Using a Voice of the Customer Program to Prevent Customer Service Meltdowns (A Lesson from Netflix)

This past year Netflix suffered a blow to its company image—along with a hit to the bottom line—when they surprised customers with a 60% price increase to their subscription fees, followed by the quickly-withdrawn plan to split off its DVD service under the moniker Qwikster. The customer outcry about these changes echoed throughout the social media sphere, and the company ended up as a late-night TV sketch punchline. Months later, Netflix is still dealing with the fallout: according to The New York Times, the company lost around 800,000 subscribers as of its earnings call for Q3 2011.

When news of the price increase was announced in the summer, Netflix customers were quick to express their outrage on Twitter, the company's blog, and the Netflix Facebook page. Here's just one example from the 5,000+ comments posted to the Netflix blog just after the price change announcement:

"Would have been nice to have some advanced notification… Thanks Netflix for again taking the time to look out for your customers… I used to brag about you but now I wouldn't recommend your service to anybody."
—Anonymous poster

This person clearly changed from a promoter to a detractor in one fell swoop, and in a very public way. In addition to the thousands of blog comments, Netflix's customer service phone lines were clogged with customers calling in with questions and complaints. To make matters worse, customer service reps at Netflix seemed poorly prepared to explain the changes.

According to a Wall Street analyst referenced in an article in The Hollywood Reporter, "Netflix management had to anticipate an uptick in churn from this major step-up in pricing and the changes to subscription plan packaging," which raised the price for a combined subscription with DVDs by mail plus video streaming from $9.99 to $15.98. But after calling Netflix customer service 35 times, the analyst found "literally no (rhyme) or reason to the responses we got." Some of the customer service representatives told him to cancel the video streaming half of the package, while some told him to cancel DVDs by mail in order to keep the monthly subscription price down. Other agents advised him to alternate between the two plans month-to-month.

The customer outrage was renewed a few months later when the company announced that it would split the DVD-by-mail side of the business off to a new website, Qwikster, while Netflix focused purely on streaming content. The subscriber base railed against the inconvenience of managing accounts on two separate sites, and many subscribers who had weathered the price increase debacle left the company for good. A mere three weeks after the Qwikster announcement, Netflix reversed the decision and left the product lines together.

Why Didn't Netflix Listen?

So, what could Netflix have done to avoid the customer turmoil? A comprehensive Voice of the Customer (VOC) program might have helped the company mitigate the satisfaction issues that have resulted in mass customer defections:

1. First off, a VOC program set up to listen to customers, by capturing the right customer feedback on an ongoing basis, would have helped Netflix to gain a better understanding of the potential customer reaction to the planned changes. Collecting input across transactions and touchpoints for deeper customer insights would have also helped Netflix to better prepare its customer service department, and perhaps introduce the pricing changes in a more acceptable way.
   
   
2. Secondly, by analyzing feedback to understand what's important to customers, Netflix could have developed more effective communications strategies prior to announcing the planned changes. They could have also made plans to deal with any negative consequences of their announcements—which might have tempered the negative impact on the company's financial standing. Instead, customers felt blindsided by both the price increase and the Qwikster announcement, and Netflix compounded the problem by providing inconsistent, confusing information.
   
   
3. Finally, by powering its VOC program with an enterprise feedback management solution with action management capabilities for the call center, Netflix would have been able to track customer complaints easily, quickly pinpoint common areas of dissatisfaction, and immediately get all agents on the same page to act on complaints. The high volume of customer feedback didn't have to lead to more confusion—the company could have used that feedback as a springboard for better agent training. They could have shared best practices for responding effectively to complaints, which would have gone a long way in saving more customer relationships.

As Netflix subscribers know, the company does send surveys to customers to collect feedback—for example, to assess performance such as how long it takes to receive a DVD in the mail. But it's unclear how deep a level of customer feedback is consistently sought.

Does Netflix have a VOC program that captures feedback across a variety of key touchpoints on an ongoing basis and regularly assesses the state of customer relationships? This kind of data, when analyzed, shared across the company, and used to respond to issues and develop strategies, could have helped Netflix navigate business change and prevent its abrupt drop in customer loyalty, dwindling subscriber base and decreasing revenue. Instead, the company came off as "tone-deaf" to the Voice of the Customer—which turned it into a national joke. Netflix has opened the door for other companies in the DVD/video streaming space to step in with a more collaborative customer attitude.

Moving forward, Netflix's challenge is to re-establish the trust of its customer base. Hopefully the company will learn to more effectively listen to the Voice of the Customer on an ongoing basis, following a regular cadence. A key element of rebuilding the bridges the company burned is to capture the right feedback, at the right time, in order to engage in a rich, ongoing dialog with its customers.