Jim S Miller

Thoughts on the Client Experience and Banking

What Netflix Can Teach Us About an Apology

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When I checked my emails yesterday, I found a message from Reed Hastings, the CEO of Netflix.  At first I assumed it was a personal email, thanking me for my post on The Science of Apologies and letting me know that he found it informative and helpful as he has had to deal with the fallout from their new pricing plan.  My post said that after a clearly intentional act the probability of punishment and the level of punishment are higher after an apology than after silence.  Since Netflix price increase was clearly intentional, I assumed they were taking the silence approach.  That all changed yesterday when Mr. Hastings sent out his apology.  But what did he really apologize for?  He said in the email, “It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming and the price changes. That was certainly not our intent, and I offer my sincere apology. Let me explain what we are doing.”  Last week Netflix told investors that they expect to have one million less customers than they expected due to the reaction to their price increase.  I don’t think that is because Netflix lacked “respect and humility”, but rather because the signficantly increased their prices without any kind of increase in their service.  Mr. Hastings did not apologize for what they did, but rather how they did it, which is a secondary issue.

In the research paper titled On Acceptance of Apologies the authors said “No other message yields the same effect. We find that admissions of regret or blameworthiness or messages including other content do not have a significant effect on punishment. That means it is not just any message that mitigates punishment after an offense, but it has to be an apology.”  I think Mr. Hastings” email failed to live up to this.  Rather than offer a sincere apology, he expressed regret (more for the way customers reacted than for what the company did) and did not apologies for the true harm that was done (the price increase). 

On top of a poor attempt at an apology, Mr. Hastings explained how they are going to make their service (now services) more difficult to use.  They are splitting the service into two companies, one that offers on-line streaming and the other that delivers DVDs by mail.  Customers will now have to use two websites and will get billed twice.  Currently if you want to watch a movie you log into a single website and see if the movie is available instantly or only on DVD.  In the future that will require going to two websites.  Most companies are trying to better integrate their services and the channels in which they deliver them and improve the client experience, but Netflix is going in the opposite direction (and it costs more).  Imagine if Apple announced that they were going to split up the company and music would no longer play on iPhones, but only on iPods.  Apple now has the highest market capitalization of any company and it is because they have integrated their products and focused on the user experience.  Netflix has chosen to move in the opposite direction.

Netflix missed an opportunity to make this about their customers and instead made it about themselves.  No where in the message do they say how this helps the customer (probably because it does not), rather it is about how this is good for their business.  Companies that only focus on themselves, at the expense of their customers, will soon find their customers looking elsewhere.  This is already happening at Netflix and I expect their recently “apology” will only make it worse.

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Written by Jim S Miller

September 20, 2011 at 9:48 am

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