Maybe you heard that Netflix raised its prices by 60 percent for customers who subscribe to its DVD and streaming video products. Then customers bailed, as did the company's market value, which was cut in half in two months. And then, the CEO of Netflix, Reed Hastings, issued an apology on the company's blog. And then, the law of unintended consequences kicked in and the piling-on began.
If you're interested in how public relations can backfire, take a look at the summary of l'affaire Hastings at the Mr. Media Training blog.
Hastings, a hugely successful entrepreneur, fell into the trap of believing Netflix is better and smarter than its customers. This happens to many companies after meteoric rises. Microsoft never cared much about how buggy Windows was once it was the worldwide standard. Apple wasn't all that concerned about the dumb-designed antenna on the iPhone4. Ditto Netflix.
Netflix, with an assist from Blockbuster like a sick dog and changed the way we think about home entertainment. Bravo for them. Netflix arguably has been just about as important as Apple or Google in terms of its impact on our culture.
If you're an entrepreneur, the only real difference between you and Reed Hastings is size and scale. You both have customers, you both screw up sometimes. So, as Chicago mayor and former White House Chief of Staff Rahm Emanuel once said, let's not let a disaster go to waste when there are lessons to be learned.
- Respond to mistakes fast, but not too fast: Hastings waited two months to respond when he knew instantly he had a catastrophe on his hands. Believe me, his CEO daily dashboard includes subscribers added and dropped, probably by the hour. So he could see in the blink of an eye that the move was a bad one.
- Have really good advisors on PR response: Even small companies should get advice on how to react to a big you-know-what storm. If you haven't had to do disaster management, there's a big risk you may make a bad situation worse. So as CEO, get some feedback and a diversity of opinion. And then do something.
- Give something back to customers: As mentioned in the Mr. Media Training blog, Hastings could have given a present to every subscriber -- a free rental -- as a way to say I'm sorry. A missed opportunity for him and many companies. You want "sorry" to be enough, but it never is. When you mess up, your customers feel pain. Sorry does not cause you pain. Giving away some money -- that causes you pain, and you should take it and ask, "Please, Sir, may I have another." That's why Taco Bell did when it was sued for putting mystery meat instead of beef in its tacos. They went on offense, gave away enough free tacos to alter the Earth's gravitational pull for a minute, and saved the company.
- Plan for the unexpected: I remember watching an episode of Kung Fu when the blind master asks one boy what he learned when attacked by surprise. He said something like, "Be suspicious of everyone." He was sent packing from the monastery. But Grasshopper said, "Always expect the unexpected." Companies don't do much disaster and scenario planning for all the mistakes -- external and self-inflicted -- that could occur. What happened to the good old SWOT analysis?