Opinion: David Sable's 'lessons from Netflix'

What’s the value of listening to your customers?  I mean, really listening.
 
Or let me ask the converse question — what’s the risk of not listening to them?
 
Just ask Netflix.
 
Netflix, for those of you outside of the U.S., is the innovative company that transformed home entertainment by offering DVD movie rentals through the mail.  They listened to people so closely and were so on the mark that they deftly killed the video rental store business.  Then they listened to their customers again, and upped their offering by streaming movies as part of everyone’s subscription.  
 
Convenience.  Instant gratification.  They got filling human desire.
 
They built a business on memberships — attracting people who wanted to belong, not just transact.
 
And then they took that dangerous step of looking at themselves instead of keeping their focus on their customer.
 
Their navel-gazing cost them 800,000 angry people who canceled their subscriptions.  Which caused their stock price to plummet 35%.  
 
How did they go so wrong?  They stopped listening to their customers.
 
Netflix changed their business model, deciding to spin-off the DVD portion of the business from the streaming portion.  Two plans.  Two rates.  Double the cost and work for their customers.  They abandoned the core ideas that had catapulted them to huge profitability — convenience and cost.
 
And then they blundered the communications, too.
 
The first email to subscribers in July announced that Netflix was splitting its services and charging two rates to “better reflect the costs of each.”
 
The second one in September apologized for the bad way it was announced but then spent 10 more paragraphs justifying the change, linking to an even longer explanation on their blog.
 
The third email in October was an about-face.  The new spin off would not be spun off but the rate hikes would stay.
 
800,000 cancellations and expectations for even more to come. Ouch.  A hard lesson to learn.  
 
The New York Times aptly observed that in Netflix’s “reliance on data and long-term strategy, the company underestimated the unquantifiable emotions of subscribers…”
 
They didn’t listen.  Worse, they didn’t ask.   We have to be careful to balance what the data tells us with what real people tell us, too. <http://www.weeklyramble.com/trends/the-pen-is-mightier-than-the-sword>
 
Similarly, there’s some push back from customers on all the algorithmic recommendations.  Go ahead and randomly look at a few books on a single topic on Amazon.  Chances are that a year from now, they’ll still try to sell you on the same thing, long after you’ve moved on.  Or as a columnist wrote in an article humorously titled, “My Cart, My Self,” “I’m not sure how well these computer programs know me.  Some of their choices seem simplistic or patronizing, while others strike me as random, even crazy.  And some are dead on, of course, which I find troubling.  The only worse thing than being misperceived by a machine is being expertly perceived by one.”
 
Data is precious information that tells us a great deal about human behavior and preference. But it doesn’t explain human character with all its wonderful, non-algorithmic rhythms. When we misuse data — by taking it out of context or making up the context, or by extrapolating or manipulating it to contrive a story we want to tell rather than by finding the truth — we become dangerously deaf.
 
Let me reiterate — I am a big believer in data.  We don’t use it enough.  We must learn to use it better.  But the killer strategy is to link the data with insight.
 
In finding a path for a brand we have to balance the composite picture of a customer that’s built from data points that come to us, with the flesh and blood realities that we get by going to them. That’s why exploring is becoming an integral part of our process.  That’s why we reach out to real people. That’s why we must always balance the quantitative with the qualitative.
 
That’s why we don’t confuse technology with innovation, or information with insight.
 
Our clients’ customers won’t be shy to tell us if we’ve got it wrong.
 
Just ask Netflix.
 
Fan the Flame