How to lose 800,000 customers in 3 months.

Want to know? Ask Reed Hastings, President and CEO of Netflix. In the third quarter of this year, the mass defection by 800,000 customers caused a 30% decrease in stock value despite increased revenue compared to the same quarter a year ago. Pretty serious numbers any way you slice it.

Hastings openly admits it was a disaster of his own making. First, he ordered a 60% subscription increase (from $10 per month to $16 per month) — a big pill to swallow. Then, almost immediately, he announced that Netflix would be divided into two companies. Qwikster would continue the mailed DVD business and NETFLIX would concentrate on providing streaming content on line.

He made two serious mistakes: First, not knowing that his customers did not want to deal with two separate companies for their entertainment and second, realizing that a price increase of such magnitude would be identified as out the question before it was rolled out.

What does that have to do with direct marketing or mailing? Nothing. But it does have everything to do with the importance of listening to and understanding your market.

Business types, like me, are always looking for ways to enhance the client experience and expand our product or service lines. To those ends, the listening part is the most important. Be quiet and listen to what your customers are saying by the way they are using your service or buying your products.

Our egos can lead us to make some very poor decisions. In the Hastings case, his hubris about knowing what was best lead to a huge downturn for his company that had been growing at a fantastic rate.

In retrospect, he learned that his customers loved their DVDs even if they didn’t watch them until they collected dust. Or, in fact, even if they were downloading movies or other content, they actually were comforted by having the physical disc in their possession. He also did not understand that NETFLIX subscribers enjoyed the task of returning the watched DVD and anticipating the arrival of their next selection.

What does that have to do with direct marketing or mailing? Again, nothing. But it does have to do with the human dimension. Granted we are talking about a very large company employing some very smart people and paying them handsomely for their expertise. They should have known better. One has to imagine that Hastings is a powerful personality, and his vision (right or wrong) was the prevailing one within the company. His “knowledge” of what was right had probably been challenged, but less than effectively, and he made the decisions that made sense to him.

So what am I trying to say in this limited space is be patient, be calm, listen to all the data, listen to the important people around you, but most of all listen to what your customers are telling you. If necessary, run your ideas past a core group, which should include actual customers or clients. Round out your opinion with a reality check.

Leave your ego at the door, keep your customers and your money.

Shhhhhhhhhhhh, I’m listening.