Out of the rubble

Netflix appears to have bounced back from last year's blunders, with membership and stock value rising again. You'll recall that Netflix's problems constituted what I regard as a true PR crisis, in which an organization response to a problem -- particularly its communications strategy -- makes things worse.

What conclusions can we draw from Netflix's bumbling and its subsequent revival? I think there are three important lessons:

1. When dealing with a crisis or unpopular decisions, communication is important -- but only honest, open, and transparent communication is effective. This is the lesson that people and organizations must learn and re-learn again and again. Netflix didn't dump chemicals into the ocean, or poison someone's drinking water, or give children cancer. It raised prices and separated its streaming and DVD-by-mail services. It angered customers, but few businesses can survive for long without making an unpopular decision, whether it is raising prices, cutting service, or even eliminating jobs. When an organization takes these kinds of steps, it is the duty of leadership to explain its actions as candidly as possible, without spin, which is where Netflix went wrong.

2. Understand your brand and what people expect of it. Netflix made a bad situation worse when it went on to announce it was rebranding its DVD service "Qwikster" and requiring people to subscribe to both services separately. Netflix built its brand on convenience. It spared people the hassle of having to drive to their local video store, hope it had the movie they wanted, and then wait in line to be served by some grumpy high school kid. Netflix didn't develop a cool new technology -- its service relied on the U.S. mail, for Pete's sake. So the worst thing it could have done was to make its new service as inconvenient as possible, which is what it did.

3. The quality of your product and service trumps everything -- most of the time. Netflix has quietly recovered no doubt people still want what the company sells: a decent selection of movies and TV shows that can be viewed whenever you want, virtually anywhere you want. As long as Netflix can provide that, and do it well, it should be fine, so long as its CEO keeps his big mouth shut.

You'll notice that this lesson carries a qualifier. Companies that have earned their customers trust can survive a crisis, but it's not guaranteed. Remember lesson number 1. How you respond to that crisis is important, and it gets more important the more severe the crisis turns out to be. Remember Chi-Chi's? The restuarant chain was already struggling when one of its Pittsburgh-area locations was hit by a hepatitis A outbreak, but the restuarant's poor response to the crisis was the nail in the coffin. Other restaurants and stores -- Jack in the Box, Sheetz -- survived similar crises, and even prospered in their wake, because they followed lesson number 1.

This being a blog about PR, by a PR guy, you won't be surprised to find that I think that's probably the most important lesson of all.