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Netflix Brand Loss: How to Preserve Your Brand Equity

Jul 18 2011

Now that we’ve had some time to let the Netflix price increase backlash settle, we’d like to explain how an organized crisis communication plan would have saved Netflix some of their brand equity.

Netflix’s Business Problem
Up until now, movie studios sold the streaming licensing rights to Netflix for less than they were worth. However, those contracts are expiring and the studios are increasing their rates. Netflix must keep their huge streaming library available to subscribers while still keeping their pricing competitive.

How Netflix handled the price increase
Netflix didn’t explain anything about the licensing issues to the public. Instead, they sent price increase emails to current customers:

and announced the 60% price increase on their blog:

Coulda, Woulda, Shoulda: How to Announce a Major Change

1. Contact your customers privately before announcing a major price increase online. And remember that just because you sent your customers an email does not mean that they all received it:

2. Be transparent about the reasons for the change:

3. Soften the blow
If you must make a difficult announcement, consider how you can soften the blow:
• Start by only raising the price for new subscribers
• Make the increases gradual over time
• Give more warning about the price increase (6 months)
• Give customers something, such as:
o A new product or service that comes with the price increase
o A discount for the next few months
o A $5 Starbucks code or card 

Crisis Communications
How should we all plan ahead to avoid losing our brand equity in a crisis?

BLOG

1. Host your own blog, to gain better control over engagement
Do you find it surprising that Netflix doesn’t host its own blog? If you can swing it financially (and it’s not that expensive), host your own blog instead of using a Blogger site like Netflix.

2. Don’t allow anonymous comments
Allowing anonymous comments on your blog is dangerous at any time. In a crisis, anonymous comments can get out of control before you even have a chance to check your blog. Plan ahead by requiring social sign-on for commenting.

3. Moderate comments!
If you don’t use a profanity filter for your blog comments, and especially if you allow anonymous comments, you must moderate every comment before it’s posted.

FACEBOOK

Netflix posted its Facebook announcement nearly a week ago, and there have been over 77k (mostly negative) comments:

The advantage of Facebook is that people can’t comment without showing their identity (for the most part…). However, this didn’t stop people from giving their honest views about the price increase.

Netflix doesn’t have a Facebook crisis plan for handling its most extreme comments. Some comments appear to have been deleted, but the worst possible comments are still on the page and there have been no public responses to any comments.

Every business with a Facebook page should have a crisis plan ahead of time. When the comments are coming fast and negative, what will you do? Here are a few examples:
• Nothing at all, as Netflix has chosen to do
• Create an FAQ page on your blog or website, and assign a moderator to include that link in answers to questions asked by commenters
• Delete inappropriate comments, including profanity

TWITTER

There hasn’t been a word on Netflix’s Twitter account since its announcement on Tuesday:

In the meantime, “Dear Netflix” has been a trending topic all over Twitter, with no sign of Netflix response to any of the questions or comments:

 

Where it Counts
Many subscribers are not planning to drop their Netflix subscription until the rate increase in September, but that hasn’t stopped Netflix’s stock price from being affected by the announcement and its backlash over the past week.

Does your business have a crisis communication plan?

A “crisis” in your business may be something very different from Netflix’s experience, but Mambo always recommends planning ahead. It’s much too difficult to make a decision like “What should we do about profanity in our blog comments?” in the heat of a crisis moment.

Resources
http://collider.com/netflix-editorial-price-hike/102483/
http://finance.yahoo.com/q?s=nflx

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Mambo Media
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2 Comments
  • Dee Lieber
    Reply

    Thanks for writing this blog- this is a great example of the consumer’s rising demand for transparency and corporate accountability. This should be a good lesson for all brands.

    July 19, 2011 at 6:43 pm
  • You make a good point, Dee! Being prepared to communicate in a crisis isn’t just “corporate best practices”; it’s expected by consumers and followers. If a brand isn’t listening and responding, the public will call them out on it!

    July 19, 2011 at 8:24 pm

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