Today, Netflix apologized for the lapse in communication when they made their price increase and explained that they were launching a new service called Qwikster, which will handle the DVD side of the business. The new service will still have the same cost as a Netflix DVD plan but will just be on a different website, run by a separate team, and under a distinct brand. Did that sentence just confuse you? The blog post that Reed Hastings wrote won't make it any clearer.
It seems that an organization renowned for its resolute focus and unique culture is bending to criticism and adding some bureaucracy and confusion to their offering. Now, if you want to utilize both of Netflix's offerings, including the one that was the original foundation of their success, you have to go to separate sites and have different interactions. It's really a bizarre decision. However, with the company stock plummeting 30% in a single week, I guess it was kind of shakeup the company felt was necessary.
My personal opinion is that this is just an extension of the underlying tone in the original move that Netflix believes the future of DVDs is grim and not very profitable. That's why they made the original decision, to focus on their most profitable customers. Now, by screening off Qwikster, the Netflix brand is free to ignore what they see as the past and focus on the future. I think they set up Qwikster so DVDs could have a place to die rather than a place to flourish.
With that being said, it still seems a little rushed to launch a new brand just to further yourself from a legacy business you don't believe in. I do think it makes sense from Netflix to send an even stronger signal that they're a streaming not a DVD company, but I thought the 100% price hike had already accomplished that. To me, this isn't a sign of an ailing Netflix, but just a misstep and some pain in getting to where they ultimately want to be. I still think the company has a bright future and will continue to grow (Qwikster is another story though...).
By now, we’re all very familiar with the accepted reasons for the necessity of an auto bailout: expensive union contracts, executive opulence, and poor management. However, I think there is one more to add to the list: a total branding and marketing failure.
I mean, had the companies just sold more cars, they could have avoided the mess that they’re in. While GM and Ford were struggling and giving up market share, Toyota’s numbers continued to grow.
I think there are a few fundamental branding issues that contributed to the overall decline of our domestic automakers.
- Wrong message. For the past decade, the US automakers have been obsessed with pushing and selling bigger while foreigners have been selling smarter. Whether it was SUVs or Trucks, the overall theme of the big three’s campaigns have been the domineering nature of their vehicles rather than their practicality. For years, you’ve seen Toyota selling vehicles based on great mileage and excellent ratings, while Ford, GM, and Chrysler failed to ever zero in on these benefits.
- Stagnant brands. Has your perception of Ford changed over the past decade? I know mine hasn’t. To me, it represents a company that makes pretty cheap and unreliable smaller cars, but has some great SUVs and trucks. As the market has been shifting toward cars over trucks, Ford needed to change this perception, but it did nothing to do that. It could have been as drastic as a new logo (like Pepsi) or a simple, consistent new message in their ads. Overall, Ford’s lack of commitment to changing the connotations associated with their brand hurt their sales numbers.
- Number of Brands. How many brands are encompassed by GM? Four? Five? Six? Try eight. That’s right, one company trying to successfully sell eight unique brands. How can GM create a unified, smart message when they’re trying to market brands as different as Saturn and Hummer? In a viability plan submitted to the government, GM recently announced that they would halve their brand count to four. However, that is still one more than its top foreign competitors, Toyota and Honda. Ford also is shedding its excess foreign brands to try and focus on just three core brands. Ford and GM having to market so many unique brands causes each brand to suffer, as they have to fight for resources and attention from the parent company. It’s just simply too hard and inefficient to successfully market more than a half dozen distinct brands; Toyota and Honda understood this fact long ago, but the domestics just kept growing their repository of different logos.
While many things contributed to the failure of the auto industry, I think more attention has to be given to the above points and the total mismanagement of their brands and marketing. The domestic automakers typify the type of companies that deserve to die in a recession: bloated, stagnant, and blind. Unless they make some real changes in their branding and marketing, the bailout will only delay the inevitable. Are there other marketing and branding follies by these companies that have caught your eye?