Here’s a question for you. How big a brand do you have to be to disappoint everyone?
And by “everyone,” I mean customers, financial markets, shareholders, even non-customers. I think that list qualifies as “everybody.” You may have some brand suggestions of your own, but in this instance I’m referring to the brand Netflix.
If you’re a brand (well, actually, if you’re pretty much anyone or anything) you disappoint when you don’t meet expectations. Right now I’m thinking customers’ expectations, but, as managing brands is a business, also expectations of those pesky financial markets. And even in this particular instance, non-customers too. More about that in a bit.
For Wall Street it was about missing expectations regarding new subscriptions and new customers. And the brand disappointment thereof, with a forecast below analyst expectations and estimates for the next three months. And not to sound like a wise guy, but I could have told them back in January that this disappointment was on the way, four months prior to last week’s announcement,.
How? Well, we are wise. Both guys and gals, here at Brand Keys, but we don’t have a crystal ball. We have something better. We have predictive customer loyalty insights. In this case from our 27th annual Customer Loyalty Engagement Index. If you click that link, it’ll take you to a list of this year’s winners – brands deemed #1 by their very own customers, adjudged by their very own customers as being best at meeting their very high expectations.
People generally have high expectations about life, the universe, and everything, but consumers have even higher expectations about brands – sometimes even higher than Wall Street. Oh, and SPOILER ALERT, you won’t find Netflix at the top. Their customers used to rate them #1, but not recently. This year Disney+ was #1, with their customers rating them better than Netflix customers when it came to meeting their Streaming Videoexpectations.
When it comes to loyalty, how well you can meet expectations is the 21st century leading-indicator of such (and positive consumer behavior and brand profitability). All that comes with a conspicuous lack of disappointment.
Anyway, customers were disappointed enough with the Netflix brand to rate it lower than Disney+ customers when it came to Streaming Video expectations, which turn out to be mostly emotional. And emotional expectations – the ones brands need to meet or even exceed if they don’t want to disappoint – move at the speed of the consumer – which is faster than brands keep up. An annual average increase of 30% versus brands that only manage to keep up with those expectations by 11%. The bigger the gap, the greater the brand disappointment.
Wall Street and shareholders were disappointed because shares fell as much as 7%. And the brand missed analyst estimates by about 30,000 subscribers. Net profits fell 18%. Average revenue also declined pretty much all over. Europe, Asia-Pac, the Middle East, and Africa. So, disappointing and suboptimal when it came to expectations.
But disappointment like that is like a Möbius strip. Consumers aren’t signing up and that’s reflected in the bottom line, which disappoints Wall Street. . . and on and on. It’s self-perpetuating, especially when it comes to disappointment.
Oh, and Netflix is getting ready to disappoint non-customers. No, you read that right. Non-customers! I’m pretty sure that wasn’t the plan, but it’s likely to be the unintended consequence of their going-forward strategy. A planned roll-out of a new program to crack down on password-sharing. It’s designed to force people who use other people’s accounts to sign up for their own accounts. Or to have account owners who share their accounts to pay extra. So, a double whammy of brand disappointment.
And yeah, I know illicit password-sharing is in contravention of every subscriber agreement ever written. But as I’ve already pointed out, very few of the loyalty and expectation values that drive actual consumer behavior are rational even if there are 100 million households out there rationalizing the sharing of their passwords. But there are going to be an awful lot of disappointed non-customers once the program rolls out.
BTW, you don’t need to be as big as Netflix to disappoint in a big way. Or disappoint a big audience. Any size brand can miss expectations. And there are two reasons brands have a difficult time with expectations. Well, OK, not so much with Wall Street where “more” or “higher” probably suffice. But first, for everyone else, expectations are emotionally-driven and are completely unconstrained by reality. And, apparently, so are subscriber agreements! But mostly there’s the fact that traditional research doesn’t make it easy to measure the kinds of emotional values that form – and drive – most consumer expectations.
And it isn’t easy, because it’s complex and people don’t think how they feel, and they don’t say what they think, and they don’t do what they say – except, perhaps, when they’re disappointed. They feel that in a nanosecond. And it only takes a little longer than that for them to find a new brand that better meets their expectations. You want to try and avoid circumstances like that all you can. Because what disappoints most is the picture in your head of how it’s “supposed to be.”