NEW YORK (MainStreet) — How the mighty have fallen.
Netflix’s (Stock Quote: NFLX) customer satisfaction level suffered the biggest drop of any of the top 40 online retailers this holiday season, falling well below competitors like Amazon.com (Stock Quote: AMZN) and Apple.com in this area, according to an annual survey of more than 8,500 shoppers conducted by the market research group ForeSee.
Netflix’s approval rating dropped from 86 out of 100 during the holidays in 2010 to 79 this year, falling out of first place for the first time since 2005. By comparison, Amazon’s rating increased two points from the year before to 88, earning it the top spot on the list.
Much of this, ForeSee argues, can be chalked up to a series of unpopular business decisions made by Netflix earlier in the year, including raising subscription prices for those who stream movies and rent DVDs and briefly toying with the idea of splitting these two services into separate companies which would have forced customers to manage multiple accounts.
"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, in a press release. "Raising prices by 60% and splitting the baby into separate DVD and streaming services totally undermines Netflix's cost and convenience advantages.”
Interestingly enough, ForeSee’s survey found that consumers were less fixated on price during the holidays than in previous years and cared more about product quality. If this is the case, Netflix’s biggest mistake may not have been raising prices, but rather failing to convince customers that they were getting more for the extra money.
At this point, only a small percentage of Netflix’s customer base has gone so far as to abandon the service altogether, but ForeSee predicts that the worst is still to come.
“Customer satisfaction is predictive, which means that Netflix's financial woes may be just beginning," Freed said.
Seth Fiegerman is a staff reporter for MainStreet. You can reach him by email at Seth.Fiegerman@thestreet.com, or follow him on Twitter @sfiegerman.