Reference no: EM133339174

Assignment: Netflix is a provider of Internet streaming media and DVDs-by-mail. In July 2011, the company was plagued by significant subscriber losses in the wake of a price increase to its most popular subscription plan and a controversial plan to spin- off its DVD-by-mail business into a new service called Qwikster. Below is a brief description of the sequence of events:

In July 2011, Netflix announces 60% price increases for the bundled offering including both the streaming and DVD-by-mail services.

Consumers react negatively to this announcement, as the following quotes from the Netflix blog illustrate:

o "This is outrageous. You are definitely taking advantage of your loyal customers, who for years have helped you grow to the company you are now. I've recommended countless friends to join Netflix. NO MORE." (posted in July 2011)

o "To say the least, I am shocked and appalled at your recent behavior. It seems like yesterday we were the best of friends. You informed me with your poignant documentaries; I always laughed at your corny B horror flicks. For four years you've been the gracious receptacle of my hard earned money, but alas, your current actions have forced me to reevaluate our relationship. Your nominal price increase, while unexpected, does not deter my loyalty. However, your mouthpiece Jessie Becker's presentation of this upcharge--as an added choice for my own benefit--insults my intelligence and reveals the breadth of your arrogance" (posted in July 2011)

• In September 2011, Netflix apologizes for its lack of respect and humility in the price increase announcement and describes a new spin-off plan in which Internet streaming and DVD-by-mail services will be offered by two different company units: Netflix for Internet streaming and Quickster for DVDs-by- mail. In essence, those consumers who want to continue with both DVD-by- mail and Internet streaming services would have to go to the two different websites (Netflix and Quickster) to subscribe for these services. Payment would also be separated into two entries on people's credit card statements.

• Consumers react even more strongly to this announcement. By the morning after the statement, 30,000 users logged comments onto the Netflix corporate blog. Approximately 800,000 people cancel their subscription in the wake of the announcement. A heated debate emerged online, with consumers adamant to post their opinions in social media websites and on the Netflix blog:

o "I swore to my friends that it was okay. I understood that the economy was bad and we all need to make a profit, but shortly after raising your prices, you decide to away will all aspects of convenience. You made me look like a fool when I stood by you on the price hike and now you have made yourselves the fool" (posted in September 2011).

o "Blockbuster, my ex, now seems dirty, old, and desperately wearing slutty clothes and marinaded in perfume trying to get me to comeback. But Netflix, you changed our wedding vows WAAAAY after our marriage and dramatically altered your proposal so that now it feels like I can't see both "kids" at the same time. And you stunted the growth of one of the kids" (posted in September 2011).

• In October 2011, Netflix apologizes again and announces that its corporate spin-off plans are now cancelled.

Questions: The Netflix case provides an interesting opportunity to use your knowledge about consumer-brand relationships to inspire effective management of the brand:

We know that different relationship types are associated with different sets of rules of conduct, or relationship contracts. Therefore, some of Netflix's aforementioned actions may or may not be perceived as "contract breaches"depending on the type of relationship that the consumer has engaged with the brand. Choose 2 different relationship types for which you would expect different reactions to Netflix's announcements and actions, and why?

b) This exhibit contains a segmentation of Netflix customer base after the incident. After this incident happened, a survey of Netflix customers was done where they were asked this question - "Think about you and Netflix in terms of being in a relationship, as if Netflix was another person. Please describe the type of relationship you have and explain a bit about why you think that". Based on insights from the data collected in response to the above question, the following relationship map was created. Based on this Relationship Map for Netflix, please provide actionable brand management recommendations to Netflix. More specifically, should: (1) prioritize one relationship type for Netflix to focus on and provide a rationale for your choice; and (2) briefly describe a specific marketing action that would propose in order to address this segment on its terms.