How 2 Industry Giants Approached Failed Customer Feedback – And How One Lost Everything

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In the 1960s and 70’s, American retail giant W.T. Grant had been the epitome of a successful American retail chain for over half a century – right up until the habits of their customers threw them for a loop.

The customer base that W.T. Grant was used to servicing, the American middle-class, had begun moving out of the city and into sunny, grassy, comfortable suburbs.

As a result, the brand’s stores were struggling to convince shoppers to leave their homes and travel into the city to do their shopping. W.T. Grant was faced with a problem, and how they responded to that problem would determine if the brand continued to shine as a paragon of their industry, or if it would shrivel away into obscurity.

Considering that you have probably never heard of W.T. Grant, you can probably guess which path they went down.

The brand continued to pester consumers with gimmicks and sales to get them to travel into the city, instead of responding in unison with other brands, who had begun to open up smaller outlets in the suburbs where more families now lived.

In 1976, with dwindling sales, W.T. Grant filed for bankruptcy and closed its doors forever; it was the second largest bankruptcy in American history at the time.

The final nail in their coffin was a desperate store credit card promotion that didn’t bother to assess a customer’s income or credit history, ensuring the company was shouldering millions of dollars in customer credit card debt at the time of its demise.

W.T. Grant had learned the hard way what happens when you don’t pay close attention to your customers.

And Sh*t Don’t Change.

While we’d all love to think that lessons learned by one are lessons learned by all, the perpetuation of similar mistakes by modern day brands points to the contrary.

The results aren’t always as disastrous as they were for W.T. Grant, but even the brands lucky enough to not completely collapse under poor customer attentiveness will find themselves majorly set back in their progress.

Of course, more important than the sometimes-enthralling stories of how recognizable brands have shot themselves in the foot is how we can use and learn from their mistakes. Pay attention to that, and you’ll avoid ever ending up in a blog post like this one.

Today, we’re going to take a look at two modern day customer feedback offenders, and why they ended up in two very different places.

#1. Naughty, Naughty Netflix

Do you remember that time in 2011 when Netflix’s stock price shrank by five times in three months, or when nearly a million of the company’s subscribers dropped it like a bad habit overnight? No? Yes? Either way, we’re going to talk about it.

The Setup

In late summer 2011, Netflix announced without prior warning that it would be splitting the company’s services – DVD rental by mail and live-streaming films – while simultaneously jacking up their prices.

Netflix likely realized that it had probably shorted itself a bit by providing the ultra-cheap subscription services it had originally established, but what was an attempt to correct their own possible mistake quickly came to be perceived as an attack on their customers.

The Fall

By the time September rolled around, before Netflix’s proposed split would even go into effect, the company had lost a staggering 800,000 subscribers; their U.S. subscriber base shrank by 23% in a single quarter. In those same few months, its stock status as a Wall St. darling plummeted from trading at nearly $300 per share to a measly $53.

Poor Netflix had a rough 3rd quarter in 2011.
The worst part was that Netflix had no excuse for not predicting the chaos it self-inflicted (or for knowing it, but proceeding anyways, which is at least as bad):

Within the first few weeks of the announcement, social research company Mashwork gathered and analyzed nearly 140,000 conversations about Netflix across various social media platforms. Not surprisingly, 26% of conversations indicated they would be cancelling their subscriptions if the company went through with the changes.

When pressed, Netflix Chief Executive Reed Hastings said he “assumed” the plan had been run by focus groups before being announced, but he wasn’t sure. According to a VentureBeat article exploring the debacle, he also said he “couldn’t recall” whether those groups had yielded positive or negative feedback.

Let’s face it, that was a lose/lose statement: Either Hastings was lying and Netflix had simply ignored negative focus group input, or he was so incompetent as an executive he wasn’t sure if his own company had researched its largest business move since its IPO.

Shortly after the statement, Netflix appeared on a prominent listing of “The 10 Most Hated Companies in America”.

The Comeback

Lucky for Netflix, their story ended up being the only one with a happy ending in this post. But it wasn’t really up to luck at all, the company got smart and started doing something it should have done from the beginning: It started listening.

That started with a stunning announcement from Hastings himself, who admitted he had “messed up” and had “slid into arrogance based upon past successes.” Wow. When’s the last time a CEO went beyond a canned apology – most likely at the urge of PR agents – and actually offered personal contrition and admittance of guilt?

That was step one, and it helped to re-kindle some public karma and Wall St. confidence, but what Netflix did next was even smarter. They paid attention to what customers had originally loved them so much for, and started hunkering down to improve their core streaming product and give customers more of what they wanted (not to mention they’d long-since ditched their plans to split services).

Netflix’s first major offering coming directly from user feedback came in the form of the smash hit, critically acclaimed series that was “House of Cards”. What few people know is that the Kevin Spacey-lead show was created as a direct result of Netflix mining its customer viewing habits data to determine what kind of original programming they should create to be the most successful.

Now, that is a big investment based directly on a brand’s consumers. It’s also exactly how companies should be approaching their decision making, no matter the size (of the company or of the decision).

What We Can Learn

While Netflix has bounced back well, a peak into public opinion and stock price over the company’s public trading history indicate a clear disruption in their trajectory. Would Netflix be even bigger today had it not stumbled? Or was the snaffu an essential wakeup call that put the company back in touch with their customers?

Either way, Netflix lives and almost died upon the opinion of its target market, and the same is true of any business you find yourself in or hope to be involved in in the future.

While bouncebacks of such scale are rare, another key takeaway from the Netflix case is that making a mistake can only be remedied by learning from it; if you piss of your customers, humbly change direction and give the people what they want. They might just forgive you. Instead, too many companies burrow into a “we-know-best” mindset and pay for it bigtime.

Plus, there has actually been research that’s shown that customers whose problems you’ve responded to attentively and solved are actually more loyal to your brand than those who have used your service or product without ever having an incident (source: CRM book ‘Turned On’).

That said, this is not a suggestion that you f*^k up just so you can try and ‘fix’ a problem for customers.

#2. Bumbling BlackBerry

“Aha!” I hear you crying, “I was wondering when this name was going to come up!” That’s right, we’re going to talk about the biggest mistake to ever flop into the modern smartphone market (sure, the Windows phone is a strong competitor, but at least Microsoft has a more diverse product portfolio to pad its failures).

The Setup

BlackBerry, or Research In Motion (RIM) as it was known at the time, had some of the first ‘smart’ mobile phones. Push email on the go, full keyboards, and more made BlackBerry phones a staple of early to mid 2000’s businessmen and women. Plus, they were a status symbol (a laughable notion today as you read this on your sleek iPhone or Galaxy Edge, but true nonetheless).

By the time the first iPhones and Android devices were hitting the market, however, smartphones became mainstream. This meant that the feature demands within the mobile market were all of a sudden driven by everyday consumers, not a handful of professional users. Plus, BlackBerry didn’t see phones with internet capabilities becoming entertainment hubs and not just business tools.

A failure to recognize either of these trends, or even to adjust and capitalize upon them when they became blaringly apparent, proved deadly.

The Fall

BlackBerry continued to chase what had been its traditional market and their old needs, rather than what other platforms capitalizing on the “app economy” had now defined as the smartphone user audience.

The public made it clear they wanted touchscreens; BlackBerry continued to make tiny button keyboards. The public made it clear they wanted to be connected socially and entertained; BlackBerry responded with an ad campaign based upon the tagline “Not a toy” to further entrench themselves as a “business tool.”

As a result, BlackBerry bled out over several years, before cutting 4,500 jobs in 2013 and being bought out by a shareholder. While the name lives on (sort of), the smartphone pioneer effectively walked into its own grave one misguided stumble after another.

In response, one RIM insider would say “The problem wasn’t that we stopped listening to customers… [it was that] we believed we knew better what customers needed long term than they did.”

Ummmm, those both kind of sound like the same thing to me, but if there was a distinction, it didn’t matter, and the result was the same.

The Comeback

Haha. Just kidding, they’re screwed.

To be fair, the BlackBerry brand is actually still releasing new devices in 2015, but they’re now going to use the Android operating system and essentially just become hardware manufacturers for Android devices, rather than the OS or product innovator they once were. It’s a small consolation for what was once such a mighty brand.

priv-hands-on-bbBlackBerry’s foray into Android was just announced and the first phone it will ship has a slide out physical keyboard under its touchscreen. Really, BlackBerry? Watch CEO John Chen give a live demo of the new BlackBerry Priv (awkward).

What We Can Learn

Just like Netflix, BlackBerry’s case illustrates a lack of listening to customer feedback, but it also adds a new important element to the mix: Failing to predict the trends of your consumer market.

Luckily, it’s not 2007 anymore, and our incredibly social world of vocal consumers means that small businesses and mega-corporations alike can tap into consumer conversations and see where things are going in enough time to do something about it.

Of course, that also means that you just look that much more of a fool if you don’t pay attention.

My advice to you is that you spend time each day monitoring and capturing insights from any and all conversations relevant to your market; more important than saving face, it will likely save your startup/business/product when the market inevitably does a 360.

Key Takeaways For This Post

Businesses of any scale can make these same mistakes, the only difference being that a small startup or business that makes them before they’ve had a chance to grow won’t even get an article talking about them in retrospect.

So, right now, I’m tasking you with paying closer attention to what your customers are saying better than you ever have before.

Don’t be passive, reach out. Don’t just hear what you want to hear, invite criticism.

Then, more importantly, look at how your company can implement the quickest and most effective micro-pivots in direction or product offering to help eliminate the shortcomings you uncover.

Your customers will love you, and you’ll love you too, because your business will be so much better off for it.

In the very near future, blog posts will start showing up here that dig into specific strategies you can start using to initiate customer conversations that better position your brand, make more sales, and become a responsive marketer.

If you’d like to be around for those lessons and explorations, please do check back frequently – or better yet, drop your email into the box below to find out when new posts go live!

All the best,

Brandon Landis
Chief Customer Happiness Manager