In its simplistic sense, a brand is a name or a symbol that represents a product, service or an organization. It helps in uniquely identifying a product from its competitors offering similar products. For example, ‘Tide’ amongst laundry detergents, Apple iPad or Samsung Galaxy amongst various computer tablets.
Although intangible, it is the most important barometer for measuring consumer’s response to an organization driven change. A strong brand enables a company to charge premium for same/similar product (example, Chrysler Town & Country versus Dodge Caravan) or extend the brand to sell other product (example, Toyota Prius).
This assignment references Netflix’s decision to create and roll back Qwikster to explain the impact of corporate decisions on its brand.
Los Gatos, California based Netflix, Inc. (NASDAQ: NFLX) is a provider of on-demand internet streaming media and movie rentals. Founded in 1997, it started offering flat monthly fee based unlimited movie rentals without due dates, late fees, shipping or handling fees in early 2000. While successfully competing with Blockbuster, Inc., Netflix started to offer unlimited online streaming of movies and TV shows in October 2008.
In the last two decades, Netflix has consistently been able to steal away customers from traditional cable TV providers and its biggest competitor, Blockbuster. With proliferation of high speed Internet, Netflix’s online business has grown steadily.
Netflix has been so successful in competing with Blockbuster that it has single handedly lead them to bankruptcy. Netflix’s profitability was partially because of amazing deals it negotiated with content providers during its initial growth period.
Over the years, its customer base has grown steadily which is reflective in its stock price.
Events that lead to brand suffer
While riding high on its growth, Netflix made an announcement to split its service and increase the price . In July, 2011 Netflix announced its intentions to
Create DVD only service for Movies and Games under Qwikster brand
Offer online only movie streaming service under Netflix brand
Raise the prices for both DVD only and online movie streaming service
These changes were reflective of Netflix’s vision of offering internet only based services. With cost of shipping DVD constantly rising, Netflix wanted to isolate the cost of creating, managing and shipping DVD from online streaming business which is more cost efficient. Separating books of account for Qwikster and Netflix would have also helped Netflix in demonstrating higher profitability for the company and eventually selling off its DVD business .
However, the stock market and Netflix customers revolted against this change . So much so that it started to lose its customers. In its quarterly guidance, it revealed that it predicted it would end up with 25 million subscribers at the end of Q3. It advised investors that the prediction has been slashed by 1 million, however most of that shortfall is predicted to come from fewer DVD-only customers than expected, which is expected to come up 800,000 short.
Response to brand impact
Netflix’s response to customer anger was quick and appreciated by everyone. Netflix
Sincerely apologized for the mistake
Fired their chief marketing officer
Shutdown Qwikster and merged back DVD and streaming business under Netflix brand
Although it did not roll back the price hike, it did enough changes to win back its customer’s heart.
Definition of effective response
Instead of looking back and focusing on what they shouldn’t have done, a mark of leadership is when the company focuses on taking a positive view of the situation and focus on salvaging the situation.
In my opinion, an effective response is one that bears the following characteristics:
Quick, if not immediate response
Explain reasoning or thought process behind one’s