Netflix has had a rough July so far. The company, which built up a glowing reputation among customers, took its customers' loyalty for granted and may wind up an example of how not to treat loyal customers.The online movie rental/streaming company is known for its convenience and price. It pummeled Blockbuster into the ground with its ease of use, wide selection, and constant customer communications. So when it announced that it would be changing its pricing structure a few weeks ago, customers revolted. For some (including me), prices may go up by 60 percent if we want to keep the mail-order service and the streaming service. Customers took to social media to complain, and now openly discuss other alternatives to the service. I myself plan to reduce, if not completely cancel, my service.
According to the San Francisco Chronicle, "33 to 50 percent of subscribers said they planned to cancel their service, although the company declined to say how many have actually followed through."
The article goes on to say that while the new fee structure can be justified, the backlash comes more from how Netflix positioned the news. The company assumed that its satisfied customers would stay loyal. This is an assumption many companies make, equating satisfaction to loyalty, and thinking once a customer is loyal, he or she will stay loyal.
Customer loyalty is fragile, and like any other relationship takes hard work to maintain and grow. Loyalty based on price and convenience is especially fragile, because if either of those change, so does loyalty. When Netflix explained its fee increases, it didn't fully explain why it broke the pay structure into two sections (streaming and at-home delivery), or how it might help the company's expansion into new markets and long-term health. Such transparency would have eased some of the pain and customer anger.
It also didn't help that the company's streaming service went down for a few hours on Sunday night. This might be the last straw for previously loyal customers who don't see how staying loyal will benefit them.
When it comes down to it, most customers stay loyal for two simple reasons: they feel the company acts in their best interests and they feel they are receiving something of value for their money. Transparency, sincere customer communications, and competence go a long way to achieving this. Netflix didn't do any of this.
Netflix has lost sight of how fragile its customers' loyalty is. Only time will tell if its can recover from its mistakes.