Netflix’s self-made CRM crisis and how Social CRM can help

Netflix, Inc., the provider of online video streaming and DVD by mail service, has fallen from customers’ grace hard and fast. Once a darling of its customers, Netflix management seems to have misjudged the negative impact of price increase and other service changes they announced “unilaterally” this summer and as a result have lost many customers.

Netflix’s CRM fiasco underscores the importance of not taking your customers for granted, especially in this day and age of Social Media. Dissatisfied customers can not only take their business elsewhere, but can also leverage Social Media tools to express their disapproval in a way that can have big impact on other customers and towards the brand. Just see the impact of Social Media firestorm generated by this CRM fiasco on Netflix stock for example (see this link).

Social media has empowered customers like never before to connect and communicate with other like minded individuals ‘publicly’ and the last thing any marketer should be doing in this Social Media age is to take important decisions impacting customers unilaterally and without explaining the rationale or motives behind such decisions. In other words, customers expect to be involved in such decision making or atleast expect a rationale explanation before any changes are made.

So what can Netflix do to recover from self-made CRM crisis. Answer is to fight fire with fire, that is use Social Media channels to engage customers and build (should I say regain) trust and loyalty (for more, see definition of Social CRM here).

For example, how about using Youtube to explain why these changes were made in the first place. How about using Facebook and blog postings to respond to customers’ criticism about price hike and services changes already announced. Key is taking customers’ into confidence in such a way that they feel that they have been involved in taking important decisions concerning the service they receive and pay for. Netflix doesn’t have to respond to comments from each and every customer, but if they respond to few customers in a fair and transparent way, other customers would appreciate and would be much more supportive of Netflix’s position.

Netflix can use this CRM crisis and turn it into a Social CRM success regaining its past glory (and stock price) if they can engage their customers on Social Media to (re)build Trust and Loyalty.

I want to end this post by sharing with you this excellent Bloomberg video on Netflix and profile of Reed Hastings, co-founder and chief executive officer of Netflix Inc. In case if you don’t see embedded video below, please click on this link for the video.

  • Richard Shapiro

    Great and interesting post by Dr.
    Harish on Netflix’ success and how they didn’t take their customers’ opinions
    into effect prior to making a major change in their services. Yes, Social Media
    can now be used to try to undo what was done. It’s too early to tell if Netflix
    will be successful or not, but everyone else can certainly learn from their
    mistakes. And, thanks for sharing the video! Richard Shapiro, The Center For Client Retention 

  • http://hkotadia.com/ Harish Kotadia, Ph.D.

    Thanks @RichardRShapiro for sharing your thoughts. Much appreciated!

  • Saori Oe

    It is definitely a great movement for both consumers and companies that a lot of CRMs are now taking place on Social Media. Easier and faster! Companies give consumers answers to their questions posted on Social Media right away, which used to take forever, because they don’t want to harm their reputations by not doing that. Companies get to receive feedback from consumers in literally a second on Social Media, which also used to take more than a second.

    In my opinion, Netflix responded to the crisis (regarding separating their business into two completely different segments for streaming and DVD rental) on its CEO’s blog, by taking the plan back. I was checking the CEO’s blog and people’s comments after I got an email from Netflix about them being two separated websites. I remember I was thinking that Netflix has to do something with these hundreds of angry comments, and a bit excited to see how they’d deal with it! Actually I wasn’t expecting them to take their word back (even though I was one of those people who really hated the idea of having to use two different websites), but they did take it back pretty quickly.

    A lot of people around me still don’t have trust on Netflix yet, but I’m still a subscriber and believe in them. The crisis showed that Netflix is actually reading and caring about those comments from consumers on their blog, and they are capable of accepting their mistake and apologizing right away. I think that is really trustworthy.

  • About Dr. Harish Kotadia


    That's me with photo gear,  taking snaps of Texas wild flowers. #texas

  • Dr. Harish Kotadia

  • Dr. Harish Kotadia is an industry recognized thought leader on Big Data and Analytics with more than fifteen years' experience as a hands-on Big Data, Analytics and BI Program/Project Manager implementing Enterprise Solutions for Fortune 500 clients in the US.

    He also has five years' work experience as a Research Executive in Marketing Research and Consulting industry working for leading MR organizations such as Gallup.

    Dr. Harish Kotadia's educational qualification includes Ph.D. in Marketing Management. Subject of his doctoral thesis was Customer Satisfaction and it involved building a statistical model for predicting satisfaction of clients with services of their ad agency.

    His educational qualification also includes M.B.A. and B.B.A. with specialization in Marketing Management and Diploma in Computer Applications.

    Dr. Harish Kotadia currently works as Principal Data Scientist and Client Partner, Big Data and Analytics at a Global Consulting Company. Views and opinion expressed in this blog are his own.



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