This week Netflix announced price hikes and in turn was rewarded with a backlash of online social protest. Earlier this year online backup giant Mozy presented its customers with a similar massive increase in cost and was met with the same reaction.
Because both companies mismanage their customers' expectations.
How Netflix & Mozy Got It Wrong
Ever increasing prices are a fact of life. Whether adjusting for inflation or otherwise, customers are used to slow, steady, incremental price increases.
Overhauling your fee structure or otherwise increasing your prices substantially is not part of that common expectation and is instead perceived as price hiking.
Price hikes and price/service structure changes are in turn experienced as a form of betrayal. This wasn't the unspoken agreement between us: it doesn't live up to the spirit of the initial customer agreement we engaged in.
If the cost of change is low enough, or perceived as worth it, customers will simply become ex-customers. There's always an incumbent waiting.
But even if the cost of change is too high (Mozy, where you've spent months uploading your initial backup) or you're basically the only player (Neflix, which offers a service at a width and depth none others do) and you retain your current customers, they KNOW how arrogant you've been and how you have abused your position of negotiation power. Your current customers can continue to make enough noise to increase customer acquisition cost " or prevent new customers from arriving at all.
Manage Your Customers' Expectations
It's not about the price (hike): its about the perception of the price (hike) " and the shitty story that follows it.
In both cases ripping customers off (because that is how people experience what you did) is introduced with a "hi folks!"-toned blog post outlining how much better life will be for "most" customers.
- Fail #1: Don't do that. Your customers aren't stupid. You're fooling no-one and only succeed at making yourself look like a glib sales guy. Don't go there.
- Fail #2: Don't make your customers feel bad. By playing the "well, most customers"card you're trying to cause doubt with people who feel mightily pissed off at what you pulled on them. You're insinuating they're nasty, knifing, nagging people. Think that's smart?
Instead, step up to the plate and admit you were wrong right away Take the blame. "Sorry, we completely miscalculated our bandwidth costs as more and more devices went online" or "It's our mistake not to to have realized how important DVD rentals would remain " unfortunately the only way we can deal with it now is by changing our prices".
Have social media management in place to go around and put out fires. Be firm in your price decision ("this is inevitable, we can't change this or we'll simply disappear as a company") but put out fires by being there ("what can we do to make this better or different?").
What else can companies forced to make price changes or tough policy decisions do to prevent a social media storm? Leave a comment by clicking here.