SMALL BUSINESS

The Netflix Apology And Qwikster Launch: 5 Lessons For Entrepreneurs

09/19/2011 03:00 pm ET | Updated Nov 19, 2011

Netflix CEO Reed Hastings, who continues to field backlash from the DVD rental company's 60 percent price hike, took to the blogosphere Sunday evening to issue an apology and make another jolting announcement about the company's structure.

In what has already been a confusing and customer-alienating quarter for the once-beloved company, Hastings announced that the newly separated DVD-by-mail service will be relaunched under a new name: Qwikster. (Watch the introductory video below.)

"Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to qwikster.com to access their DVD queues and choose movies," Hastings wrote.

In other words, the 12 million Netflix customers that subscribe to both DVD-by-mail and streaming services will now have to visit two websites to operate their accounts and pay two separate charges (which will still add up to the inflated $16 price tag).

Hastings goes on to admit that he should have been more forthcoming when it came to the sudden service split of DVD-by-mail and streaming, writing, "I should have personally given a full justification to our members of why we are separating DVD and streaming, and charging for both. It wouldn’t have changed the price increase, but it would have been the right thing to do."

With Netflix stock dropping at a record pace and the service losing a projected 1 million more subscribers than previously thought, here are five things entrepreneurs can learn from Netflix's operational snafus.

1. Don't offend customers with belated, hollow apologies. After issuing a steep price increase to your loyal customers, bragging about your company's astronomical growth and noting that "companies rarely die from moving too fast, and they frequently die from moving too slowly" probably won't make them feel sympathetic to your situation.

2. Figure out the right way to raise prices. In what seemed to be a quick turnaround in its dedication to customer satisfaction, Netflix announced back in July that its pricing structure was going to change dramatically. In contrast, another subscription-based entertainment service -- Sirius radio -- just came off a three-year price freeze, opting to subject their service to a more gradual $1.50 increase.

3. Realize your competitors are waiting to pounce. Dish network recently announced the launch of its Blockbuster movie-streaming service, a direct threat to Netflix, which will also lose its partnership with Starz in February, diminishing its lineup by nearly 1,000 titles.

4. Don't confuse customers even more by still not giving them what they want. In his blog post, CEO Reed Hastings writes, "A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated. So if you subscribe to both services, and if you need to change your credit card or email address, you would need to do it in two places." He continues, "Members who subscribe to both services will have two entries on their credit card statements, one for Qwikster and one for Netflix. The total will be the same as the current charges."

5. Be sure to secure your social media identity before changing your brand. In what has turned into a rather comical situation, Twitter probes found that the @Qwikster handle was already in use by Jason Castillo, whose profile picture identifies him as a version of Sesame Street's Elmo, wielding a lit joint.

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