NetFlix handling price increases correctly

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Mistakes happen all the time and even big companies like Netflix aren?t exempted. What is important is to learn from those mistakes, move on and make sure that they don?t happen again. Netflix seems to have taken this lesson to heart as they are making changes with their pricing plan moving forward.

The companies? streaming service goes for $7.99 and with the increase, it?ll be $8.99 for new customers but the existing Netflix subscribers will be able to retain their $7.99 subscription for the next two years.

Netflix learned things the hard way with its last pricing structure change as it wasn?t handled very well. When it was originally setup, all of the companies? services, including DVD rental and streaming, were all under the same umbrella and the whole package originally cost $9.99.

The company then saw a significant increase in popularity and size for its instant library. At this point, Netflix decided to unbundle their services. They would be asking streaming users to pay $7.99 and also ask their DVD renters to pay $7.99. If you wanted both services, you would go from paying $10 a month to paying $16 a month. That?s a 60 percent price hike.

You can imagine the backlash this move made as people generally felt they were ripped off. The company?s explanation was both unclear and poorly executed. Because of this, Netflix experienced a massive share price dive which it took a while to recover from.

That was both a painful and enlightening lesson for Netflix and they have since learned from that major mistake and have tried to make amends by valuing their customers more and by being fair.

In a letter to a Netflix member, an email will read like the one below.

Hi <User>,

In order to continue adding more movies and TV shows, we are increasing our price from $7.99 to $8.99 for new members. As a thank you for being a member of Netflix already, we guarantee that your plan and price will not change for two years.

This is a big improvement from their old ways and should help attract and retain their users in the future.

Photo Source: Netflix website

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