Your customers are re-evaluating their spending. Will you make the cut?
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Like so many other services, Netflix is raising prices. It’s not the first time they’ve done this. But customers have suddenly balked — and bailed. The service is experiencing a record number of subscriber cancellations.
What’s different this time? I believe there are two primary factors: (1) inflation is causing people to reevaluate their spending habits, and (2) there is little meaningful difference between Netflix and other streaming services.
Customer attrition can create a domino effect of negative financial consequences for a brand, its shareholders, and people at all levels of an organization. The Netflix subscriber slimdown is one of several recent examples making business and marketing leaders nervous.
Can a customer exodus be prevented? Yes, if you’re willing to accept feedback and make changes. Try this helpful exercise. Put yourself in your customer’s place. Would you renew? With rising prices, your customer is asking these questions:
Do I really need this? In my house, Blue Apron is a perfect example of a “don’t need that anymore” casualty. We signed up with a promo code, enjoyed the novelty and convenience of meal kit deliveries for a few months, but ultimately decided we could live without them. Plus, the single-use packaging was wasteful.
If your customer signed up for your service on a whim, you might be vulnerable. Time to adjust your pitch. To win us back, Blue Apron could highlight how we’ve stopped cooking for ourselves as we’ve gotten busier again. If I’m feeling exhausted, unhealthy, and guilty about dining out more, suddenly Blue Apron becomes a need instead of a nicety. Not that I’m endorsing #PizzaShaming, of course.
What value am I getting? Have you ever felt bitter about paying an invoice or seeing a certain recurring charge on your statement? You may not have been able to put your finger on why, but there’s a good chance your value assessment slipped into deficit territory.
I started to feel this way about a boutique gym I joined. It was fun initially, with a nice little community, clean facilities, and great instructors. Then — every three months or so — there was a price increase. I took the first few in stride. I started working out more to get my money’s worth. This was great, until they added penalty fees and parking became impossible. And ended up with a repetitive hip injury from doing the same routines over and over. The value equation had flipped.
As your customers audit their expenses, big line items and painful increases will likely be scrutinized. Time to give your loyal customers a break or an extra benefit. To remind me of the value of their workouts (in the right doses), the gym could offer a streaming version of their classes at a fraction of the in-studio price and a discount on at-home equipment.
Can I get a similar service for less? Goodbye Netflix, hello Hulu. With prices rising in many categories, customers are seeking savings where they can — especially if the difference between services is negligible and the process of switching is easy.
If you and your competitor(s) have become interchangeable, you could be the one getting cut. Time to create some distance between you and your closest rivals. Remind customers what they can’t get anywhere else. Netflix did this with a strategically timed release of their latest season of Stranger Things. It’s a start.
Am I missing out on something new? Hard seltzers are a great example of a new entrant shaking up an established category. Customers appreciate the lower calorie count and different flavor profiles, with convenient and often clever packaging. Here’s looking at you, Mom Water.
If a newcomer is disrupting your category, your customer may not be picking your product as often. Time to stay true to what you do best. Sometimes it’s OK to double down on your expertise and your position. For example, if you’re a craft brewer and flavor is king, keep leaning into your high-ABV hopped-up varieties. You could consider a packaging update, but your customers will appreciate your consistent product. In the words of Ron Swanson, “Never half-ass two things, whole-ass one thing.”
Is there a better way? Sometimes customers no longer need (or want) the service you provide in the specific way you’re providing it. This has happened to taxicab companies, cable providers, and Tupperware. It’s coming for gas stations. It may be happening to you.
If there is a legitimately superior option to your services — one that threatens your entire category — you may just be seeing the first exits before an exodus. Time to evolve your offering. This is the hardest advice to hear, but it is possible to pivot from a dying category like DVDs. Netflix did it.
Jenn Schimmelpfennig is the founder and president of Pivot Marketing, a branding firm focused on strategic change and growth.