Companies Pay a High Price After Losing Customer Trust

The old adage proclaims that the customer is always right. For companies who lose sight of that, the financial consequences can be disastrous.

Netflix has been the leading providing of on-demand Internet streaming media and DVDs by mail in North America for more than a decade while it has recently become established in Europe and the Caribbean, too.

But when the US firm suddenly raised its prices and split its DVD business from the online video streaming business in 2011, it so enraged its customer base that it lost almost one million subscribers in four short traumatic months.

The company is still feeling the after-effects of that financial shock two years on with its financial chief admitting it will take up to three years to rebuild trust with its customers. Netflix has admitted that any attempts to change its pricing again could have a catastrophic effect on business.

To recapture those customers who cancelled subscriptions, Netflix is investing more in original content that viewers won’t be able to see elsewhere and going for exclusive rights to online streaming and DVDs. Among its original content is the long-running US comedy show Arrested Development and the miniseries House of Cards.

An increase in unique content may not, however, be enough to persuade previously-loyal viewers to fork out once again for Netflix. Trust, once broken, can be an extremely difficult thing to regain and with more suppliers now providing online content and streaming, Netflix may continue to rue its disastrous decision to hike prices for a long time to come.

What this situation does indicate is that the consumer still maintains some power even when faced with the might of major corporations. A threat to take business elsewhere that is followed through by millions will always send shivers through the boardrooms of Wall Street.

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