Netflix recently announced that it reaches 25 million subscribers which raises the question, was all that social media angst about the Netflix price increase much ado about nothing?

Two things should probably be stated before speculating that it probably was:

1> Netflix screwed up. Let’s get that out of the way. There is no question that the communication and the roll-out of the communications was not well done. It generated the social media buzz that is exactly what companies would like to avoid. That said, there is no reason for them to panic – and  maybe – the research (or consumer behaviour) was on their side.

2> All the social media scraping that companies may have been doing to see how the online community was abuzz about the decision also has considerable value. It helps understand how brands are at risk because of the brand communications that they cannot control.

Austin Carr over at Fast Company reports on Crimson Hexagon data that shows that 62% of the twitter stream commentary was negative. A fairly telling, but not surprising piece of information.

Now, I also want to add that there is considerable discussion in the blogosphere about what Netflix did wrong and what they should have done differently. One great example is Nilofer Merchant, who find four faults.

I am not convinced that the Netflix mistakes really were that serious and think that the market research (MR) may have shown that Netflix had it right or at least not as wrong as it looked at the time.

Neither I nor the public has seen the MR in this case, which is really too bad. Assuming that for business reasons, the price had to be raised, we could ask ourselves: did the MR suggest that the price raise was a problem? Is this really just some poor communications or it just the inevitable, reaction to price changes?

No one wants price increases and research around price changes are always fraught with risk because people always want something for nothing.

So what could the market research have shown. Well, here are three completely plausible findings, supported only by my imagination.

  • usage patterns of the service (streaming versus dvd) that suggested few would be actually left paying the 60% higher cost. So, once any initial shock was over, subscribers would be okay.
  • an emerging concern with content (or lack of) that was holding back new subscribers or serving as a pain point for existing customers. Without a price increase, Netflix could not overcome this barrier.
  • an acknowledgement among a large group that the service was really, really inexpensive and probably unsustainable.

Since I made these up, it is hard to know what considerations drove the Netflix decision but this is the value of market research, if properly executed, to help drive business decisions. Social media analytics no doubt drove Netflix to express “regret” today and they should help other companies do a better job of explaining and responding to negative customer feedback.