Netflix was 2011′s biggest loser in customer satisfaction

Netflix had a rough year, for sure: The company has taken its lumps from users, analysts and investors ever since it announced a major price hike and an ill-advised plan to spin off its DVD-by-mail service into a separate business called Qwikster. All of that has led to a massive decline in customer satisfaction, as the once high-flying company saw its rating drop to its lowest ratings ever, according to ratings company ForeSee.

ForeSee, which issues a twice-yearly report tracking customer satisfaction, reported that Netflix’s rating during the holiday season dropped seven points from 86 to 79 points, a decline of 8 percent from a year ago, making it the biggest loser in the survey. That’s a huge drop for Netflix, which for years had been among the top companies in the report. Meanwhile, Amazon, which typically battles Netflix for the #1 spot, was the clear leader this year, with a record score of 88.

Netflix’s customer satisfaction aside, the index of the top 40 Internet retailers was actually pretty good, with the average score for the group increasing to 79. So for now, Netflix is just average among the top companies in the survey.

Of course, it didn’t take a crystal ball to see this was coming: Netflix lost 800,000 subscribers in the third quarter, and domestic growth in the fourth quarter — which is usually pretty robust due to holiday gifts that come with Netflix embedded — is expected to be flat or down. Meanwhile, confidence in the company’s stock has collapsed, sending its share price from above $300 down to about $70. So it should come as little surprise that customer satisfaction dropped so precipitously.

Netflix is still the clear leader in the online streaming space, with about 24 million subscribers. But for years Netflix has relied on the virtuous cycle of positive word-of-mouth to help propel its growth. With customer satisfaction declining rapidly, it’ll have to work harder to retain existing customers and to win new ones.