December 29, 2011

Netflix Is 2011's Biggest Loser In New Customer Satisfaction Survey: Poor Business Strategy and Bad PR Keeps Haunting Movie-Rental Company — Meanwhile, Amazon Takes Top Honors, With Apple and Avon Close Behind

After a year filled with risky moves and half-baked strategies — and horrible PR that showed little or no consideration for what its customers actually valued — Netflix continues to pay the price. According to a new customer satisfaction survey from consumer research firm ForeSee Results, the movie-rental company is steadily losing ground to competitor Amazon The customer satisfaction gap between Amazon and Netflix is widening and may pose a significant threat to Netflix's outlook going forward, according to the survey results released this week. ForeSee said that Amazon's customer satisfaction score climbed two points to 88 on its 100-point scale, the best reading ever in 14 years of checking satisfaction with online retailers. Meanwhile, Netflix's satisfaction score plunged to 79 from 86 a year ago after it announced and then had to abandon plans to separate its online streaming service from its deliver-by-mail DVD rentals. "After years of being separated by a point or two, Amazon and Netflix, which are increasingly in direct competition as Amazon expands into streaming video and rentals, are now separated by nine points in terms of satisfaction, a gulf that may be too wide for Netflix to overcome anytime soon," said ForeSee's statement about the survey, CNNMoney reports. There was a five-way tie for second place, with Apple, Avon, JC Penney, Liberty Interactive unit QVC and VistaPrint all scoring 83 for customer satisfaction with their online services. Most matched or improved their scores from last year, with only QVC taking a one-point step backwards, according to CNNMoney.

Netflix slashed its subscriber estimates and will lose money for the full fiscal year due to backlash against its plans. Netflix shares have plunged 76% from its high point in July, CNNMoney.com reports.

"Netflix totally misread its customer base and is paying the price, damaging its brand among both consumers and investors," said Larry Freed, president and CEO of ForeSee, reports CNNMoney writer Chris Isidore.