Example 2: Communicate Effectively While Streaming Video
The CEO of Netflix, Reed Hastings, tried to contain the public backlash against his decision to split the company’s streaming and DVD services into two separate, disjointed companies, but it was not enough to stop customers from exploring competitive options like Amazon Instant Video, and Netflix lost significant market share. Facing tremendous criticism from subscribers, investors, shareholders, and media, Hastings announced the decision to kill the separate DVD service concept in a blogpost: “I messed up. I owe everyone an explanation.” Twenty-seven thousand angry comments and 5,000 frustrated tweets by beleaguered customers resulted in 800,000 customers leaving Netflix for other alternatives. Before this incident, Netflix shares traded at a price-earnings ratio of about eighty, based on favorable earnings forecasts. However, after this blunder, Netlfix shares plunged 60 percent in 2011 and the company is expected to post losses in 2012, as well.
Not surprisingly, Netflix competitors like Hulu, Amazon, Flixster, Ultraviolet, and Cinema Nowjumped at this mass disenchantment with Netflix, doing everything they could to make it easier for consumers to get their video content any time, anywhere. Netflix was once the darling of the masses because of its quick action and bold experimentation to outwit older players (e.g., Blockbuster) in the video rental market. However, Netflix’s bad business decisions and inability to respond quickly in a hugely competitive market have led punters to speculate on the company’s future.
Customers look for innovation and bold experiments that have customer insight and experience at their core, but any business decision that betrays the interest of the customer is surely going to invite severely negative reactions.
Example 3: Disrupt the Retail Status Quo
JC Penney’s (JCP) new pricing strategy, formulated by CEO Ron Johnson (a former Apple executive) is an interesting example of a bold decision to disrupt the status quo of retail sales at their stores. He recently unveiled a simple, three-point pricing policy—“Every Day,” “Month-long Value” (theme sales), and “Best Prices” (clearance)—as one of his initiatives to transform the retail organization into a potential twenty-first-century market leader. This is very different from the more than 600 confusing price points the company used before to influence customers’ impulsive, deal-driven decisions rather than focus on product and brand quality.