How Did Netflix Lose 800,000 Subscribers?

I recently posted a story about the importance of obtaining research and insights from customers and focusnetflixsed on the McDonald’s example which saw them harness research methods to help them come back (stronger than ever) from their first ever quarterly loss.

Researching that post took me on a fascinating journey and made me aware of both the flight and plight of various other brands and businesses that have either used (or ignored) research opportunities, contributing in some shape or form to their businesses successes or failures.

One of the most interesting stories we stumbled upon was that of Netflix in the US.

In 2011 Netflix split their DVD and streaming businesses and in doing so increased their prices by (an estimated) 40%! As a result, and perhaps unsurprisingly they lost a whopping 800,000 subscribers and their stock price fell to less than half its previous value.

According to the Daily Mail this made them ‘one of the 10 most hated companies in America’.

A short while after this, in an interview with the New York Times Netflix Chief Executive Reed Hastings said he ‘assumed the plan to split the company had been presented to customer focus groups before it was made public but wasn’t entirely sure’. Hastings also rather shockingly confessed that ‘he couldn’t recall what those focus groups had said about the plan’.

I’m sure that you’ll agree that a decision as monumental as this one would call for heaps of consideration from focus groups, polls and online surveys!

While Netflix eventually axed their plan to split the businesses and seemingly dodged a bullet by managing to recover their losses and continue with growth (according to recent figures), neglecting the views of their customers could have quite easily seen the pendulum swing the other way.

So, what can we take away from this example?

A well-designed market research study would have undoubtedly illustrated to Netflix how their existing customers would reject the changes they were planning and could have also identified alternate products, services, changes and ideas that the Netflix C –suite (being so far removed from their average subscriber) might never have considered.

Conducting a thorough research study like this one would have made Netflix’s customers feel empowered which in turn would have driven loyalty.

To read more about data collection and using data to drive a targeted email marketing programme, check out dotMailer’s popular guide.

Sarah Shearman, on the Direct Marketing News blog says that ‘today’s empowered customers are more likely to be loyal to companies that best understand their needs, goals, and preferences’.

As always, we’d love to hear your thoughts. Tweet us using @dotmailer or leave your comments below – we always reply!

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