“THE PRICE IS RIGHT”- WHAT SMALL BUSINESSES CAN LEARN FROM NETFLIX’S PRICING DEBACLE
by Alice Gallop
Product pricing is a tricky business, especially for any small-business owner and marketer. There are oodles of uncertainties — if I hadn’t priced it as high, would it have sold more? Would it have sold any less if I’d priced it higher? Should I charge more or less than my biggest competitor and why? The questions are endless, the answers are limited.
There are, however, a few top tips that small-business owners can take from Netflix’s pricing debacle:
1. Never stop doing market research
Bluntly speaking, Netflix’s price increase seems to have hit members like a ton of bricks. Did they even ask customers what they might be willing to pay for their services? A better price structure could perhaps have been devised with greater customer input. The most important thing to remember about market research is that it should never stop. Rule number one Netflix, rule number one.
2. Offer discounts to keep your customers happy
Your customer should always win. You will never get your business off the ground if the customer doesn’t feel like they’re winning. If Netflix had offered their longstanding customers a compensatory discount, they may have felt slightly less ticked off by the price change. The prices should never leave the customer doubting whether what they paid was even worth it. Don’t forget — today’s customers use social media like a megaphone for both positive and negative publicity.
3. Know your competition — you’re not invincible
Once the world’s largest video streaming service, Netflix now has fast-growing services, such as HBO and Amazon Prime, hot on its tail. Their long-beleaguered competitor, Amazon, has recently launched a new monthly subscription for its video-streaming service, which has seen its customer base surge. Whilst HBO’s exclusive streaming rights to Game of Thrones has proved to be of enormous success for the company. In this instance, Netflix may just have forgotten to look left and right before crossing the road.
4. When and how you communicate matters
In a recent JPMorgan survey, it emerged that 80% of Netflix’s customers didn’t even know that the intended change in price was looming. It is essential to keep your customers in the loop and communicate the value that a price increase will bring. Even if it is just a gentle reminder — in Netflix’s case that a long-awaited new series of Gilmore Girls is coming exclusively to their subscribers in November (where you lead, I will follow)- customers want to know what they’re getting for their extra hard-earned cash.
Of course, sometimes business growth isn’t without growing pains, but we can’t help but think that Netflix may need to go back to the basics when formulating their pricing strategy. There is often a price to pay for pricing.