Trying to Brand Over Problems Only Makes Matters Worse. The Cautionary Tale of Qwikster.

Trying to Brand Over Problems Only Makes Matters Worse. The Cautionary Tale of Qwikster.:

This past July, Netflix announced the birth of Qwikster. And just months later, in early October, Netflix announced the death of Qwikster. It may not be the quickest about-face the world of branding has seen lately, but it’s certainly up there (Gap, for one, has it beat).

From the beginning, the launch of Qwikster was a curious move – both from a business and a branding perspective. Qwikster was supposed to take over Netflix’s job of representing the DVD-by-mail business, with the telltale red envelopes. That would then free Netflix to take on the new role of representing the streaming business – which the company believes is its future. This was put plainly enough in a September blog post by co-Founder and CEO Reed Hastings: “For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming.”

The other key aim of this brand shift-aroo was to provide a messaging platform to help soften the landing of the new pricing scheme for subscribers. Before, a Netflix subscriber paid one monthly fee to cover both DVD rentals and streaming. But with two brands, each representing a discrete service, the company would start charging separately for DVDs and streaming, increasing a subscriber’s bill for both by $6. It didn’t go down well.

I suspect there are few in business who think Mr. Hastings wasn’t right in doing something. After all, the marketplace is littered with businesses that were making a killing quarter after quarter until suddenly the category itself seemed to shift beneath their feet, causing them to stumble badly. This scenario brings to mind casualties such as Yahoo!, AOL, Borders, Friendster, Palm and Nokia, to name just a few. So let’s not debate the fact that Netflix needed to do some speedy and proactive brand re-positioning, along with a price increase. (Precisely what increase was optimal is a topic worthy of its own debate). But why create an entirely new brand?

There were three distinct, basic branding moves that Mr. Hastings and team could have made:

1. Create a new brand to represent the legacy DVD business (which they did with Qwikster … for a short while).
2. Create a new brand to represent streaming (which they didn’t do, instead giving this job to Netflix alone).
3. Reposition Netflix by focusing its core business on streaming (which, initially they didn’t do, but ended up doing after the Qwikster kerfuffle).

Let’s take each strategy in turn and take a closer look.

1. Create a new brand to represent the legacy DVD business

My instinctual reaction is that this strategy required an unnecessary amount of effort. First the company had to create a new brand. Then it had to work hard to transfer the positioning of Netflix to Qwikster while simultaneously repositioning Netflix to streaming alone. While this may have been achievable with lots of time and money, this change was made in the midst of an extremely unpopular pricing change. Netflix should have seen the inevitable customer reaction coming: customers viewed the new brand as smoke and mirrors to distract their attention from a price hike …and that only made them madder and matters worse for Netflix.

2. Create a new brand to represent streaming

What sinks this strategy before it leaves the harbor is that all the hard-won brand equity in the Netflix brand would have been saddled on the dying horse of DVD rentals.

3. Reposition Netflix by focusing its core business on streaming

This move doesn’t require Netflix to abandon DVD rentals, it just shifts the business/brand emphasis to streaming in acknowledgement that this is where the market is headed (and you can’t deny the elegance and convenience of the name Netflix). Plus, it doesn’t create a brand architecture mess to compound the already messy message of a big price increase. In the months it took Netflix to finally arrive at this strategy, it no doubt lost far more customers than just the price increase alone would have. And the market reacted to Netflix’s recent quarterly earnings report by devaluing its shares by 28 percent.

In conclusion, the fast coming and going of Qwikster is a cautionary tale. Companies shouldn’t be too quick to abandon the brand equity of their flagship brand(s). Companies shouldn’t underestimate the ability of a brand to shift its focus and relevance. And companies shouldn’t presume that “branding over” an unpopular pricing change (or any significant change that is likely to be unpopular among customers) will somehow make an unpopular message easier to swallow.