Netflix Raises Prices – and No One Freaks Out

NETFLIX TV 150x150 Netflix Raises Prices   and No One Freaks Out

THE PR VERDICT: “A” (PR PERFECT) for Netflix.

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.

Netflix: From Doghouse to Darling

netflix Netflix: From Doghouse to Darling

THE PR VERDICT: “A” (PR Perfect) to Netflix, for making its own luck.

Sometimes, the famously fickle PR gods send you a gift, and if you’re lucky, smart, or both, you’ll get a chance to use it. This week’s beneficiary: Netflix. Two years ago, the video streaming and DVD rental company was a case study – literally – on how to fail a thriving enterprise, with questionable pricing and business decisions that sent subscribers stampeding for the exits. Netflix became the poster child for PR ignorance and customer neglect, losing nearly one million subscribers over a matter of months.

Then, a chastened Netflix started to turn it around. It reversed unpopular business decisions and issued a sincere (and persistent) mea culpa. It aligned its communications strategy with its business plan, breaking new ground for a streaming service by providing original content. Today, its subscriber base surpasses HBO’s and its stock price is six times what it was only a year ago. Quarterly earnings are next week.

And the gift? Just a humorous online chat between a funny, friendly, and helpful Netflix customer service representative and a user with a video playback problem. A screenshot of the Star Trek-themed dialogue was posted online on Imgur and Reddit and is getting wider attention. Netflix is getting free publicity from it – earned the hard way, and through hard work.

THE PR VERDICT: “A” (PR Perfect) for Netflix, for a turnaround in tone, culture, and attitude that turned around its business.

THE PR TAKEAWAY: Good communication is contagious. Netflix’s earnest soul-searching two years ago, translated into words and actions, now appears to touch even the most routine business activities. Granted, maybe not all of Netflix’s help calls end as happily – customer service is a weak spot for many firms. But this exchange garnered publicity precisely because it speaks to a prevailing positive mindset that has formed about the company, one that seems to attract great employees as well as loyal, happy customers. Netflix provides an object lesson in how good conmunications helps throughout an organization. Its little PR gift also confirms that luck doesn’t just happen; you make your own.