Yesterday, Netflix co-founder Reed Hastings sent out an e-mail to over 25 million subscribers, apologizing for the way the DVD rental and streaming service giant handled announcements of both a 60% price increase and a split in its service option plans. Yet today the media reports that customers are still angry. Why?
In an article published today in The Chicago Tribune, Daniel Diermeier, a professor at Northwestern University’s Kellogg School of Management and author of Reputation Rules, commented, “There’s sometimes too much focus on the apology itself.” “I’m sorry” is in most cases not enough to restore the loyal trust of customers (see BP’s Tony Hayward after the Deepwater Horizon explosion); there also has to be a real plan for making things right again.
Diermeier points to several major reputational blunders Netflix committed — namely waiting too long to issue the apology, and splitting the company in two. Hastings had been quick to issue comments to the press, but not to customers, who went online by the millions to complain. As a result, Netflix has lost over half a million subscribers since the price increase — and its stock price has scrubbed off nearly a quarter of its value in just under a month since first announcing its revised pricing structure.
Maybe Netflix can avoid becoming the new New Coke in the years to come — bur for now, it is a case-study of the challenges of reputation management.