Netflix Tanks Customer Satisfaction Survey: 5 Things Investors Need to Know

For the first time in its history, Netflix has fallen below Amazon in customer satisfaction, dropping 7 to 8 percent to a rating of 79 out of 100 in the 2011 ForeSee poll, a survey that measures e-retail satisfaction each year.

At the end of 2011, the consumer analytic poll shows Netflix has fallen in every category, including site content, site functionality, merchandise and prices. In its report, ForeSee predicts that Amazon and Netflix would continue to go in opposite directions into 2012, with a gulf that may be too wide for Netflix to overcome anytime soon.

Netflix Investors

As news of Netflix's steep drop in customer satisfaction spread, many investors were eager to gather as much information as they could on the company's prospects for 2012.

Following an abysmal summer for Netflix's PR department, where unexpected price hikes and DVD-instant plan splitting caused more than 100,000 customers to slam the company's Facebook page or quit Netflix all together, the aftermath of the temporary cancellation surge appears to be the site's popular standing.

But for Netflix investors worried that the movie streaming site's stock might plummet, never fear: There is a silver lining to the ForeSee poll, as well as some information that will help Netflix in the future.

5 Things to Know

Below, here are five things to know, and to keep in mind, about the ForeSee poll and the effect such a low customer satisfaction rate will have on the movie-streaming site.

1. Yes, It Looks Bad.

There's no denying that such a prominent survey's findings aren't good news for the company, as much for how people will react to it as to what it reveals about the site's current level of customer satisfaction. Netflix dropped the most of any of the companies profiled in the survey, and has gone from being one fo the consistent tops in satisfaction to a just-average score in the holiday shopping season.

Netflix joins Gap, Sony and Overstock.com in the bottom four, with Overstock coming in dead last. Worse, Amazon topped the list uncontested for the first time in years, the undisputed winner after tying with Netflix in past surveys.

2. Survey Caps Major Losses

Let's face it: anyone paying attention to Netflix's fortunes this summer could hardly be surprised that the company's customer satisfication dropped steeply from 2010 to 2011.

Netflix totally misread its customer base and is paying the price, damaging its brand among both consumers and investors, Larry Freed, ForeSee's CEO and president, told the New York Daily News.

Netflix stock shares lost more than half their value this year, and the vast majority of that decline came from customer reactions to the split-price fiasco, when the company raised prices by 60 percent and then failed even to sell it well to its once-loyal customers.

If Netflix hopes to recover its base and increase the worth of its stock, the company must first re-establish trust, working on knowing its customers and getting them the best deals (or what appear to be the best deals) rather than raising prices too rapidly and with such poor communication with consumers.

3. Netflix is Still Average

Hardly a cause for celebration, but a comfort nonetheless: Rather than plummeting to an atrociously low customer satisfaction score, the movie streaming site clocks in at 79 out of 100, the aggregate score and just one below what the e-commerce satisfaction survey considers the threshold for excellence.

4. Netflix Plans to Continue Expanding Into Tablets

In at least one way, the streaming site has been keeping up with its customer demands: focusing on expanding its service to tablet computers.

When Netflix appeared on the scene in 1998, its revolutionary combination of online media and movie/TV rentals was a precursor to legal sites like Hulu and illegal ones like Megavideo and Sidereel. Now that tablets like the Kindle Fire are becoming more and more popular, Netflix has launched a free (to download, at least) Netflix app to add to tablets from an Amazon Kindle Fire to an Apple iPad.

Since both Amazon and Apple rose to be at the top in customer satisfaction, Netflix's move to get in on the tablet action is especially well-timed. Nor is it the only area where the company has been expanding: By working through more video game consoles, Blu-ray players and devices like Roku's set-top boxes, Netflix is also making it easier and easier to take the computer-centered program and bring it to a big-screen TV.

5. Netflix Is Still The Most Popular Streaming Site

Netflix still accounts for the bulk of subscriptions for movie streaming sites, with a recent poll showing Netflix bringing in far more people than its main competitor, even during the price hike this summer.

Even more exhilirating for Netflix investors, the site continues to pull in huge numbers of people spending time on Netflix, not just clicking in an clicking out. In 2011, visitors spent 1 billion minutes on Netflix.com compared to 480 million minutes on Hulu, with more than twice as many minutes logged in all.

And while the ForeSee survey may be getting a lot of press, a Citi survey on TechCrunch reveals that while Amazon may rate highly in some areas, its online streaming portion is a whopping 18 percent lower than Netflix, ranking below Hulu, iTunes, and news sites like ABC. The poll also shows Netflix gaining seven points in viewership from the end of May, just before the company price hike, and December, a few months after it.

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