Do You Have the Guts It Takes to Fire 800,000 Customers?

Do you have the guts that Netflix has? Are you up to firing some of your low-margin, want-everything-for-free type customers?

My last month’s blog was about learning from Netflix as it raised prices and alienated a segment of its customer base. Last week, the results came in. The company didn’t shed the expected 600,000 customers, but 800,000. Well done Netflix!

That is about the same population as my home state, Rhode Island! That must be a new record for a customer mass exodus. I heard Bank of America is jealous since it ticked off not quite that many with its recent ATM charge idea.

Now back to Netflix. Too bad Wall Street didn’t like the Netflix strategy, tanking the stock by 36 percent. Funny thing is, the company’s profitability rose 65 percent during the recent quarter. Private business owners drool at that level of profit increase, but Wall Street looks at it differently. Private business owners look at things long term and run a business to succeed. Wall Street looks for short-term gain.

It is still a challenging situation to fire customers. Only time will tell if Netflix lost those customers forever. Will they continue to spread bad press about Netflix? Will the spiral continue to a point of hurting the company long term?

Netflix still has 24 million subscribers, so it’s not crying just yet. The company is betting the farm on streaming video, and lost mostly DVD-by-mail customers. Pretty gutsy move.

Maybe it is time for you to shed those 500-business-cards-a-year type customers and move onto greener pastures?

The ballgame is still not over, and we can still learn as this move plays out. Blood is in the water and Netflix’ competitors know it. Management botched a spin-off off the mail-in business and the way they communicated price hikes was awful. The stock is down from $300 a share in April 2010 to $76 this week.