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Survey: ‘Netflix Totally Misread its Customer Base’

30 Dec, 2011 By: Erik Gruenwedel

Netflix’s widely reported public relations gaffes last September have not been forgotten while Amazon can apparently do no wrong, according to an annual winter holiday consumer survey of the top 40 e-commerce websites.

The Los Gatos, Calif.-based rental service endured a mass exodus of subscribers and widespread criticism in September after raising the monthly rate of its most-popular disc/streaming rental program, and then compounded the problem with an aborted spin-off of its by-mail disc service.

As a result, Netflix saw the rug pulled from under its perennial No. 1 ranking, tumbling 8% to 79 on a scale of 100, according to Ann Arbor, Mich.-based research firm ForeSee.com, which surveyed 8,500 online respondents from Nov. 30 through Dec. 12.

A score of 80 and above is considered excellent in terms of retaining and luring consumers, while a score below 80 risks losing consumers and market share. Survey respondents are queried on four key elements: perceptions of content, merchandise, site functionality and prices.

Netflix took a hit on all four: its content score was down 7%, its functionality score was down 3%, its merchandise score was down 6%, and its price score was down 12%. The report indicated that the 12% drop due to pricing is “alarming,” since most people visiting Netflix are subscribers and thereby committed to the prices associated with membership.

Netflix’s drop in satisfaction also registers a 9% drop in future brand commitment, a 10% drop in customers’ likelihood to use Netflix the same time they purchase a similar product, an 11% drop in customers’ likelihood to recommend the company, and a 5% drop in customers’ likelihood to return to the website again, according to ForeSee.

“Netflix seems to have forgotten how they created a much-loved brand and why people loved their service so much,” read the ForeSee report. “In fact, Netflix totally misread its customer base, damaging its brand among both consumers and investors at a time when providers of streaming and rented-video content proliferate the market.”

Meanwhile, Blockbuster.com resurfaced with an aggressive marketing campaign and is hoping to take advantage of Netflix’s mistakes. Blockbuster is down 1 point this year (from 76 to 75), which means only four points separate it from Netflix. Last year, they were separated by 10 points.

“Still Blockbuster won’t get very far unless they step up the customer experience they are providing as much as they step up their marketing,” the report stated.

Amazon, which has trailed or tied Netflix for the last six years, moved up 2 points to 88 — an all-time e-commerce record, topping last year’s all-time top score of 87 held by Netflix in the spring.

“Since Amazon and Netflix are now in direct competition for market share when it comes to streaming video and rentals, this report could spell troubled months ahead for Netflix,” said ForeSee.

Fourteen other websites registered scores of 80 or above, including QVC with 83, Avon (83), Apple (83), VistaPrint (83), JC Penny (83), Newegg (82), L.L. Bean (81), Victoria’s Secret (81), Barnes and Noble (81), eBay (80), Williams-Sonoma (80), Hewlett Packard (80), Dell (80) , and SportsmansGuide.com (80).

Among the laggards, Gap and Overstock.com tallied scores of 73 and 72, respectively. Notable achievers since ForeSee began its survey/ranking in 2004 include Target.com, up 6 points to 76; BestBuy.com, up 7 points to 79, and Costco.com, up 10 points to 79.

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