What We Have Here is a Failure to CommunicateSpecifically, the whole Netflix fiasco shows just what can happen when a firm doesn’t communicate with its customers. The company tried just automating their new 60% price hike with an email explaining the value to consumers and a recent mea culpa explaining the change would involve splitting into 2 unrelated websites requiring customers notify each when updating information or rating a movie only made matters worse.

Anatomy of a Communication Disaster

Certainly, not every failure to communicate is as big as Netflix, where they didn’t try to communicate at all. This communication failure is telling — because it shows a total lack of concern with customers and their well-being. It also shows the company believes its customers are too stupid to see that moves made by the company are in the company’s interests — not that of customers.

In the days of social media; where consumer voices are amplified by sharing across social networks, ignoring the needs of customers is disasterous. This move will likely generate just as much backlash in social media as did the original announcement of the price hike.

Results of a Failure to Communicate

Netflix is begging customers to cancel their subscriptions. They got cocky after driving Blockbuster to the brink of bankruptcy. Reed Hastings, CEO of Netflix, is taking advantage of his near monopoly to piggishly extend profit margins for the firm and it’s investors.

Hastings thinks this will improve investor relations and drive up stock prices (probably because much of his salary is in stock). It’s a short-sighted strategy that ultimately may bankrupt Netflix because these moves cost them customers. And it’s customer who keep a business afloat, not investors.

What Netflix is doing is inviting competitors to take over their market.

And Amazon is nearly ready to respond and eat Netflix for lunch. Amazon already offers a download service and live streaming video for movies and TV programs through their Amazon Instant service. I can think of few companies I would less like breathing down my neck.

Today, Amazon implements streaming video through a pay-per-view system, but offering subscriptions may be their next move in light of Netflix’s poor business and communication practices. (Of course, they need a better interface. My streaming video from Amazon is a little jerky and downloads only work if you buy the video and have a PC system. You also need a special video player as it doesn’t work with standard players such as RealPlayer).

Your Turn

What do you think of Netflix’s recent changes? Have other examples of failures to communicate. Share them in the comments below.