Whar Can Netflix Teach Government Shared Services About Customer Service?
Organizations that excel at customer service listen and take note. They benchmark and apply the best practices and processes to their organization. They also learn from mistakes – both their own and others. To this end there is a lot government shared services can learn about customer service from Netflix.
Some background. Netflix is a streaming video and dvd by mail service. It was a favorite of investors, customers and Wall Street since start up in 2007. Its subscriber base went up quarter after quarter along with stock price and revenue. It pioneered the dvd by mail service that knocked Blockbuster out of the box and was one of the first companies to deliver movies via the internet. Investors loved it, customers, myself included, even more so. That is until July of this year. In July Netflix announced they were raising the cost of a combined dvd and streaming video subscription by 60%! The reason: customers were relying too heavily on the dvd by mail service (the least profitable method for delivering content) and not enough on streaming video (the most profitable method of delivering contemt). The price of a share of Netflix dropped 61% in 3 months as 800,00 customers left the company in the 4th quarter.
In September 2011 about the time the higher rate went into effect Netflix announced they were separating its streaming video service from its dvd by mail services with separate web sites and separate bills. Customers would search for content on one site and, failing to find it, log in and search for the same content on the other site. More customers left. It was no urprise that when Netflix released its 4th quarter earnings statement it was worse than the most pessimistic analyst projections. Netflix stock dropped another 26%. The company had lost 75% of its market value in just 3 months.
What can Netflix teach shared services about customer service?
Don’t blame the customer. Netflix said customers’ stubborn insistence on clinging to the outdated dvd format was the problem. In fact, I ordered dvds by mail when the content I wanted was not available for streaming. Having framed the issue incorrectly (customer preference vs the unavailability of streaming content} the solution was incorrect. Ask the wrong question and you get the wrong answer every time.
Don’t treat your customers like captives. In raising rates 60%, Netflix forgot that their customers had choices. A lot more now than in 2007. Treat your customers like they have a choice even if you don’t think they do. You could be wrong.
Service recovery is important. How you recover from a service failure can be as bad as the failure itself. To add insult to injury, Netflix followed up the announcement of a 60% rate hike with an announcement of their intent to separate its streaming video service from its dvd by mail service. Normally this would mean absolutely nothing to customers except Netflix added that they were creating a separate web site for customers to manage their dvd subscription and customers would be billed separately for dvds. At a time when all their energy should have been focused on recovery they announced their intent to inflict more damage.