This time they warned you – Netflix, that is. The on-demand streaming video service that scored one of the worst marketing and PR flops since the introduction of New Coke when they raised their rates in 2011. They announced a price increase for rentals last week, but this time in a way structured to keep existing customers happy – and investors, too.
You might recall Qwikster, the company’s ill-conceived DVD-only service, spun off in 2011 in the wake of a controversial and unpopular price hike that effectively doubled the cost of rentals. Subscribers rebelled and quit in droves, and Netflix reversed course, killing the service before it ever launched. It then spent much of the next year apologizing and begging customers to come back.
Clearly the company learned something from that experience. This time, Netflix moved methodically, initially raising the prospect of price increases months ago. It firmed up that news in late April with a letter to shareholders announcing a pending increase of “one or two” dollars. The final word came in an email to customers Friday – a $1 bump, but only for new customers, and no increase for existing members for two years. So far, the villagers have yet to light their torches or storm the castle.
THE PR VERDICT: “A” (PR Perfect) for Netflix, for taking the time to set appropriate expectations.
THE PR TAKEAWAY: Timing is everything – and that doesn’t always mean just picking the right moment. Netflix, looking to avoid another mass stampede of customers for the exits, wisely started telegraphing its intentions on pricing months before actually announcing the increase. This amounted to a period of test marketing, giving both Netflix subscribers and investors time to get used to the idea. Then, by grandfathering in existing customers at the current price for two years, Netflix actually won a measure of goodwill, solely becauset it set expectations of a price increase for everyone. Investors liked the news also, sending the company’s stock up on the increase.