Netflix knows its future is in video streaming, but its roots exist in DVDs. So how do you nudge consumers to wean themselves off of lower margin DVDs to the higher margin streaming videos?
Introducing Qwikster, a knee-jerk reaction to a disastrous price increase announcement that was met with even greater consumer disdain. Many people put Qwikster up there with New Coke – but it might have been the right idea – just poorly executed.
Creating a separate business for DVDs will allow Netflix to buffer itself from a business model that (over the long-haul) will most likely decline. In creating this new division, however, they didn’t connect the old Netflix to the new Qwikster, so a consumer had to set up their preferences, waitlists, cues and billing data all over again. It makes you wonder if they were following the online banking model, which makes it so cumbersome to switch banks, that they expected subscribers to begrudgingly switch to streaming Netflix over setting up a new DVD account…)
All Netflix had to do was allow customers to conduct a simple transfer for a limited period of time, and they would have been less likely bothered by the change. Furthermore, providing an incentive to try the new technology (following the lead of the airlines when they introduced online booking) would have helped ease the pain.
So what can you learn from Netflix?
- Think about all the ramifications of significant changes in your business
- If the initial reaction to a major change is negative, take time to let it sink in. Sometimes it just takes time for people to adjust to change.
- Limit the knee-jerk reactions – they never seem to work out as you’d like.