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Raising Prices? 7 Ways to Prevent a Customer Uprising

It hasn't been a good week for Netflix. And it's only Tuesday.

On Sunday, the online movie rental company's servers reportedly melted down for part of the day, leaving many subscribers movie-less.

Yesterday, its shares slipped more than 4 percent after analysts downgraded its stock.

And who can forget what happened the week before, when Netflix announced it would effectively raise prices by about 60 percent? The screams from unhappy customers only grew louder as the week wore on.

There's even a new term entering the vernacular for a company that willingly provokes the ire of its customers: It's netflixing them.

But could all of this have been prevented?

I asked Mikkel Svane, the CEO of Zendesk, which develops web-based customer support software. He offered the following strategies for how any company can avoid netflixing its own customers.

1. Ask before you raise prices. "Get feedback from a set of trusted customers before you make a change so you know what the impact could be and what would make it acceptable to your customer base," he says. Had Netflix done its homework, it might have gone in a different direction, he says.

2. Don't underestimate the cheapness of your customers. Your most price-sensitive customers -- that's corporate-speak for "cheap" -- can be your biggest fans when you're offering a
good deal. An in this economy, who isn't watching their money? "When prices are raised, they can be the most vocal against you," says Svane.

3. Don't underestimate the power of social media. "Getting 67,000 comments on Facebook is not just a snowball effect," he says. "It's an avalanche."

4. Be prepared to respond through all feedback channels. Customer will reach out to you through Twitter, Facebook, email, phone and the Web. "Make sure your customer service team has the tools to monitor and respond through all of them," says Svane. (In fact, Netflix staffed up its call centers, but it appears to have not been enough.)

5. Get ahead of the crisis. "In the event of an outcry, respond quickly and own the problem," he says. Netflix appears to have been more reactive than proactive.

6. Watch your tone. "Angry customers do not want their concerns trivialized," says Svane.

7. Don't sugarcoat the problem. Don't try to disguise the true nature of the news or, as some say, put lipstick on a pig. "Recognize that people can take bad news as long as it is explained clearly, honestly, and simply," he says. "They may not like it, but if you are precise, they can accept it and move on."

Can Netflix recover from this disaster, and maybe reclaim its good name? I think so.

The way I see it, the company has two things going for it: The public's insatiable appetite for movies, which is evident in the passionate reaction to its price increase; and a little help from Rupert Murdoch, who is competing for Corporate Villain of the Week honors.

I'm betting Murdoch is going to win that one.


Christopher Elliott is a consumer advocate, syndicated columnist and curator of the On Your Side wiki. He's the author of the upcoming book Scammed: How to Save Your Money and Find Better Service in a World of Schemes, Swindles, and Shady Deals, which critics have called it "eye-opening" and "inspiring." You can follow Elliott on Twitter, Facebook or his personal blog, or email him directly.
Photo: redwood 1/Flickr