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How Netflix Alienated Its Customers And Became Less Popular Than Blockbuster In Two Weeks

First Posted: 07/25/11 07:31 PM ET   Updated: 09/24/11 06:12 AM ET

There are several titles in Netflix's huge video library that might be used to describe the company's incredible fall from its customers' good graces following its July 12 price hike, which upped prices 60 percent overnight for some users. "How To Lose Friends & Alienate People," for example. "American Greed," perhaps. Or, if you believe some of the more pointed Internet commenters, it can all be traced back to the title of a film that won't be available on Netflix for some time: "Horrible Bosses."

Until recently, my perception of Netflix's PR meltdown was purely based on what I'd seen posted on blogs, Twitter and Facebook by scores of furious commenters. But now we have a graph of consumer perceptions to quantify just how much Netflix has angered its user base: BrandIndex, a research firm tracking consumer perception of different brands, charts the difference in how the public views Netflix as opposed to its competitors before the announcement, on the day of the announcement and immediately following the announcement. The data represent an ongoing, daily survey of 5,000 consumers per day. See if you can guess the date on which Netflix came out with its new prices:

This chart represents a 7-week period and 15,000 people. Each respondent is asked two simple questions: Which brands have you heard positive news about recently? Which brands have you heard negative news about recently? As you can see, the day that the new pricing schemes were announced and immediately afterwards were not good for Netflix; it crashed from a consumer perception significantly higher than Redbox and DirecTV, down into the negative numbers, into the lowly depths of Blockbuster.

So, what happened? Companies announce price hikes and unpopular subscription changes all the time (see: Verizon and AT&T, mobile data caps). Netflix, however, apparently did not do enough to comfort its upset customers or cool their ire (Netflix did not respond to a request for comment). Here's a brief timeline of its ongoing PR nightmare, along with some additional insight by BrandIndex's Ted Marzilli:

Netflix Announces Price Changes With Press Release
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The story of how Netflix ticked off its customers more than just about any company in America that didn't spill an inconceivable amount of oil in the Gulf of Mexico begins with a rather innocuous press release.

Rather than contact their users about the price hike themselves, Netflix first put out this release and let the news outlets disperse the story of the pricing overhaul for them (they later sent emails, but after everyone had already heard about the price hike elsewhere). The change: Netflix eliminated the $9.99 1-DVD-at-a-time + unlimited streaming plan in favor of two separate plans: $7.99 for 1-DVD-at-a-time, and $7.99 for unlimited streaming, with no discount for combining the two.

And thus the rage began to form: Netflix allowed the news media to notify customers of its price hike. The consumers did not shoot the messenger, however; rather, they approached, fully-loaded, the corporate entity they saw as the villains, as Netflix was about to discover...
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