take on the gym-membership model

yesterday I saw a blazing headline which read that Netflix lost 800,000 customers in the third quarter which was higher than analysts had predicted.   The dropoff was expected after Netflix tried to break their core-business into separate groups and then also raised rates to their customers..   This to me seemed like a recipe for disaster from the beginning.   If they had taken even a casual survey of their customers they would have realized that most people probably don't use the service very regularly and bringing a publicized price-increase during some pretty bad economic times was going to lead to an exodus.  

I've been thinking about it for the last 24 hours and although I originally compared this Netflix disaster to the inability for RIM to realize they were getting beat to the punch with their breadwinning product by Apple and Android they never adjusted and just hoped that their core customers would just not notice that everybody around them had cooler phones which had great cameras, fantastic browsers, thousands of apps and oh yeah by the way also had the ability to send and receive emails.

but the more I think of it, that was a technology failure, this was even dumber.. this was a failure to recognize that your customers base wasn't using your product to begin with but they kept paying for it anyway.  It's like getting a gym membership, you do it for the first few months pretty religiously and before you know it it's been two seasons since you last stepped foot in that  sweat hall, you've put back the 5 pounds you lost and added 10 more.   You know you are throwing $80 away per month but you still have a hope to go back to twice per week and feel like giving up the membership is like giving up on fitness overall...kind of like giving up on the chance to see all those classic movies you've always wanted to see but just never have time for.     Now if Jack LaLane jacked their rates up 30%, there would probably be hundred of thousands of people who would take notice and turn their over their membership cards because now they realize they'd be paying $40 more per month and still not getting any slimmer..

so if your business model is dependant on customers who pay for your service but don't actually use it... here's a piece of free advice from the Average Asshole.....let sleeping dogs lie