Guest post by Joe Hackman 
If you’re a Netflix subscriber, you’ve probably already received a notice indicating the pricing and plan changes.
If you haven’t, it can be summarized as a discount for streaming-only customers, and a huge price hike (up to 60%) for people who like to get DVDs from them in addition to the streaming.
Our family happens to enjoy both, and evidently we’re not alone.
Since the emails started rolling out, Netflix has been taking a beating of “Dear Netflix – ” tweets, comments (38,007 as of this writing) on its Fan page, and overall really bad sentiment across the blogosphere and social media.
A solution to the problem
The best argument that I’ve seen for Netflix is that the studios are squeezing it for more money. As early as 2009 there was an indication that studios were going to be squeezing more out of their DVD products.
The only problem is that is a relatively weak argument. “Why is that?” you ask.
There is absolutely no reason why Netflix couldn’t honor its current customers’ pricing and raise the prices for new subscribers. This would prevent the loyal subscribers from feeling like they are being gouged.
A real test
If Netflix were to honor its current pricing with subscribers, and was unable to win new subscribers with the higher pricing model, then it would know that the new pricing model would also not work for its current customers. It could achieve this without alienating their loyal customers.
You know; the people who helped put their local Blockbuster out of business by loyally ordering their DVD rentals from Netflix the last few years. Yep, those “valued customers.”
A relatively strong brand has been tarnished. That is unfortunate, but it is a self-inflicted wound.
What would you do if you were Netflix?
Joe Hackman is an entrepreneur, blogger, podcaster and technology advocate. He founded IT services firm Managed Solutions in 1997. In addition to that, he is a CMO/CTO at a startup. More about Joe at http://joesgonesocial.com.
![[EVENT]: PR Hacks for Small Biz (online)](https://shonaliburke.com/wp-content/uploads/2021/06/FB-Ad-1200x800-01-01-01-Copy-500x383.jpeg)
[…] basically said this is a mea culpa in a few months of what were, while correct business moves, terrible PR moves. All that said, I still believe that Netflix was on the right […]
[…] How Netflix Could Solve its Price Increase Debacle (waxingunlyrical.com) […]
@AVGamerican thanks for sharing your personal view on this issue. You make an excellent point about the feedback survey, I was not aware of that and that does speak to the “attitude” of the company.
Look, I understand that the costs of everything is going up, and companes must maintain a minimun revenue – – BUT- – Raising prices by 30% to 60% depending on which plan you had is outrageous. Imagine going to the grocery store to find milk had gone from $4.00 to $7.00 in one step. Most of America has been suffering through this down-turn and pinching pennies to do so. Many are lucky to have jobs, and those who do haven’t had pay raises in 3-5 years. A small increase in plan price of perhaps $1.00 to $2.00 depending on the plan would have been unpopular, but understandable. This action is is either the result of rampant greed, or that of a company in a desperate situation. As for my family, we HAD a 2-at-a-time with streaming video plan. Our answer -NO-, either Netfilx needs to learn a lesson about greed, or succumb, which ever situation drove their decision. As for us, we cancelled our membership after 5 years. BTW, when you cancel your membership, they ask you to participate in an exit surveyt. The survey asks ONLY the questions they want to ask, and gives you a selection of answers to choose from, again ONLY what they WANT to hear. There is NO comment section for valid or pertainent feedback as to why you are really leaving. Just one last parting insult for former loyal customers.
@johnhaydon you too John! Enjoy your family time.
@hackmanj Have a great weekend, Joe.
@hackmanj @rachaelseda That does indeed make your point more clear, and I have to agree. We will see if they do anything to undo the damage to their image. Perhaps discussions like this one will find their way to the right eyeballs.
@ExtremelyAvg I think you mis-interpreted my comment, I think it’s perfectly ok to be successful and to earn profit (that’s not evil). My statement was with regards to a company that would raise their prices frequently in a dramatic fashion and expect people to just take it while hiding under a table around the controversy it stirs. That’s a company out of touch with it’s customers and the evil part is really more over the arrogance of not caring what their customers think. Hope this helps to explain my position. Though it does appear that we disagree and what fun would life be if we all agreed about everything (can you say BORING). My point is they could have honored their existing customers pricing plans and avoided the controversy all-together while still raising their prices for new customers (like Verizon did, thanks to @rachaelseda for the example).
To me it’s obvious the companies that actually give a crap about their customers and those that don’t. Netflix is looking more like the latter right now, and that is disappointing to me.
@hackmanj
I am not a wealthy man, and if you were to check my tax returns, you would see I live well below the poverty line, but I am not sure I subscribe to the theory that companies like Apple, Starbucks and Netflix are the devil, because they strive to make a profit.
Again, please don’t misunderstand. I think everyone has the right to call Apple (Their stock set a record today) or Starbucks, or Netflix evil, because I like freedom of expression. I just view things differently.
Though I do struggle to make ends meet, I have 3 novels coming out this year. They may sell a little bit, which would be a huge help, but that isn’t what I dream about when I go to bed. I have dreams of huge sales. I would like to make millions and millions of dollars from my books. I will start them out at $2.99 and if they do well, I will…believe it or not…raise the price. Why you ask? Because I want to maximize my profit.
I don’t think making profit is evil, it is how we choose to spend it. I was on the board of directors of DC Habitat for Humanity and currently can’t afford to help them at all. This makes me sad. Warren Buffett and Bill Gates are changing the world with their philanthropy.
It used to be considered the American dream to become successful. I am saddened that it is now considered to be evil. I am friendly and even if my novels are successful, I will still be a nice person. I really don’t want to be called evil.
There may be an entirely different reason for them raising the price. This is just a guess, but perhaps they would like to drive all of their customers to the Streaming Only option? I don’t know the operating costs associated with the DVD in the mail part, but it is certainly higher than a zero raw material product.
They have made a business decision and it is either going to help their company thrive or cause them to lose market share. I just don’t agree that the decision rises to the level of evil.
@hackmanj I am not a wealthy man, and if you were to check my tax returns, you would see I live well below the poverty line, but I am not sure I subscribe to the theory that companies like Apple, Starbucks and Netflix are the devil, because they strive to make a profit.
Again, please don’t misunderstand. I think everyone has the right to call Apple (Their stock set a record today) or Starbucks, or Netflix evil, because I like freedom of expression. I just view things differently.
Though I do struggle to make ends meet, I have 3 novels coming out this year. They may sell a little bit, which would be a huge help, but that isn’t what I dream about when I go to bed. I have dreams of huge sales. I would like to make millions and millions of dollars from my books. I will start them out at $2.99 and if they do well, I will…believe it or not…raise the price. Why you ask? Because I want to maximize my profit.
I don’t think making profit is evil, it is how we choose to spend it. I was on the board of directors of DC Habitat for Humanity and currently can’t afford to help them at all. This makes me sad. Warren Buffett and Bill Gates are changing the world with their philanthropy.
It used to be considered the American dream to become successful. I am saddened that it is now considered to be evil. I am friendly and even if my novels are successful, I will still be a nice person. I really don’t want to be called evil.
There may be an entirely different reason for them raising the price. This is just a guess, but perhaps they would like to drive all of their customers to the Streaming Only option? I don’t know the operating costs associated with the DVD in the mail part, but it is certainly higher than a zero raw material product.
They have made a business decision and it is either going to help their company thrive or cause them to loose market share. I just don’t agree that the decision rises to the level of evil.
@ExtremelyAvg thanks for clarifying your perspective and from that lens everything you said makes sense. Mine is a little different as you might have observed. To me it’s not just about the bottom line it’s about not being perceived as the devil (and earning that perception!).
Canada has laws about Caffeine? Blasphemy! ;)
@johnhaydon thanks for sharing that post John. Happy Friday to you sir!
@hackmanj My degree is in Economics, so I am interested in cases like the Netflix price change. If more people are like you, and remain, despite the price change, then it seems they have a price inelastic service, which may indicate it was a smart move. (Note: I am not endorsing their move, just analyzing)
You make a valuable point about following though. There is certainly value in having an Apple/Starbucks loyalty. Most of the ardent supporters of both those brands are loyal enough to almost rise to the level of a religion. I feel that same loyalty to Diet Mountain Dew and have planned my own Jihad against Canada, who as ‘anti-diet dew’ (read caffeine) laws on the book. I will get them when I rule the world…I digress.
The point is, is that loyalty greater than the throughput gain? I don’t know. I can tell you this, if I were to choose between paying say $35.00 per month for Netflix streaming and keeping my cable tv, I would pay for Netflix. For me, who watches almost all of my favorite TV shows via Netflix or Hulu, the value is vastly greater than cable TV. I am likely in a minority, but my point is this, to me, the service they provide is vastly more valuable than what I am being charged.
I arrive at this conclusion based upon my very tight budget. I have almost completely stopped buying DVDs. Each month I would purchase 1 to 3 seasons of my favorite shows, because I liked to watch them back to back. Last month I spent about $90.00 on Top Gear. This month, I have been watching the older seasons on Netflix. I haven’t bought a DVD in 4 weeks. I also don’t rent DVD’s from the convenience store much anymore, probably saving me an additional $21.00 per month.
Again, I am not pro or con the move by Netflix, and I certainly think they handled it poorly, but the reality of the matter, for me, is I would pay more.
I certainly don’t want them to go away, if there is truth they are getting squeezed by the TV and Movie people.
@ExtremelyAvg we’ll suck it up and pay but also look at other options for now. Even if financially they end off better short term I still think they will have lost the opportunity to maintain a Starbucks/Apple type following and that is hard to quantify the cost. Would they rather be that company people love or the company that people will jump ship when the opportunity arises? They are in my view setting themselves up for failure later. Good will is such a valuable commodity and one that they have very little of today. It’s the whole win the battle lose the war concept, I hope they never feel validated for how they have approached their loyal customers.
Thanks for your comment :)
@hackmanj @LaurenVargas When you say they are going to make a change. Which company are they going to switch to? Or do you mean stream only?
I am one of those people who was on the 1 DVD + plan, and was thrilled when they changed the model. I have never used the DVD portion. I do feel sorry for people like you and your family. I think you are right, they could have done a better job.
My question is this, are you going to stop using Netflix?
If all they get are people being angry, but a small number of people stop using the service, then their throughput will increase and they will be better off. If lots and lots of subscribers bail, they will have blundered.
I personally can’t imagine dropping Netflix, though if they had raised my rate, I would be upset too.
I am one of those people who was on the 1 DVD + plan, and was thrilled when they changed the model. I have never used the DVD portion. I do feel bad for people like you and your family. I think you are right, they could have done a better job.
My question is this, are you going to stop using Netflix?
If all they get are people being angry, but a small number of people stop using the service, then their throughput will increase and they will be better off. If lots and lots of subscribers bail, they will have blundered.
I personally can’t imagine dropping Netflix, though if they had raised my rate, I would be upset too.
@mistrtim yeah I have to admit I was pretty annoyed with the first increase to be honest. We had just upgraded to a Blu-Ray plan and the cost went up substantially. We downgraded then to what we have today and subsequently it is now going up a lot in price :-/
@hackmanj Well Joe.. not being a customer of Netflix I didn’t realize this about their pricing history. With this new information I have to completely agree with your evaluation that they tarnished a good reputation and in my view.. they deserve the results of their folly!
@TheJackB you’re probably right Jack. I can’t imagine all the people that will either cut back or leave for another provider will be insignificant.
Which plan are you going to switch to? Are you looking at alternatives as well?
@LaurenVargas it’s great to get a different perspective and regardless of the actual subscriber figures vs those complaining the truth is Netflix has never stirred up this much negative sentiment that I’ve observed. They had a very solid reputation and most of their customers advocated and contributed to their success.
A lot of my friends on Facebook and other networks have indicated they are going to make a change. If that is any indication this is definitely going to hurt them. Their competitors must be doing back flips today. It will be interesting to see what happens long term.
Thanks for joining the discussion Lauren.
Joe
@HowieSPM I would love it if they could stream more content as well and it would be worth more to me too.
Interesting point about them being sitting ducks, and wow could you gauge the reaction quickly. I knew they were in trouble when I read the Email but even more so when I saw the reactions to my initial Facebook, Twitter and G+ posts.
Thanks for adding an extra dimension to the discussion.
@mistrtim part of the issue Tim is that this isn’t the first major pricing/program change in recent months. Sure they have the right to raise their prices 2 times significantly in a short period of time but they also tarnished a strong brand that had generally very good customer sentiment. It’s hard to quantify what that is going to cost them. I think people are going to be more inclined to look at, consider and switch to alternatives. I doubt that was their intention.
Thanks for reading and commenting, always nice to hear from you!
@Tinu I wish they had added value to it. The truth is I think the quality of the solution is part of the problem. This wasn’t the first price/programming change in recent months which is probably something I should have mentioned. It might be that the backlash has to do with a threshold that has been exceeded with many of the subscribers.
Thanks for your comment and for taking the time to read my post :)
Joe
I was on the 1 DVD + unlimited streaming plan but as of this am changing plans. There is limited time in the day and this is very significant increase.
I think that they might get hurt on the volume of account changes.
@shonali of course! We all know #joessocool cc:: @hackmanj #gojoe
So I may be in the minority on this one. I hear a lot of chatter on social networks about the price increase, but is that reflective of the entire client base? Also, of those complaining are they actually dropping subscriptions? Influencing others not to subscribe? I think we can all agree that they could have done a better job with the communications, but the space is evolving and maintaining a DVD business is more expensive. Streaming is gaining ground and Netflix is wanting to push that forward…and willing to take that gamble. I just wonder how all of the online chatter is actually affecting the company.
@jdlasica @sarahnordgren @rachaelseda @reveew Thanks so much for sharing @hackmanj post!
If they could get the whole film library that I can get from them in the mail on streaming that would be best. I would pay $20/month for that.
I want to comment specifically on the Facebook Fan Page screen shot. That is 2.5% of their 1.5mil fans. Does anyone know their total subscribers? So in reality this could be a cheaper way to handle things than people jumping on 800 lines to complain. It also proves brands can’t reach us via Social Media very well but we sure can reach them! They are sitting ducks not us.
As someone who runs a Fan Page you can not contact fans. You can post and hope they see or come to your page. So they will come 1 at a time if they are happy 100 at a time if pissed.
All businesses have the right to increase rates in particular when their own costs go up. Nobody likes to pay more, but when a business explains why they need to change things IN ADVANCE of the changes.. customers have a chance to assimilate and prepare for the changes.Netflix definitely failed by not being transparent with their customers. People would complain.. some people would quit, but if the proper justifications were there.. most people would accept the changes as long as the value was still there and they had options.Comparisons to other services and costs are also another way of justifying price increases as long as the numbers make sense.I think people saw the convenience of Netflix making sense compared to the cost of driving to the local video store and renting a movie. I would daresay that for some people even with the increase.. there is a benefit.
I’d find a way to add value for the price hike.
Okay that’s not true. I’d listen to the market response and say that changing to the new pricing plan is optional as long as their membership doesn’t lapse. Then I’d add value for the price hike.
The issue for me isn’t paying more. I have plenty of crap I’m subscribed to that I don’t use enough to justify the cost. But those people aren’t dumb enough to call attention to it.
The issue for me is that I’m going to pay more for something that isn’t great, that I’m already getting elsewhere. Except that now that they’ve called it to my attention, maybe i won’t be paying for it at all. The convenience of keeping the hundreds of instant view items in my queue is not worth it.
@hackmanj Yes that’s what I want to know…what really was the thought process behind this…hmmm…to be continued #gojoe
Verizon is a PERFECT example of this!! I didn’t even think about it. I was telling everyone I knew to hurry up and get an unlimited plan if they didn’t have one already!
I completely agree with leaving prices as-are for current customers, kinda like how Verizon isn’t reducing my wife and I’s unlimited data plans and also jacking up the price for them. Why not? Because we had it before these changes were made. Why would this be any different for NetFlix? Money was definitely a large part of the equation. They seemed to have ignored the precedent set by every other company of “grandfathering” people in when changes like these occur. The only reason I can think of is money. They know that there is not a better streaming service, and it’s beautiful to be able put in an order for a DVD and while waiting enjoy a streaming movie or TV series. It’s awesome and nobody offers that. The knew that and took advantage.
Will I leave NetFlix? No, because as I’ve read mentioned before by NetFlix: $16/month for streaming and DVD delivery is an awesome value, even at 60% more than it was. So, with that said, should it have been handled differently for current customers? Yes. Is it THAT big of a deal in the grand scheme of things? Not really. My wife and I were already paying $11.99 a month, we’re not going to get too upset about another $4 bucks.
@rachaelseda I had never considered alternatives since we went Netflix, now of course I am. I think more than that I am just wondering who brewed this up and how they will respond to the backlash. So far I haven’t seen anything. Thanks for the comment. #gorachael
Ouch I agree with you. If I was a subscriber, I definitely wouldn’t be anymore. There’s too many options now, with Red Box and even Blockbuster jumping on that bandwagon. I’m wondering whose smart idea this was!