Brand decision mistakes happen.
We saw it decades ago with New Coke. More recently with the Gap. And most recently, Netflix reversed a highly unpopular brand decision after realizing their once successful branding strategies had been tone-deaf to the customers who had made their brand a success.
How much do these reversals cost companies? The protests and general ridicule that erupted upon Netflix’s announcement that they were separating their DVD and streaming services were immediately everywhere. The new name for the DVD service, Qwikster, took the brunt of the punishment, however this was backed by a strong sense of customer betrayal. Customer defections, according to yesterday’s earning report, surpassed 800,000, due largely to unpopular price increases, but accelerated by this announcement.
The source of these feelings and actions came down to two justifiable points: 1) Netflix seemed to be putting its business priorities ahead of the needs of its customers, and 2) Netflix was trying to get out of the DVD rental business as fast as it could. Reid Hastings’ letter to customers said as much when he proclaimed:
“We realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.”
This is what we would call “sacrificial lamb” branding. By splitting the DVD business off, giving it a lowbrow name, and offering customers less for their money than they had received before, Netflix was signaling how little it now cares for the business. Having a different website with a different name would, hopefully, allow Netflix to disavow DVD rentals without tarnishing their own name.
Putting the business before the brand obviously did not work for Netflix, and it remains to be seen whether their brand reversal can repair the customer damage. What is clear, is instead of looking at pigeonholed brands like Borders and AOL when making their future plans, Netflix should have considered those brands that have successfully led customers along major brand transitions, notably Amazon and Apple.
Under astute leadership and keen customer insight, both Apple and Amazon have seamlessly transitioned multiple times from physical product to digital services, taking excited and faithful customers along for the ride each time. Successful branding strategies like Apple redefined music, media and telecommunications with each advancing initiative, announcing each revolution in a trademark keynote address. Amazon has redefined how it sells books, music, media, and everything else under the sun without major brand reversals. In the end, it is these brands, with the loyalty that they engender that will probably unseat Netflix.
The lesson learned here is, successful branding strategies never put the business before the brand. Customer engagement, understanding and loyalty to your business should be considered alongside decisions to cut costs, or streamline or evolve businesses. Not making these considerations can result in embarrassing and costly brand reversals.
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