Netflix CEO Reed Hastings made a statement this week apologizing for poor communication on the recent pricing changes and announcing the
renaming moving of Netflix’s current DVD delivery services to a new, wholly owned subsidiary called Qwikster.
Now, I’m no CEO, and I don’t claim to know everything about business, but I would like to send a couple tips out there to Reed Hastings. Just basic business advice.
1. Keeping existing customers increases profit.
Netflix, lost 1 million customers because they monkeyed with their pricing. Marketing history is FULL of schemes to increase your price without losing customers, and I’m sure reducing value, creating complicated new price schemes and confusing customers with new company names is not at the top of the list. Honestly, Netflix streaming library is pretty weak right now. Seems like it would have been easy to gradually pare it down a little and then come out with a new “premium streaming” package that could be purchased for an upgrade, or maybe add a pay-per-view system for new movies like Amazon is working on. No, instead they chose to upset their customers, remind them what they were paying Netflix each month and lost a million customers.
2. Protect your brand
Brands are important. Ask anyone, read any marketing book, brands are vital to your business. Netflix has a brilliant brand. Red envelopes, dvds, the Netflix name… all brilliant. Why do you think Redbox is Red, because Netflix built such an amazing brand around those envelopes. Now Netflix is throwing the number one brand for DVD rentals out the window and going with Qwikster (a name that they don’t even own on twitter yet) and Netflix will now be known as the lame streaming library that is overpriced and contains only B-movies and TV shows. Not smart. DVD rentals are your bread and butter, why not make Qwikster the new streaming service and leave Netflix alone.
The bottom line is Netflix was making upwards of $50 million every quarter, it will be interesting to see if the management has killed the Golden Goose under the name of staying competitive and moving with the market. Some business models aren’t meant to be viable forever and your best bet is to make hay while the sun shines. Hopefully Netflix hasn’t quit early.