In previous posts I have discussed companies that have really put social media to work for them, however social media can be devastating to a company if not used effectively; just ask Netflix.
In 2011 Netflix was set to launch a new service called Qwikster, which would have offered a DVD only service to it’s customers. On October 10,2011 Netflix announced that they would not be going ahead with it’s separate entity in Qwikster only three weeks after it had announced it’s plans to create it. What changed the companies mind so suddenly you ask? Three words: Social Media Mishap
Netflix advertised a Twitter account for @Qwikster before they quickly realized that user name already existed in the Twitter database. Not only did it exist, but also it belonged to a user not associated with Netflix that talked about drugs and cursed a lot. Even though he was not associated with Twitter the damage was already done and Netflix bad reputation had been created and poor judgment would be associated with the brand.
Additions to this Disastrous Recipe
Although the social media mishap was bad, and caused an enormous amount of negative media and opinion of the company, it had an equal counterpart in the downfall of Qwikster. Netflix got to greedy within their success and tried to separate their DVD by Mail package and their online streaming package. Although risk is associated in every setting, including the risk of failure, a company of this size should have conducted the research and gotten to know it’s customers better, so that they would have known Qwikster was a terrible idea and would not garner support amongst their customers. The customers did not want to pay and have their existing services separated. Although they canceled the separation of services, Netflix still intends to keep its price increase.
Consequences of Their Actions
After Netflix announced their Qwikster plan, their stock price dropped 25% from $155 to $117. After announcing the 60% price increase earlier in the same year, their stock dropped from $300. On website cited “ The cost of this particular blunder was 800,000 lost subscribers, or $192 million in $20/month subscriber fees.”
Whenever a company introduces a new product or innovation there is always some sort of risk involved. How with this affect our existing product sales and customer opinions will our customers be open to the new product will be competitive in our market? Unfortunately for Netflix their marketing team, social media team, and risk management team failed causing them to lose many customers, company value, and money while gaining negative publicity and poor brand recognition.
I think that since Netflix offers a convenient product, and therefore it’s customers will move on from this social media disaster. In the future I feel as though Netflix will be it’s own biggest enemy.
Are you a Netflix customer? If so, did you continue your service when the price increased? Do you feel like Netflix can bounce back from this social media mishap?
Smith, S. (2012, January 20). What the Biggest Social Media Blunders Have Taught Us. Ragan.com. Retrieved February 26, 2012 from http://www.ragan.com/Main/Articles/What_the_biggest_social_media_blunders_have_taught_44253.aspx
Kafka, P. (2011, October 10). Qwisktter is Gonester: Netflix kills it’s dvd only business before launch. All things D. Retrieved February 26, 2012 from http://allthingsd.com/20111010/qwikster-is-gonester-netflix-kills-its-dvd-only-business-before-launch/