The DVD rental service Netflix quickly became a household name simply by offering what no other DVD rental store was doing. It turned the business and pleasure of rentals into a convenient transaction that never required your to go past your mailbox or your online account. It made what people do easier and more efficient and there’s no better marketing than that.

But the simple principle of “if it ain’t broke don’t fix it” didn’t keep Netflix executives from tampering with what was otherwise a brilliant design.

Changes in service and especially pricing caused the company to lose over 800,000 paid subscribers in just one quarter. That’s an astounding loss. While it’s just a dent to them, as they still have over 23 million users, the lost customers should raise red flags.

The loss also wasn’t an overnight transition. As an on-again off-again NetFlix user among many others, I know that a sudden SIXTY PERCENT fee hike was too much for many loyal and long-time customers. Here’s what you can learn from what some are calling the first wave of a sinking ship….

1. Service First, Sales Later

Netflix ignored the golden rule of business, and that’s that sales always follow service. If you have good service, you’ll have profits. Tamper with your services and you’ll quickly see plummeting sales.

2. Don’t Ignore Feedback

Recently Bank of America tried to implement a $5 monthly fee for all customers who didn’t meet a minimum monthly balance. The move caused uproar and BofA quickly took noticed and decided the money they’d make from the hike wasn’t worth the bad PR.

Netflix did just the opposite. They ignored social conversations and the reviews they were receiving in the press. Worse, when they finally got around to addressing it, it was already a dead issue that was forgotten by much of the press and consumers. By resurrecting the proverbial dead horse, they reminded people how much they hated it.

3. Don’t Divide Your Brand

Brand marketing is a tough business that takes hard-earned dollars. The larger the company, the more dollars it takes to create brand awareness. And despite the good and bad PR, NetFlix is known for their movie and game rental service. So when they decided to fracture the brand by creating a separate name, Qwikster, for their DVD rental, they unwittingly sent themselves back to the drawing board. The rule here is stick with your brand and do everything you can to bolster it.

4. Respect Your Customer’s Intelligence

No one likes being treated like an idiot. But that’s exactly what Netflix did to their customers. Rather than trying to gain sympathy and explain price hikes due to rising cost or any other number of reasons, they instead used a rather transparently manipulative ploy. They acted like they were doing you a favor. Netflix claimed that the price hike was some sort of “convenience” to the customer. Almost a million customers later, we can safely say that it wasn’t.