Six Reasons Netflix CEO Reed Hastings’ Apology Failed
Back in July, Netflix raised its rates by 60 percent for customers who subscribe to its DVD and streaming video services.
Customers were outraged. Hundreds of thousands of people canceled their subscription, and Wall Street responded by punishing the company’s stock, which is down more than 50 percent over the past two months.
Despite the outrage, Netflix CEO Reed Hastings declined to apologize to his customers for two months, arrogantly adopting a crisis communications approach toward his customers that can best be described as: “Deal with it.”
Last night, Mr. Hastings finally posted an “apology” on his company’s blog that missed the mark. It reads, in part:
“I messed up.…It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming, and the price changes. That was certainly not our intent, and I offer my sincere apology. I want to acknowledge and thank our many members that stuck with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly.”
Mr. Hastings then continued by announcing a new change, one that would split his company into two different entities – one for DVDs, another for streaming video. The two websites won’t be coordinated – customers will have to rent videos from two different sites, reviews will no longer appear on both sites, and customer service requests (such as address changes) will need to be made twice.
Here are six reasons Mr. Hastings’ apology failed:
- It Came Two Months Too Late: Why did Mr. Hastings allow customer resentment to simmer for months before stepping in and issuing an apology? By waiting, he allowed customer dissatisfaction to deepen and his company’s reputation to suffer additional damage. Plus, it makes it look like he apologized because he had to – not because he wanted to.
- He Combined The “Apology” With Yet Another Unpopular Change: By combining his apology with the announcement that his company was going to make the customer experience even less pleasant, he completely negated the value of the apology. He should have issued the apology weeks (or months) earlier as a stand-alone statement, which would have been viewed as a more sincere act.
- He Didn’t Give Anything to Customers: Mr. Hastings could have increased the value of his apology by offering customers something for their inconvenience – a free month, a free movie, something. Instead, he continues to appear more self-interested than customer-oriented.
- He Never Explained Why Netflix Had to Increase Its Fees: He alluded to additional streaming content, but didn’t explain how customers would benefit from the additional costs.
- He Offered a Tepidly-Worded Apology: Mr. Hastings offered one of those half-hearted “if you were offended” types of apologies. He shouldn’t have written “To members who felt we treated them thoughtlessly.” He should have simply said: “We treated our members thoughtlessly, and we apologize.”
- Didn’t Give Customers an Easy Way to Contact Them: Many commenters on the Netflix blog complained that the company didn’t provide them with an easy way to communicate with them regarding their accounts. The company made a phone number available, but didn’t have an easy way to email their questions or complaints to an account representative.
Almost 18,000 people have commented on the Netflix blog over the past 24 hours. Kathryn E. Krieger of Miami eloquently summed up her frustrations with the company:
“I think the decision to create two totally separate companies is foolhardy. While they may not feel like two separate companies on your end, they absolutely will on the consumer’s. In exchange for paying the same amount of money and receiving the same quality of service, customers can now look forward to two… separate websites, two separate queues, two separate billing statements, two sets of ratings, two sets of searching, etc. “What’s in it for me?” is the first thing I must ask myself – the first thing every consumer asks themselves when they see a change like this – and your email offers no good answers to that question. As far as I can tell, Netflix gets all the benefits here and the consumer gets all the negatives.”
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Related: Seven Rules to Remember When a Crisis Strikes
Fantastic analysis. I credit this blog for giving me the background to know a media flame-out when I see one now.
And folks, this here’s a first-class BBQ!
As always, on target analysis and conclusions. I really don’t understand how this sort of thing still happens today. Behind closed doors, I’m certain customer service is the low priority, but you’d think there would be smarter people guiding the public response and protecting the company from the self-inflicted wounds you listed.
It will be interesting to see if their customers will send the appropriate economic reply or simply accept poor customer service and general lack of respect as a requirement to get a movie or TV show … Is it me or does that seem to be a trend these days? I think I’d be happier if it were just me.
Again, great post, Brad!
Excellent analysis…and for the record, I DID send the “appropriate economic reply”…
Couldn’t agree more … My thoughts exactly.
Not to mention that the press also jumped onto the story about the name of the new company’s Twitter handle not being available is being used by a guy who tweets about smoking weed.
You picked a great quote, I wonder if Ms. Krieger is in marketing b/c she certainly highlighted many of the fails, namely the WIIFM gaff. Instead of thinking what they can do better, how they can attract more subscribers, they seem to have looked at their internal issues and keep passing the ‘solution’ onto the paying customer.
Now the PR fail in combining the late apology with a major announcement change, almost like an afterthought.. it’s becoming an excellent example of what not to do. FWIW.
This note from Reed Hastings is one of the more interesting coverups I have read. It completely ignores the most irritating of the recent changes – the price increases, and describes a new irritating problem – now 2 web sites to manage instead of one. I do not understand the minds of management when they think they can send out what, in their mind, is the perfect solution to a problem they created. It would have been somewhat acceptable to increase subscription prices by perhaps 10%, but to double those prices, and now create 2 web sites goes beyond any proper customer care. Netflix had a very good product, but these new changes may be an attempt to force subscribers off DVDs and just deliver streaming movies, since that eliminates a significant part of Netflix’s internal expenses. My reply to Hastings went into a general info mailbox that will never be read. What a joke!