Why Netflix Customers Aren’t Seeing Red

Yes, every Netflix customer does see red when retrieving the company’s DVDs from their mailboxes, thanks to the firm’s signature envelope design.  But rarely do they “see red” when actually using the Netflix service.  The company, after all, pioneered a new approach to DVD rental that ultimately drove the dominant industry player, Blockbuster, into bankruptcy.

Netflix took the DVD rental customer experience to an entirely different plane.  As a result, it has earned customer satisfaction ratings higher than even Amazon.com, and seen its stock return outpace the broader market by 6,000% over the last five years.

A message I recently received from a friend underscored just how adept Netflix is at nailing the customer experience in all the right places.  He and his family were watching a movie one night using Netflix’s instant viewing service (streaming video).  In the middle of it, the movie froze and they had to turn it off.

The next morning, my friend received the following e-mail from Netflix:

The message didn’t go to all Netflix subscribers.  It didn’t go to just the people who complained (my friend never did).  It apparently went to everyone who was trying to watch streaming video during the time window when the company experienced technical problems.

Not only did all these Netflix subscribers get a proactive apology, with the mere click of a link, they got a partial rebate on their monthly Netflix charge.

How often is it that a company reaches out to you when it knows something has gone awry with your experience?  It’s really quite rare, except perhaps in cases of formal product recalls, where lives could be endangered.

For that reason, when it does happen, it’s striking and memorable.  It exudes quality and forthrightness.  It reflects a genuine interest in the customer’s wellbeing (underscored here by a rebate offer that could easily trim a six-figure sum from Netflix’s top line).  It is, quite simply, a very powerful driver of customer goodwill and loyalty.

Many companies would rather stick needles in their eyes than proactively notify customers about a problem.  Others might consider such a gesture, but would obsess over the financial implications to the point of paralysis.

Netflix, though, has institutionalized this practice.  And when they first considered doing it, I’m sure they must have done some number crunching.  The big difference from other companies?  Netflix appears to have recognized that, yes, proactive communication in these instances does translate into some additional cost.  But they know it also drives long-term customer loyalty and advocacy, the value of which far overshadows the trivial additional expense.

Which is why, even when faced with a frustrating service outage, Netflix customers aren’t seeing red.  And the company, in turn, is seeing a whole lot of green.