Netflix has customers seeing red

July 18, 2011 | blog | By Mike Sullivan

When does a challenger brand cease to be a challenger brand? Some would say when they stop acting like one. The truth is, the shift starts far earlier than that. Underdogs cease to be underdogs when they stop thinking like underdogs. Once that happens, it’s virtually impossible to go back.

Last week, Netflix announced a price increase of up to 60% that will dramatically change delivery and pricing for the company’s nearly 23 million subscribers. Where presently, customers can receive DVDs by mail and stream movies instantly online for as little as $10 per month, moving forward, those two options will be split with customers paying $8 for one or the other, or a minimum of $16 for both. On the high end, subscribers wanting four DVDs at a time plus streaming would pay $30 per month.

Netflix price increase affects nearly 23 million customers

Within 24 hours of the announcement, 40,000 people had responded on Netflix’s Facebook page and an angry post on Netflix’s blog received 5,000 responses – the limit allowed by the site. It seems Twitter, too, was lit up with countless tweets from disgruntled members. For many, this was a slap in face. For others an outright betrayal. But why is that? Companies raise prices all the time without lighting up the blogosphere. What did Netflix do that was so bad?

The answer lies in their status as one of the country’s beloved challenger brands. Years ago, when big, bad Blockbuster thumbed their nose at the world with their “too big to fail” arrogance, Netflix stepped into the breach with a cool, simple, affordable solution that people loved. Netflix gave people the flexible, affordable way to watch movies that Blockbuster could have, but didn’t. And people loved them for it. When they added online streaming, that allegiance only grew.

Like all of the challenger brands we love, Netflix solved a real problem for us. They delivered service that made every customer believe they really cared and did it all while charging a very reasonable price. But for many, that all changed with last week’s price increase. On Tuesday, Netflix was a TV and movie buffet. On Wednesday, they went a la carte and immediately shifted the way millions of their customers looked at them.

On Friday, in a USA Today online article, a Colorado man said, “it makes you wonder if they really want to serve their customers, or just their stock holders.” Someone posting a comment to the story added, “Netflix was our last hope for a fair-priced, customer-caring movie company. Now, they are just as bad as satellite and cable companies.” Can Netflix make a financially-driven move and still remain a Challenger? We’ll see.

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Mike Sullivan

President at LOOMIS, the country’s leading challenger brand advertising agency


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