Customers Outraged at New Netflix Pricing, Investors Giddy
July 14, 2011 12:30 PM
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The price hike and change in service plans are not sitting well with many Netflix customers, but Netflix already knew this would happen
Two days ago, Netflix announced that it would
change its pricing and plans
associated with its DVD rental and video streaming services. These changes include separating DVD rental from video streaming entirely, charging $7.99 for one or the other. For both, the cost is $15.98 (the current price for one DVD out at a time and unlimited video streaming is $9.99).
The price hike and change in service plans are not sitting well with many Netflix customers, but Netflix
already knew this would happen
. In fact, one day before announcing these plans, Netflix told customer service representatives to be prepared for angry callers.
Today, the company even increased the number of personnel in the department to handle the amount of phone calls they've received. "Hundreds" of Netflix employees have been answering phones, and this still caused some callers to have to wait to speak to an employee. The sales representatives have said that many of the calls have been "emotional."
"We tested, we researched, we analyzed," said Netflix spokesman Steve Swasey. "We knew what the reaction would be. We are not surprised. We knew that there would be some people upset by the service and with the price being adjusted."
According to Rich Greenfield, a Wall Street analyst with BTIG Research, Netflix employees have not been giving callers satisfactory responses through the day. Greenfield tested how Netflix's service department was handling the flood of calls by making over 35 calls over a two-hour time period, and said that Netflix employees simply tell customers (who threaten to cancel their subscription) to wait to cancel until September when the new plans/pricing takes place.
"There was simply no promo or 'save' technique to offer us a discount to
retain our business
," said Greenfield. "This would appear to illustrate that Netflix is simply not concerned with the prospect of losing customers."
In addition, Greenfield said he waited on hold for about 9 to 15 minutes while making these calls.
While customers are up-in-arms,
investors are salivating
at the Netflix price rise. According to Ingrid Chung, a Goldman Sachs analyst, the higher prices will make up for the cancellations by "driving customers toward more profitable Netflix plans."
"Gross margins should benefit as we believe that the majority of lower-priced (subscribers) were less profitable for Netflix," said Chung.
Chung also mentioned that "lower-priced subscribers" may be drawn to the streaming-only service as well, which could prove to be a successful shift.
Netflix shares increased three percent yesterday after the announcement of the new plans.
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RE: They guessed wrong
7/14/2011 8:02:34 PM
Wow...here's an idea:
Offer something to people that is irresistible, drive your competition (a.k.a Blockbuster, Hollywood Video, and every other video store) out of business, get your customer base used to the idea of easy, reliable and predictable (also known as budgetable) access to your product, and then...
RAISE THE @#$%^&! PRICES! \o/
Hey, why not...they do it with gasoline, food, clothing and EVERYTHING ELSE, why not Internet entertainment?
Greed at its very best, the CORE of inflation.
"I want more", says one guy..."why?" says the customer. "Because...I just want more, so I'm raising my prices. What are you going to do about it now that I've got you hooked?" "What CAN I do?" says the customer. So he pays more for the same thing, getting LESS value for his dollar.
Meanwhile, Greed continues ebbing and flowing, leading the poor customer by the nose until he gets so sick of it he QUITS USING THEM...
Ahhh...peace at last.
"So if you want to save the planet, feel free to drive your Hummer. Just avoid the drive thru line at McDonalds." -- Michael Asher
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