When Chasing or Paying Dollars Creates a Crisis

Do you wonder if the Netflix Board of Directors ever asked Reed Hastings, “Did you lose your loving mind?”

Early in 2011, Netflix is a Wall Street favorite with revenues up over the previous year, profits up year-over-year as well and subscribers flocking to your service. Faced with this scenario, the only concern keeping most CEO’s awake at night would be whether the government could print dollar bills fast enough to keep up with the flow of money into the company’s bank account.

Unless you are Reed Hastings. No, this chowder-head comes into the office one day and announces a whole new pricing scheme. One that could only have been conceived during a weekend diet of magic mushrooms and tequila chasers.

Ol’ Reed dismisses talk favoring a fancy voice of the customer survey proposed by his marketing team because the data will only tell him he has more air between his ears than a balloon in flight. No, Reed decides that the challenges are few now that those pesky competitors at Blockbuster are out of business. Time has come for creative destruction. Get the crisis communications counselors on alert because they’ll be working overtime trying to perform damage control from this mess.

So Reed orders his media relations staff to issue a press release announcing a new pricing plan that will effectively increase customer costs by roughly 60 percent. Yeah, that’s the ticket. Let’s charge a few dollars more for our content-rich original service and then create an entire new cost revenue stream for the aspect of our business that is aligned with modern technology but provides customers with less quality content. And, in a concession to his marketing communications team, the genius decides to notify customers of the intent to extract the added dollars by sending an e-mail in the middle of the night.

Well, after a savage beating via social media and when the number of lost subscribers surpassed the half-million mark, the genius unveils a grand scheme to fix the damage. Since Reed trashed the original Netflix brand, the remedy was to create a new brand identity for the most popular business segment. Let’s force our customers to have two log-in names, two passwords and two monthly bills instead of the tired old model where customers could go to a single Web site and easily order a movie and watch others while waiting for the postman to arrive.

Now, Reed’s really perplexed. He doesn’t understand why the subscriber cancellations continue when he’s taken numerous steps to make it very difficult for customers to conduct business with his company.

Three weeks pass and Reed summons his executive communications pro to write a letter apologizing to customers and shareholders adding the new brand name is dead, the old brand name lives and he would immediately pursue avenues to regain the 60 percent loss in share price his strategy produced. After all, he had to do something to get the Board of Directors off his back.

Be Yourself AA. Broke.

As a valued friend said, a legacy airline entering bankruptcy isn’t a surprise nowadays and shouldn’t be considered a crisis.

That is, unless you are among the 88,000 direct employees of AMR Corp. or the 130,000 workers and retirees who might have their pensions gutted. Or shareholders who watch the stock price drop 70 percent over the past year and likely will be wiped out in the reorganization.

The 240,000 people who currently fly American Airlines each day didn’t realize any immediate impact. The reorganization may result in fewer routes and longer check-in/gate lines because of staff reductions in time but the all important frequent flier program likely will remain in tact. Booking award travel likely will prove more difficult but could be aided by the airline agreeing to allow award travel on airlines that purchase routes from American.

American and AMR Corp., seeks relief from higher labor costs than rival domestic and foreign carriers who already restructured through bankruptcy actions.

Take a moment to submit your “Top 5 Corporate Crises During 2011” poll co-sponsored by Evolving World Communications and the Institute for Crisis Management at http://tinyurl.com/828uuqg.

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