Posted on : 11-10-2011 | By : Frank Eliason | In : In the News, Leadership, Uncategorized
Tags: Harish Kotadia, Netflix, Paul Greenberg, Quickster
Over the years Social CRM has continued to be a hot topic of online conversation and debate, yet I am not sure we still have a clear understanding of SCRM versus a Customer experience culture! Two different aspects that both play into the successful organization in todays connected world. What started my thinking for this post was a Facebook post I noticed today indicating that Netflix was in a ‘CRM crisis.’ The Facebook post linked to this blog post by Harish Kotadia, Ph.D titled ‘Netflix’s Self Made CRM Crisis and How Social CRM Can Help.’ I found this interesting, given my views regarding social CRM. Now let me be clear the debate regarding this topic will not end here, just like it did not end when Paul Greenberg put his stake in the ground. In that post Paul offered the following short definition for SCRM:
“CRM is a philosophy & a business strategy, supported by a technology platform, business rules, workflow, processes & social characteristics, designed to engage the customer in a collaborative conversation in order to provide mutually beneficial value in a trusted & transparent business environment. It’s the company’s response to the customer’s ownership of the conversation.”
I love his definition, but I do wonder if it is too broad. I firmly believe that the social Customer owns your brand and a change in the way we conduct business is an imperative. We will take a close look at my view of the Netflix issues in recent months. Before going into that, lets take a look at CRM. Wikipedia defines CRM as:
Customer relationship management (CRM) is a widely implemented strategy for managing a company’s interactions with customers, clients and sales prospects. It involves using technology to organize, automate, and synchronize business processes—principally sales activities, but also those for marketing, customer service, and technical support. The overall goals are to find, attract, and win new clients, nurture and retain those the company already has, entice former clients back into the fold, and reduce the costs of marketing and client service. Customer relationship management describes a company-wide business strategy including customer-interface departments as well as other departments. Measuring and valuing customer relationships is critical to implementing this strategy.
CRM, although part of a broader culture, starts with technology to better understand Customers, interactions, and build relationships. CRM tools help us know our Customers and the interactions they have with us. When you add the social component, you do gain a few other aspects. First and foremost, you now gain the ability to know more about the Customer, or at least what they want known by the general public. You can learn what is important to them, whether about your product or not. Great way to further interactions with Customer and prospects!
Now let’s get into the Netflix conversation! First let me say I personally love Netflix streaming and have been a subscriber for a while. I tried Netflix by DVD years ago, but I never fully got into it. I also have been fascinated by the Netflix CEO, Reed Hastings, for his ability to be a disrupter to varies business models over the years. Netflix first stirred the pot back in July when it increased subscriber fees. Basically DVD rentals used to be $2 a month more for streaming subscribers. This of course caused a firestorm, because this was a rate increase from $9.99 a month to $15.98 a month, a 60% increase for many subscribers. As a percentage, the increase was substantial, and in many views, unwarranted. Based on financial discussions during quarterly calls, it is safe to assume that Netflix knew that they would see a backlash and some subscriber defections. Of course later discussions make me think this was much greater than they anticipated. As pointed out in this CNN article on the topic, Netflix lost one million or more in subscribers. Then on September 18, Reed Hastings and the Netflix team offered an explanation, and introduced ‘Qwikster.’ In the post I think there is a strong glimpse into Reed Hastings with this quote:
“Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly”
For those of us who paid close attention as the scenario played out, you know that the blog post seemed rushed. Even the Qwikster domain was still pointing to another web property. At the same time, the quote above still holds true that the decision to split could have been the thought all along. The big question then becomes why not discuss it when the fee changes were made? Now comes the recent news that they will not be switching to the Qwikster model due to feedback from Consumers. Basically the feedback was very negative because increase cost and then the perceived difficulty of consumers if they have to manage their Netflix accounts from multiple websites. Now the overall situation reflects flip flopping, as pointed out by this CNN article. You can also make the case that there appears to be overly managing to the perception and not the business. In my view Netflix is a great service, with strong leadership, but there are causes to this trouble, long before the price increase. First the model was obviously priced to gain market share, which Netflix did in a tremendous fashion. During the time they helped change the model for renting movies, including seeing major rental chains going out of business or severely downsizing. There brand was also mentioned regularly when anyone discussed cord cutting from cable. They were changing many business models. The challenge I have always seen was price. It used to cost $3-$5 a night to rent movies (okay $2 when rentals started), and they shifted that to about $8 for as many as you could get. As a Consumer, I love that, but as a business person I have to question sustainability. Even in there streaming business, they offered a lot of content, much of which came from Starz, yet it cost less than Starz on a monthly basis. I could not see Starz keeping that up, which, as it looks like now, they will not be as of early next year. This to me can be partially a breakdown of SCRM, specifically over thinking business decisions and making quick decisions based on negative feedback. Ultimately if you had a strong business plan, you would not be jumping around like this. This is more reflective of leadership, as opposed to SCRM. There are going to be times tough decisions by business have to be made. If the fees were a key component, then they should have discussed the business realities on day 1. If the plan was to split the business all along, then they should have done that from day 1. I would guess the real plan was to increase the price, allow the falloff of Customers then slowly shift to an all streaming model. I am not sure we will ever know the real reasons for decisions, but I want to see the disruptive leadership in Reed Hastings step out further. What I have seen is handling that is reminiscent of so many other, more mature firms instead of what I have come to expect.
Key lessens is listen, as it would appear Netflix is doing, but SCRM will not always help every situation. In this case this was a business that was well trusted. The trust is eroding not due to SCRM but what appears to be missing focus, speculation by others (even myself within this post) and a vision not yet articulated. My advice to leaders is
- Know your business and the future you envision
- Focus on the needs of the Customer
- Do not be afraid to make tough decisions, but be honest to what they are
- Be cautious of wavering, because it does erode trust (sometime you must, and then just be open to why)