Lessons in how to lose customer trust from Netflix and Instagram

The recent hoopla resulting from the decision by Instagram use any user content for ads reminded me of some of the lessons cited in the book by Don Peppers and Martha Rogers, Ph. D – Extreme Trust.

Extreme Trust

The book cites the example of Netflix when it split it’s service into two separate businesses as an example of what not to do. Netflix saw a business trend and for it’s operational efficiency thought it’s in it’s best interest to have two separate businesses. In the end Netflix did back track on some of the negative impact to customers of the decision (two different websites for example) but still made it two different services instead of one for people to deal with. Whatever your opinion of the decision, the market has not been kind to Netflix since the original decision. It was a series of decisions that set the mood and eroded trust in the intent Netflix had. There was the price increase in July 2001 and then the split of DVD and streaming services with Qwikster. None of this has helped NFLX, just look at the cliff in the stock price below from after July 2011.

NFLX Stock Price Trend

Of late Instagram has been the subject of much criticism with it’s decision (since somewhat reversed) to sell it’s customers photographs. The change to the terms that created the uproar have been quoted by many media outlets, included here for your reference:

“You hereby grant to Instagram a non-exclusive, fully paid and  royalty-free, transferable, sub-licenseable, worldwide license to use the content that you post on or through the service … You agree that a business or other entity may pay us to display your username, likeness, photos, and/or actions you take, in connection with paid or sponsored content or promotions, without any compensation to you.”

Instagram has since changed it’s mind and Kevin Systrom (co-founder, Instagram) has posted a blog titled “Thank you, and we’re listening” that outlines the intent of the change and an update to the terms to clarify advertising, ownership and privacy concerns people have raised. So things are better but what do you think and how do you feel? That is the real question.

In the end we have many iterations with companies and services and the series of interactions with their actions and their employees are what we use to judge them. It’s as simple as that. On one hand I like the response from Kevin Systrom in his blog post, on the other hand I’ve seen the series of changes Facebook has made with it’s privacy policy, default settings etc and I can’t help associate this latest action by Instagram with that history. For me I say let’s wait and see, but it’s two strikes for Instagram at this point … this round cost two strikes. Of course that’s just my opinion. What really matters is what the majority of customers perceive is the intent of Instragram, that’s that they’ll use to make up their own minds. For Instagram’s sake they don’t suffer from the one two punch Netflix is still recovering from.