Tuesday, July 12, 2011

One GIANT bad move by Netflix

Money is important, and cost hikes are inevitable, but a recent move by Netflix to raise prices for those who want both mailed-to-home videos and instant streaming may be losing it more customers and losing more money than gaining.

The change (see below), which was announced by email and on the Netflix Facebook page, has received over 13,000 Facebook comments on the Facebook announcement, most of them negative. Users are declaring they will drop Netflix for Hulu Plus, Amazon Prime, or Redbox if Netflix does not get rid of the change.

On a move (or lack of movement) almost as bad as the announced change, Netflix has yet to respond to the negative comments.

Marketing choices are difficult to make, and may require higher prices, but without good public relations, those decisions will hurt, rather than help a company. This is why clear communication is so important, as is having a prepared response for negative reactions. It seems Netflix has failed big time here.

Will Netflix users keep good on their word and drop the service? Are there any positives to Netflix's actions?

Read the Netflix announcement I received below:
We are separating unlimited DVDs by mail and unlimited streaming into two separate plans to better reflect the costs of each. Now our members have a choice: a streaming only plan, a DVD only plan, or both.

Your current $9.99 a month membership for unlimited streaming and unlimited DVDs will be split into 2 distinct plans:

Plan 1: Unlimited Streaming (no DVDs) for $7.99 a month
Plan 2: Unlimited DVDs, 1 out at-a-time (no streaming) for $7.99 a month

Your price for getting both of these plans will be $15.98 a month ($7.99 + $7.99). You don't need to do anything to continue your memberships for both unlimited streaming and unlimited DVDs.

These prices will start for charges on or after September 1, 2011.

You can easily change or cancel your unlimited streaming plan, unlimited DVD plan, or both, by going to the Plan Change page in Your Account.

We realize you have many choices for home entertainment, and we thank you for your business. As always, if you have questions, please feel free to call us at 1-888-357-1516.

–The Netflix Team

1 comment:

  1. That's a boost of 60%. $8 and $8 isn't bad if you only use one option, and it cuts the price by 20% for single-service users.

    However, they raised it too much too fast. Most marketers would give a quantity discount. $8 for each service, but $7 each if you get them together.

    Presumably, the typical user will use one less if he or she uses the other one more. Therefore, Netflix can afford to boost the cost 40% instead of 60%.

    I assume they can, anyway. I haven't seen their balance sheet.