CNNMoney foreshadowed the increase, observing that Netflix’s licensing agreements with studios will expire and it is projected renewal costs will rise from $180 million in 2010 to $1.98 billion in 2012.
Instead of leveling with customers, Netflix spun the price increase as a way to offer their “lowest prices ever…[and] provide great value to…members” by offering them “a choice” between streaming and DVDs. However, Netflix customers currently enjoy both services at a lower price. The “choice” is really between diminished services or a price increase.
Social marketer Jason Yormark called this out in The Lost Art Of Transparency Or How Netflix Dropped The Ball, cautioning communicators from thinking their audience are stupid:
Netflix does a lot of things right, but not being open and transparent about their subscription changes are currently hurting them as they are taking a beating in the public’s eye. What Netflix should have done was just been open about the increase in operational expenses they are experiencing due to the studio’s demands, and that in order to continue to provide the same level of service, they have to pass some of those costs on to their customers.
A Washington DC-based food blogger (who will remain nameless to protect the guilty) soon provided me with another example. A guest author wrote an unfavorable review for them of a recent event highlighting regional cuisine. He called the “atmosphere…stagnant and old”, concluding that he “…did not have a good time and would not attend again.”
A few days later the article was replaced. Same author, writing about the same event, and same photo, but this time the event was described as having a “charming setting and good food” and “an overall success”.
To make sure I wasn’t crazy, I Googled the article. Sure enough, two links came up: the original post and its sanitized replacement. The original post’s link generated “Page not found. Sorry, the page you were looking for…does not exist.” The blogger failed to account for (or accepted they could not control) that Google cached the original article, allowing me to confirm their duplicity.
In the original post, he described the chicken kebobs:
There are several possible explanations. The guest writer could have posted his review without the editor reviewing it first. The site owner could have gotten cold feet since they are also trying to monetize their blog through a cookbook and television series cooking “with top local chefs”. They may have realized they jeopardized future access to those local venues and chefs they rely on for content. Whitewashing traded the risk of alienating local restaurants and chefs for the risk of alienating their readers.
The swap probably went unnoticed by most, but destroyed their credibility with those of us who did. The first review was probably genuine, while its replacement seemed written as something someone wanted to hear. Rather than sticking to their guns and standing by their work, they folded.
If they got complaints from the venue and chefs being panned, the situation could have been managed with more transparency. They could have allowed another guest writer to offer a counterpoint, allowing the readers to decide for themselves. Similarly, they could have invited the chef, restaurant manager, or event coordinator to post a comment on the blog. At very least a simple note explaining their change of heart would have gone a long way in preserving their reputation.
What’s the bottom line when it comes to transparency?
- Don’t underestimate your audience. Instead of being upfront about the rising costs of licensing agreements, Netflix thought it could convince customers that it was reducing services or increasing prices as a service to them. The blogger tried to sweep a bad review under the rug and replace it without anyone noticing. In both cases, people saw through their ruse and called them on it.
- The Truth is Out There. Netflix should have taken into account that customers may have read about the background on CNNMoney. The blogger forgot that web pages are cached or thought the chance someone would go back and check was low.
- Consider the Cost. Disgruntled or disillusioned audiences will turn on you on social media. According to Entrepreneur.com “Customers left more than 12,000, mostly angry messages on the company’s blog. Many vowed to leave Netflix for Hulu, Blockbuster and other competitors.” I removed my subscription to that blog from Google Reader, but I could have gone the extra step of naming names, turning this into an exposé. Businesses have real costs they have to contend with, but they can’t do it at the expense of their customer satisfaction or credibility.