Did you ditch Netflix after it announced price increases late summer 2011 or when it announced Quikster? Or did you leave GoDaddy after it supported SOPA or had massive downtime in September 2012?
In fact, a lot of people did.
But why? Both services had a large user base. So why did people jump ship when there was a bump in the road instead of giving them a chance to recover?
Netflix’ real mistake
Netflix’ past success was based largely on two factors: early mover advantage and the recommendation/content discovery engine.
However, the content selection itself was never that great. Which frankly, I understand. How could they feasibly offer high quality content from premier studios for only $8 a month. But this wasn’t the real problem.
Netflix never moved customers from Satisfied to Completely Satisfied. Although seemingly subtle, the difference is huge.
Thomas O. Jones and W. Earl Sasser, Jr. wrote in the Harvard Business Review in 1995 about a study they performed with Xerox on how customer loyalty affected sales.
One discovery by Xerox shattered conventional wisdom: It’s totally satisfied customers were six times more likely to repurchase Xerox products over the next 18 months than its satisfied customers.
Did you catch that? The customers that answered 5 on a 5-point scale were six times more likely to repurchase than those that answered with a 4.
Being good or pretty good is not good enough! Customers who aren’t completely satisfied can be lured away and easier than you think.
Netflix’ mistake? It did not provide a service that customers were completely satisfied with (arguably for a variety of reasons). So when it announced a price hike of only dollars, customers fled to alternatives.
Had customers been completely satisfied, then the attrition rate would have been much lower.
What GoDaddy doesn’t understand
Domains are a commodity business:
- Price is extremely low and nearly standard across registries
- Customers have many alternatives
- Transferring to a competitor is very fast and easy
Maintaining customer loyalty in such a market makes moving customers from Satisfied to Completely Satisfied even more important. So stunts such as supporting SOPA, which was particularly enraging to the web community (i.e. GoDaddy’s target market), and experiencing service disruptions drive customers to create movements such as Leave GoDaddy Day.
(Killing elephants doesn’t help your image either)
GoDaddy is still a huge player in the market, but that does not mean it isn’t susceptible to falling out of favor (again, commodity market with low switching costs). In fact, out of 7,597 votes on Amplicate.com, 81% of respondents said they “hate” GoDaddy.
Build completely satisfied customers
Traditionally, managers argue that moving a customer from a 4 to a 5 is just too costly. That the benefits are outweighed by the cost.
And maybe that’s true in a few exceptional cases.
However, completely satisfied customers bring superior long-term financial performance. Consider the quintessential example of most things branding – Apple – who can charge a high premium because users are not just users but evangelists. When Apple does make a gaffe, users quickly forgive (e.g. everything that the iPhone surprisingly doesn’t have such as a functioning map application).
Stop and recognize the value of completely satisfied customers.
I recommend implementing a Voice of Customer program, which is very simple, to (1) determine just how loyal your customers are and (2) identify the customers that you can move from satisfied to completely satisfied.