Watching them stumble from gaff to gaff this summer, it’s apparent now that Netflix, who I ghink we all assume does a lot of research with its customers, must have asked the wrong questions, or ignored what might have looked like an unhappy minority.  How else to explain their complete lack of a Plan B?

Let me start by saying I like Netflix—I’ve been a loyal customer for more than 10 years.  When Netflix announced their price increase, I kept the instant plan and just down-graded from four to three DVDs. To keep the flow of Fringe discs coming, my wife and I will have to turn them over a little faster. Not much of an inconvenience for us, and I think we actually saved $1 a month, so we weren’t all that upset with the pricing changes.  Breaking themselves into two separate companies, though, didn’t seem to offer us any benefits, and my guess is that a lot of other people felt that way too.  This is something Netflix should have heard from market research with customers.  Armed with this possibility, they could have prepared a Plan B in the event that enough of the market didn’t like the company’s new strategic direction to warrant pulling the plug on Plan A.

OK, so they didn’t have a Plan B ready to go, but with their customers and the Media up in arms, they could have moved quickly to prepare one. Recognizing that a good Plan B uses existing assets (in the case of Netflix, a history of good customer relationships) and can be implemented
quickly and inexpensively, their Plan B might have looked something like this:

• Develop service plans that relate to bundling or separating  DVD and streaming
• Let customers know the unilateral decision was a mistake, and that Netflix really wants to hear what they want
• Do informal  research to get a handle on what will fly, then present the best options to the whole customer base to vote on electronically
• Tally and publish the results, and then offer customers a choice of the winning plans.
• In all marketing, make explicit the benefits of each plan for likely user segments (“if you watch a mix of DVDs and streaming then the Anywhere/Anytime plan may be best for you—here’s why.”).
• Identify the best, vulnerable customers , and put a full-court press on them to stay.  Ditto with winning back the best lost customers.
• Publicize any good data about customer retention and winback.

Like all Plan Bs, this one wouldn’t have solved all of their problems, but it would have sent a clear signal to everyone that Netflix was listening and responding thoughtfully. The precipitous slide in customer retention and share price could have been arrested.

OK, this was our two cents on what Netflix could have done. We’d love to hear what your Plan B would have been—please post your thoughts on our site!