business errors

Netflix.. Is a 50% increase in price a Mistake?

In our house Netflix streaming has been a game changer in entertainment.  My 7 year old loves it. She has access to hours of her favorite shows. For over a year we have had the one DVD/Blu-ray w/streaming for $11.99.  Last night I got an email saying that prices were “going down”, but the plans were separated to $7.99 for streaming and $9.99 for one Blu-ray at a time by mail.  This is an increase of  50%, spun as price reduction! It is  this kind of double-speak that gives marketing a bad name.

It is my belief that this is a bad move for Netflix and will cost them money and goodwill that is expensive to recreate.  Here are my reasons.

The combined streaming and disc-by-mail Netflix offered had no real competition, especially at the price levels.  When you separate them out, each service has to compete on its own. 

For $2 more a month than Netflix’s new pricing, I can get Blockbuster’s disc-by-mail plan with games and 5 same day swaps at the local store.  Blockbuster also gets new titles sooner than Netflix.   I can get a movie at Redbox the day I want it for $1.   That is 8-10 ten movies a month before it cost me the same as a Netflix system that at most can get me 10 movies a month if I watch them the same day I get them and mail them back that day.  In my opinion Netflix disc-by-mail plan is a poor value compared to both Blockbuster and Redbox.

Netflix for our needs is the best all-you-can-eat streaming for older content.  Problem is some people may want fresh content from Hulu or Amazon.  Amazon Prime has a growing all-you-can-eat plan for about $6.50 a month that also includes free 3 day shipping for the year too.  Amazon Prime at Christmas could make the streaming free!  So I am sure more than a few people will find that with higher prices, another streaming service fits what they want better.

My feeling is that the marketing team that owns this pricing model is going to be under fire inside Netflix very fast.  Yesterday we were happy customers, endlessly paying $12 a month for streaming and one disc at a time service that we hardly used. 

Less Happy and More Expensive Customers

Today I am a disgruntled customer looking at all the new competition Netflix has AND I that just cut my monthly payment to them by $4 a month!!  All of us that were willing to pay $4 more a month so we could get the occasional Blu-ray are going to leave.  Those that they will keep the service at the new rate will be the heavy use more expensive users.  So while at first blush, it looked like a good way to increase net revenue per-account, what will happen is that those who were light usage on the disc-by-mail side are gone and they are now paying less.  So the average revenue per account may stay pretty level between those that pay the new price and those that go to streaming only.  But the cost per account will go up, as the only ones paying more are the ones using it the most.  Netflix disc-by-mail service makes no sense if you have a Blockbuster or Redbox location nearby and it make no sense unless you are using it a lot.  Netflix just learned how to remove all the lower cost accounts and keep the higher cost accounts. 

I will predict that this cynical attempt to raise prices will cost Netflix revenue and will energize it’s closest competitors who’s main weakness was they didn’t include an unlimited streaming program with the disc-by-mail service. 

Most of all, it made a lot of happy customers who raved about the service into mad customers who are now complaining on Facebook and Twitter about the service.  In one day the Netflix blog entry about new pricing maxed out at 5000 comments with most being very negative and that at midnight they had over a 26 minute wait time on the phones. This tells me Netflix was clueless about the damage this will do to their customer mindset. 

In my mind, Netflix went from  a useful innovator to a greedy and not very smart company all in just one email!

Fast Food – Customer Service Done Right

If  you read my recent post “Beware O0ps Pricing” you will see how Papa John’s Pizza failed miserably to do customer service.  So it is with great pleasure I get to give kudos to Jack-in-the-Box.  This last week I took a break from my normal home-packed sandwich to get a guilt pleasure.  In this case it was a Jack-in-the-Box Sirloin Burger. 

Sadly it was terrible.  I don’t remember them being terrible, but this one was badly made with too much sauce, a meat patty that was falling apart, and sad bit-o-lettuce.

A few hours later, I got a call!!

It was so bad, when got back to my desk I filled out a feedback form on the Jack-in-the-Box website.  I gave them an email address and phone number and told them how bad the burger was.  I figured that was it, maybe someone would read it.  I might even get a “We’re Sorry” email.  However! a few hours later, I got a call!!  Someone has the job to read those feedback forms as soon as they come in and contact the customer.  The result was they wanted details on why the burger was bad, and then offered to send me a coupon so I could try one again in them.

It’s not that hard people!  Papa John’s had people staffing the phones, just no process to take care of the customer.  Jack-in-the-Box has the process in place and clearly showed they value their customers more than saving a buck or two.  Good Job Jack!!

Beware “Oops! Sorry” Pricing

I am not giant on conspiracy theories.  I tend to think that most of what happens that is bad is the organic result of humans being part of the process.  As a matter of fact there are times that I would find a grand, global conspiracy a bit comforting, because it might mean someone knows how to keep the whole “thing” from melting down, falling apart or just not reaching the worst case.

However, I am a firm believer in watching for patterns.  Is is possible that 90% of the programmers writing computer systems that manage inventory and pricing them accidentally only put in bugs that charge me more?  Could be, but I doubt it.  How often do you get a better price at the check-out scanner than was posted on the shelf?  How often does an error save you money on your utility bill, vs charge overcharge you? Continue reading

Verizon and T-Mobile I Want To Be A Customer But…

Today I am again writing about business.  This week I wanted to become a customer of T-mobile or expand my Verizon services.  In both cases it is clear to me that these companies are paying large amounts of money to product managers and developers to create molds their customers are expected to fit, molds that may be costing them many customers like myself.

As I wrote last week, I have an HP Elitebook 8440p that I really love.  One aspect I find exceptional about this machine is that even though I bought a well priced pre-configured version without Bluetooth or 3G broadband built in, HP shipped the unit with the cables and antennas installed. This has allowed me to add these later without taking the machine apart.  Kudos to HP for allowing me to expand my machine within my budget and not locking me out because I wanted to spend less to start.

That brings me to last week and my discovery that some large companies are paying product management large amounts of money to lose them customers.  It sounds silly, but it is true.  In my opinion these companies have product management teams that think they are in competition with the customer; that there is a game they can win by making the customer do what they want.  Why not create a system where you win customers to your product by letting them choose the service levels they want.  I am not talking about free products or even discount products, just letting the customer buy and use the product in the quantities that they need it. Continue reading

Dear HP, We Have Friends and Family

This is my first post about business.  I chose this topic because it is a case where a business that could be exceptional is dropping the ball.

I currently own an HP Elitebook 8440p.  This is an amazing little business machine.  When my old HP failed, I was going to choose as different brand.  However, I often work contracts with large companies that use things like smart-cards for security and this machine was the best deal I could find on a machine with a built-in reader.

Buying an Elitebook class machine, kicks me out of HP’s consumer support division and into business support.  It has given me a fascinating view into a company that understands support, almost.  It is HP’s paradoxical business vs consumer support that has prompted the writing of this post.

My previous HP was a TX1419nr, Best Buy consumer model.  Because of a recent lawsuit with HP and Nvidia I expect it to be replaced because it died early do to a hot running graphic chip that slowly weaken the electrical connections and can cause a specific set of failures.  Mine failed the first time out of warranty.  I got it fixed and then it failed when I was on a key deadline.    BUT, it is not a bad support experience with that machine that leads me to question if HP understands that business people don’t live in the office. Continue reading