It’s rare that a pricing move by one company affects so many people at the same time so transparently. This week’s announcement by Netflix of new pricing plans falls into this category.
In a nutshell, Netflix goes from a plan at $9.99 that allowed streaming of content plus one DVD at a time to two plans, streaming or DVDs, each at $7.99. Netflix needs to push customers to the cheaper-to-deliver streaming plan, long-term. (It’s not equivalent products, though: the streaming options are largely a who’s-who of B-list stars in C-list movies).
If you still want both, your price just went from $10 to $16. That’s a big jump percentage-wise, but still a bargain compared to buying content, and massively convenient. Yet some customers are talking about cancelling.
Moving to legal pricing; I’ve just covered that extensively here. But I think lawyers can learn a thing or two from the Netflix pricing kerfuffle. Here are five thoughts that popped up between my rabbit ears:
1. It is really hard to raise prices. In the current environment, any price increase gives clients a reason to buy from someone else or stop buying altogether.
2. People watch monthly charges like a hawk. Netflix has the monthly subscription income that VCs want and investors need. Law firms want this too, but a price increase hits every month, and clients need budgetary certainty and a long-term lower unit cost trendline.
3. You have to carefully lay the groundwork for a price increase. Netflix just sent an email announcing the increase; there was no build-up as far as I could see. Any law firm that wants to increase prices has to show some added service or increased value. That your costs are going up or your partners want to make more are not valid reasons anymore.
4. Some people are thrifty; others are cheap. I imagine the Netflix pricing strategists sat around a table saying …“$16 bucks for both services is less than many people spend at Starbucks in one week.” Yes, but it’s still a 60% increase. It certainly shows why consumer legal services are a brutal market outside of the contingency fee sphere.
5. All customers have options; law firm clients, especially. Part of the Netflix approach demonstrates a certain hubris of thinking they are the only game in the digital TV town. Not true. That’s what some law firms have thought historically. No longer.
Netflix will likely continue to do well. They are really hearing about it from customers, though. But when a low-cost, innovative leader hears about it from a small price increase in real dollars, all businesses should learn from their strategy and tactics.
In the corporate legal space, I don’t hear any clients talking about wanting price increases. Law firms that try can expect a lot of static.
Hey Moe, Hey Larry, should the Howard Law Firm raise prices?