Netflix Fiasco Provides CEO Takeaways
October 13 2011 by ChiefExecutive.net
Netflix’s stock took a serious tumble after CEO Reed Hastings announced a 60 percent price increase in July and a separation of streaming online and DVD-by-mail services in September. This separation would make the rental process more laborious for customers, and doesn’t that go against the whole principle of Netflix success?
But is there ever a good time to raise prices?
Chief Executive covered the ensuing controversy here: 3 Ways to Avoid Your Own Netflix Pricing Fiasco.
With an exodus of customers, Hastings had to do something. This week, he bowed to pressure and nixed Qwikster, the DVD-by-mail portion of the new plan. The CEO even admitted, “there is a difference between moving quickly – which Netflix has done very well for years – and moving too fast, which is what we did in this case.” Netflix will keep the 60 percent price increase.
Hastings did the right thing when it came to Qwiskter: he listened to his customers, realized he had made a mistake and quickly changed course. In a Wall Street Journal article, Wharton professor Katherine Milkman praises Hastings’ bold move saying that too often, “people want to save face and don’t think, what’s best for my company at this point?” Hastings showed Netflix customers that he’s listening to them and he puts the future of the brand above his pride.
The increases in price still remain, and it will be interesting to see how customers react over a longer-period, and consequently how Hastings incorporates these reactions into management decisions.