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Netflix managers prepared for backlash to price hike
by Greg Sandoval

July 13, 2011

Netflix managers knew some customers would be unhappy with the company's decision to raise prices, and a day before announcing the fee increase they told customer-service personnel to be prepared for angry callers.

Some of Netflix's customer-service representatives told subscribers today that they added extra employees in the department to help handle the flood of calls, many of them emotional, the employees said. Hundreds of Netflix employees were answering phones today and that still wasn't enough to prevent some callers from experiencing extended delays before speaking to a Netflix employee, the reps told customers

Starting in September, the company will no longer offer users the ability to access both streaming video and by-mail DVDs for $9.99 a month. Netflix said Tuesday that it was splitting each distribution mode into two separate subscription plans, each costing $7.99 per month. To receive both, subscribers must pay $15.98. The announcement saw the company's blog fill up with 4,000 responses, most of them negative. Over the past couple days, there was speculation that Netflix didn't anticipate how the price increase would anger some customers.

Netflix spokesman Steve Swasey confirmed that Netflix had indeed prepared employees to receive a certain amount of calls from those unhappy with the hike. Swasey said Netflix did not go into this with its eyes closed.

"We tested, we researched, we analyzed," Swasey told CNET this evening. "We knew what the reaction would be. We are not surprised. We knew that there would be some people upset by the service and with the price being adjusted."

Rich Greenfield, a Wall Street analyst with BTIG Research, conducted a test of how Netflix's customer service department was handling calls following the announcement. In a report issued today, Greenfield said he learned Netflix was being overwhelmed by calls. He said BTIG made 35 calls over two hours and waited on hold typically between 9 minutes and 15 minutes.

Greenfield also said he was unhappy with the response from Netflix employees. He wrote that they suggest to those who threaten to cancel their subscription that they should wait until September, when the plan is due to take effect.

"There was simply no promo or 'save' technique to offer us a discount to retain our business," Greenfield wrote. "This would appear to illustrate that Netflix is simply not concerned with the prospect of losing customers."

I called Netflix's customer-service number this evening. I waited 9 minutes on hold and was greeted by a male employee who was polite. The Netflix employee said that he was instructed not to rush anybody off the phone and to hear people out--their complaints or suggestions--and to process cancellations if that was what they wanted. He acknowledged that there were a lot of extra people working the phones and that there seemed to be a lot more callers than reps.

What everybody wants to know is, are the scores of complaints to the company and those being posted around the Web enough to convince Netflix to backpedal or offer a concession? It doesn't sound that way.

When asked these questions, Swasey said: "These are our prices."

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