Friday, September 23, 2011

Change in Service: A Lesson Learned

Sometimes companies have to alter the way they do business and change their service plans. As these changes often center around a price increase, new limitations, or dismissal of services altogether, customers can have a negative reaction to the news. For some companies, breaking the news goes smoothly as they take measures to soften the blow, while others spring the news to the clients with minimal warning or explanation.

The way in which Netflix managed its recent service changes is a perfect example of this type of news being received poorly. Netflix decided to separate their services, DVD-by-mail and streaming, and raise their prices significantly for both. Customers viewed the execution of the change as abrupt and confusing. In the brief time since the initial announcement, many of Netflix’s subscribers have canceled their accounts altogether. In fact, the number was significantly more than Reed Hastings, the CEO of Netflix, was expecting.  In effort to apologize for the way Netflix handled the reorganization announcement, Hastings emailed all subscribers and posted a letter on the Netflix blog. He acknowledged that he “… messed up. [And owes] everyone an explanation,” but then went on to announce yet another change!  Netflix is separating the services even more into Qwikster, for DVD-by-mail, while the streaming services will remain as Netflix. This surprise did not have the designed effect and in fact elicited even more backlash. We will have to wait and see how Netflix deals with this new PR debacle and they may be realizing that sometimes an apology isn’t enough.

When AT&T changed their service plan in late June, it was not happy news to some existing and potential customers. They replaced their unlimited data plan with a tiered pricing plan. However they did allow subscribers who already had unlimited data plans remain grandfathered into the plan. This placated the customers who were reaping the benefits of the service being nixing. AT&T handled the situation with skill and there wasn’t a significant impact to their customer base consequently.

When companies change their services plans, regardless of the reasons for the decision, they inherently tread dangerous waters. Before alerting their customers and the world, they should develop a strategy that will minimize the backlash. If there is a drastic price increase or another product change equally undesirable from a customer’s viewpoint, here are a few strategies companies could consider to soften the effect:

  • Notice, and Lots of It:  Give the public plenty of notice and utilize a forum where customers, particularly those directly affected, can express questions and concerns.
  • Grandfathered Services:  Honor services and prices current clients have prior to the change.
  • Details:  Explain the change in detail! The more transparent you are with your announcement, the more your clients will trust your decision.
  • Discounts: Offer a free month of service or some other type of coupon if clients take advantage of multiple services

If you have any more ideas of ways companies could make the news of service plan changes easier, we’d love to hear from you!

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