“There is a difference between moving too quickly—which Netflix has done very well for years—and moving too fast, which is what we did in this case.” With those words, Netflix has backed away from its controversial plan to split the company into two parts. The DVD rental-by-mail business, which was going to be called Qwikster, will remain part of the Netflix business. It’s a reversal that makes sense.
You Lost Me At Hello: Why Qwikster Wouldn’t Work
When Reed Hastings announced the plan to split Netflix into two discrete companies, he violated one of the principal tenets of Brand Modeling: Know what your customers value most about doing business with your organization. In the days and weeks that followed the initial announcement, one thing became clear: Netflix’s customers did not want two services providing what they used to get in a single location. They were strongly opposed to the idea.
Imagine the headaches, stress, and damaged investor relations that could have been spared had Netflix’s leadership known ahead of time what their customer base’s reaction to the change would have been. Let’s make no mistake. Reed Hastings is not a stupid man. Had he known the magnitude of the fallout from what he saw (and from the tone of Netflix’s communications to their members, continues to see) as a simple and necessary change, things would have been handled differently.
Eliminating Uncertainty: The Role of Brand Modeling
Every business has growing pains. When you’re an industry leader like Netflix, those growing pains are going to be more visible, studied, and scrutinized by everyone: your customers, your critics, the business press, the investment community.
Growing pains occur because businesses exist in an environment of perpetual uncertainty. We lack an absolute, definitive way to predict the outcome of our choices and actions ahead of time. We’re in a position where we must make choices and take action and then see what happens.
However, the lack of perfect, absolute knowledge about consumer reactions and behavior doesn’t mean we’re completely clueless, either. Brand Modeling provides us with the tools to delve deeply and intensely into the psychological factors that motivate customer behavior. The more we know and understand about our customer base, the more accurately we can predict how they will respond to any change in operations.
It’s unfortunately easy to mistake what may seem to be the obvious right decision for your business for what your customers actually want. This disconnect can have catastrophic consequences. It’s easy to see that Reed Hastings believes that streaming media is the future of his company. There may be good, logical, strategic reasons to split off the DVD rental business. However, Netflix’s customers don’t want the good, logical, strategic reasons. They want what they’ve always wanted: a simple, enjoyable way to watch movies.
Can Netflix recover? We think they can. Reed Hasting’s emails is a small first step. Listening to their customers, especially their most fervent, loyal customers (folks we call Brand Lovers) would be a great next step.