Grow My Company

Netflix: An exercise in social media backlash over business decision

A 2:21PM on July 12 I received an email from Netflix informing me that my $9.99/month subscription for 1 DVD out at a time + unlimited streaming is going up to $16.99. That's about a 60% price hike!

My stomach started to churn. I'm a long-time customer. I signed up before they even had local distribution channels. It used to take about 10 days from the date I mailed back a DVD to when I got a new one, but I stuck with Netflix because I believed it was an overall great value.

My opinion never wavered when they eventually dropped the price of my 3-DVD out at a time plan, when I realized that I wasn't watching enough movies and dropped down to the 1-DVD out at a time plan, and when they added a rather sad assortment of B and C level movies for streaming.

But this...a 60% price hike...made my blood boil. And I've only streamed a handful of titles in the last several years.

So I tweeted it, and followers retweeted it. And other Netflix subscribers tweeted it. And Facebook members posted complaints in their status updates. And the Netflix Facebook Page lit up like a Christmas tree with 41,000+ comments on the announcement from angry members, plus countless Page posts raging against Netflix's move. And the Netflix blog received 5000+ comments on its post about the fee hike. "Dear Netflix" is trending at #5 in the top 10 on Twitter. Several of my social media friends have shared a link to a blog post called, "Mad About Netflix Prices? Here Are Some Alternative Services."

This is all within the just last 26 hours.

So, what did Netflix do to quell the social media storm? Nothing. Not a peep from them in response to their angry customers. 

Netflix has been known for its exemplary customer service and brilliant business planning for many years, so they likely anticipated the backlash. But did they expect the volume and the venom? Only Netflix can answer that, but they're not talking. 

Perhaps they're attempting to wait out the storm and hope that everything just goes back to status quo. Maybe they're waiting to gage just how bad things get, as in how many people quit Netflix. Maybe they just don't care. They've made a business decision, and the heck with customer backlash.

In any event, it seems bad business to have not anticipated the storm thundering over Netflix right now. And the past has proven that brands are made and broken in social media. Time will tell if this is one of the all-time-great examples of social media failure or a brilliant move by a company running one of the largest-scale research projects of all time.

 

 - Christine Pilch

How to buy TV advertising, and what all those sales promo numbers really mean

If you want the skinny on buying TV advertising, here's a crash course from someone who sold and bought a lot of TV advertising over my career. I sold advertising for the local ABC affiliate for several years back in the 90s, and then I spent many hundreds of thousands of dollars annually while acting in my capacity as marketing director for an employer, as well as overseeing media purchases on behalf of many clients within my own business. I've seen all the tricks and tactics to make you spend your money with a particular station.

Stations seem to have finally realized that an average business owner doesn't understand technical numbers like ratings points. They understand plain English numbers in the thousands, so the marketing pieces I'm seeing lately reflects this. Ratings are more technical. Although they're not hard to grasp, the average business owner isn't expected to understand them. Agencies generally buy on ratings and subsequently use these projections/promises of delivery to make sure they receive what they paid for. If you're interested in the definition please check the glossary below. But for now, let's discuss common TV sales tactics.

Household numbers: One of the most common tricks to make poor ratings numbers look better is to use households numbers instead of popular buying demos, like adults 25-54. Think about your clients. It is unlikely that reaching a large number of households would be helpful to you. Household numbers include people of all ages, from newborn to elderly, people in all income brackets, people living in apartments, etc. If you've done your positioning work, you know exactly who buys your services. They are the only people you should be targeting with your advertising dollars. If a station is using household numbers in its promotional pieces, your clients are likely not watching its programming.

Packages: TV sales people love to sell packages that include a couple spots in key, effective areas and lots of spots at times where there is very little viewership. They try to fool you into thinking you're getting a great deal because of the frequency with which your ad runs. Again, think of your positioning. Are your key prospects watching TV at 3AM, 10:30AM, or 2:30PM? Are they watching during the daytime on the weekends? Probably not. Your target prospects are probably listening to news as they get ready for work in the morning and make dinner in the evening, however, so a $1,500 package that includes just 2 or 3 news spots and many spots in other areas may be a waste of your money.

Commissions: Sales people are paid on commission, so it's to their advantage to convince you to spend as much of your budget with them as possible. Many media sales people are honest and will try to find a good fit to advertise your service on their station. Some are not. The best insurance you have is your position statement. Don't buy an area that doesn't have a lot of viewers who are likely to buy your services. Ask for cost per thousand numbers of your chosen demos when looking at proposals, so you can evaluate bang for your buck among areas. Don't waste your money.

Glossary:

Ratings point: One ratings point is 1 percent of all TVs in a market whether on or off. 

Share: A share is a percentage of TVs on at the time.

Book: Nielsen puts out ratings books 4 times per year. Some markets are metered, which means that some homes have boxes sitting atop their TVs that record what station the TV is displaying through the day. Most markets are calculated by diary, however. This method relies on people writing down what they watch at any given time. Although this is the most accurate information available about programming popularity, as you can imagine, it is very flawed.

Projection: A projection is a mathematical equation of ratings from a particular book against viewing levels from another book. For example, TV viewership is traditionally up in the winter vs. the summer in New England, so if you're placing an annual buy, you may ask for projections that include numbers based on the latest ratings book adjusted for seasonal viewing levels.

Don't be fooled into buying advertising that won't work. Go back to basics and judge every advertising opportunity against your positioning. Spend your money wisely.

 - Christine Pilch

Photo credit: William Hook