Did you ditch Netflix after it announced price increases late summer 2011 or when it announced Quikster? Or did you leave GoDaddy after it supported SOPA or had massive downtime in September 2012?
I did.
In fact, a lot of people did.
But why? Both services had a large user base. So why did people jump ship when there was a bump in the road instead of giving them a chance to recover?
Netflix’ real mistake
Netflix’ past success was based largely on two factors: early mover advantage and the recommendation/content discovery engine.
However, the content selection itself was never that great. Which frankly, I understand. How could they feasibly offer high quality content from premier studios for only $8 a month. But this wasn’t the real problem.
Netflix never moved customers from Satisfied to Completely Satisfied. Although seemingly subtle, the difference is huge.
Thomas O. Jones and W. Earl Sasser, Jr. wrote in the Harvard Business Review in 1995 about a study they performed with Xerox on how customer loyalty affected sales.
One discovery by Xerox shattered conventional wisdom: It’s totally satisfied customers were six times more likely to repurchase Xerox products over the next 18 months than its satisfied customers.
Did you catch that? The customers that answered 5 on a 5-point scale were six times more likely to repurchase than those that answered with a 4.
Being good or pretty good is not good enough! Customers who aren’t completely satisfied can be lured away and easier than you think.
Netflix’ mistake? It did not provide a service that customers were completely satisfied with (arguably for a variety of reasons). So when it announced a price hike of only dollars, customers fled to alternatives.
Had customers been completely satisfied, then the attrition rate would have been much lower.
What GoDaddy doesn’t understand
Domains are a commodity business:
- Price is extremely low and nearly standard across registries
- Customers have many alternatives
- Transferring to a competitor is very fast and easy
Maintaining customer loyalty in such a market makes moving customers from Satisfied to Completely Satisfied even more important. So stunts such as supporting SOPA, which was particularly enraging to the web community (i.e. GoDaddy’s target market), and experiencing service disruptions drive customers to create movements such as Leave GoDaddy Day.
(Killing elephants doesn’t help your image either)
GoDaddy is still a huge player in the market, but that does not mean it isn’t susceptible to falling out of favor (again, commodity market with low switching costs). In fact, out of 7,597 votes on Amplicate.com, 81% of respondents said they “hate” GoDaddy.
Build completely satisfied customers
Traditionally, managers argue that moving a customer from a 4 to a 5 is just too costly. That the benefits are outweighed by the cost.
And maybe that’s true in a few exceptional cases.
However, completely satisfied customers bring superior long-term financial performance. Consider the quintessential example of most things branding – Apple – who can charge a high premium because users are not just users but evangelists. When Apple does make a gaffe, users quickly forgive (e.g. everything that the iPhone surprisingly doesn’t have such as a functioning map application).
Stop and recognize the value of completely satisfied customers.
I recommend implementing a Voice of Customer program, which is very simple, to (1) determine just how loyal your customers are and (2) identify the customers that you can move from satisfied to completely satisfied.
My name is Adam Williams and these are my musings and observations about brand and product marketing. I hope you'll join the conversation.
Qualifiers, 1) I ditched Netflix on the announcement of their rate hike. 2) I hate GoDaddy. (I could write whole blog posts on each of these.)
Once upon a time I sat in an business class where they discussed the value of a customer and how to quantify this. It was an interesting discussion. But Adam, you are bringing this to a whole ne level for me, and I think most businesses should pay attention to this.
It seems obvious now, but there is a different value to a customer, an unsatisfied customer, a satisfied customer, and a completely satisfied customer.
Here are my personal examples.
Customer: For me this is like a where I buy my gas. I simply pick the cheapest place on my normal commute and buy my gas there. If the cheapest place changes, I switch. So my value is only on the transaction.
Unsatisfied Customer: There is a KFC on State St in AF that has consistently treated me poorly. I have vowed on several occasions never to return. And in todays world, I have blogged about how rotten their service is.
Satisfied Customer: My ISP in AF is awesome. Fast with really good uptime and reasonable prices. There are a few things I would change if I could, but it is the best I have seen. But if there was one that was better, ans solved my double NAT issues, I would switch for the same money. (Maybe even a bit more)
Completely Satisfied: The Water Garden Cinema in PG is a discount theater, that only play G, PG and PG-13 movies. Their prices used to be $3 per ticket. They do a great job of trying to please their customers. They talk to them on FB and respond to comments on their website. They are really trying to serve their community and listen to them. So when they raised their rates to $3.50 per ticket, I kept going. And I keep recommending them.
So here is my question. Is there a good alternative to Netflix? I have seen a few that tried but so far I am not completely satisfied with them either.
Hey Roy, thanks for the comment! And I’m glad that I could broaden your horizon a bit. I love the examples that you provided. I think they hit the nail on the head.
In terms of a good alternative to Netflix, I think it depends on your consumption behaviors and desires. For me, Hulu Plus provides what I need (I’m more interested in TV content than movies). Though, the recent website redesign does have me frustrated