Netflix’s Near Death Experience
In 2011, Netflix made a terrible decision.
It was a fairly catastrophic error of judgement which threatened to make Netflix collapse like a House Of Cards.
The short version is — they didn’t listen to customer feedback.
The long version is even more interesting.
During what I imagine was a particularly warm Summer’s day, the sun shining, the sticky heat almost unpalatable, Netflix made an Earth-shattering announcement.
They decided that they would be splitting up into two products. One would be their live-streaming service, and the other their DVD rental.
Before that, their customers could use both of these services as one product.
The other addendum to their coup d’etat was that they would raise their prices for both of these, now standalone, products.
It’s safe to say this didn’t go down too well.
By September of the same year, Netflix had lost an eye-watering, lip-quavering 800,000 subscribers and their stock had dropped to a fifth of their pre-suicidal price.
The icing on their unmitigated disaster of a cake? They were named on a list of “The Ten Most Hated Companies In America”.
Arguably as far removed from a glowing review as you can possibly get.
Of course, the real kicker, and you might want to sit down for this, is that they were warned.
Netflix did the hard work and ventured out into the world of their customers. They asked them what they thought of the proposed changes.
And 26% of those surveyed told Netflix that if those changes went ahead, they would cancel their subscription.
That’s right, a whole quarter of their customer base would potentially get up and leave if they went through with it.
But Netflix was rife with hubris. Netflix established themselves, alongside the likes of Faustus or Walter White, as over-confidence personified.
They ignored their customers. And they paid the price.
As we know, Netflix has since recovered and gone from strength to strength. According to some sources, their overall worth exceeds that of U.S. network, CBS.
They’ve even become part of youth culture’s vernacular, with the phrase “Netflix and chill” helping to kindle romances around the English speaking world.
And this rise to glory started with an apology.
CEO Reed Hastings made a public confession of guilt, renouncing his misplaced confidence. This outpouring of self-deprecation and blame was enough to defrost the cold animosity between Netflix and its customers.
It was a good start.
They then started to listen. You could say that it was about time.
By listening to what their customers wanted, how they felt, Netflix were able to start rolling out improvement after improvement, eventually becoming the unstoppable tour de force they are today.
Perhaps the most interesting development was the decision to produce their own shows.
In fact, their much-loved offerings — House Of Cards, Orange Is The New Black, Stranger Things — are what distinguishes them from their peers.
Even more interesting was how they decided which shows were worth producing.
Netflix had mined a wealth of data, understanding who watched what, and knowing other shows those customers would enjoy.
Using this data, they were able to identify shows that, if they produced, would be sure-fire hits amongst their customers.
And lo, House Of Cards was born.
Netflix haven’t had to look back since.
The moral of this fable, kids, is that your customers often know best, and if you ignore them, you do so at your own peril.
But much like Netflix learned from their mistakes, so too can you.
Start listening to your customers, and let them guide your product development, and you’ll reap the rewards.
I mean, Stranger Things have happened, right?
Thanks for reading! If you found this helpful then why not give me your heart or pass this post around!
