust of its customers.

So many companies fall into the trap of making business decisions without considering the implications on their brand or without caring about how they will affect their reputation.  Sure, they might be good for their bottom line in the short term, but over time this kind of backlash does far greater damage.