The prep for this week’s article has been amazing in a car-wreck sort of way. You see the twisted hunks of metal and think, “Wow. I didn’t know cars could do that! “ and then you wince, because for whoever was inside, it had to hurt.

Netflix is this week’s retail car wreck. Consumers can be really creative when they’re mad. And when a company throws out a 60% price increase to a large base of its customers with a terse email, a blog post, and a Facebook post — and little explanation, consumers get really, really mad. Just search Netflix on Twitter, and you’ll get an instant view into the creativity that results from anger.

For the record, I’m a Netflix customer. I’m already on the streaming-only package, something called Instant Watch, so I was unaffected by the increase. My next-door neighbor, on the other hand, has been getting streaming and one DVD per month, so she was directly impacted, and she’s hopping mad. Her family is ditching the service the day the price increase hits in September and moving their rental business to Redbox.

The social media implications of how Netflix handled this price increase have, with the speed of the Twittersphere, already been covered in depth — you can get a good idea of the types of conversations by searching Twitter on #smmeasure, as just one example. My only complaint about their social media response is a lack of acknowledgement of consumers’ wrath. If you look at Netflix’s Twitter and Facebook presences, they’re just blithely going on as if they had not dropped a huge bombshell on their customers, and with no recognition that their customers are angry.

But that’s not what I’m here to talk about. Whether you believe that we are on an inflationary or deflationary course — the Robin Report had a good article about that last week — there’s no argument that two important underlying prices in the retail supply chain have increased significantly this decade, and don’t look set to decline soon. And those are agricultural raw materials commodities prices – foods like wheat and rice and corn, but also clothing inputs like cotton – and energy prices.

Whether demand is there or not, retailers and manufacturers (those that rely on agricultural raw materials and have a far-flung supply chain that is exposed to rising transportation costs) face rising costs that someone is going to have to pay for. Given that some manufacturers and retailers have tried to stave off passing these prices on to consumers since the beginning of the recession — either by taking the direct margin hit or by shrinking pack size to keep the price the same (and hoping consumers didn’t notice much) — we will come to a point where they can’t continue to do that and must raise retail prices.

Netflix poses an interesting list of cautionary tales when it comes to raising prices:

1. If you’re not contractually prevented from doing so, explain what you’re doing and why.

Netflix offered an explanation on its blog, but it clearly wasn’t enough to satisfy customers, as a pass through the maxed-out comments section below the post shows. The rationale that Netflix offered was that it was not satisfying customers by forcing the bundling of streaming and DVDs — that there were still a lot of customers that wanted the DVD-only option and didn’t use the streaming. That might explain returning to a DVD-only plan, but it doesn’t explain the price hike that customers who want to keep both will have to swallow — 60% if you make no changes and just accept the price increase. Netflix makes some reference to the current plan not making great financial sense, but doesn’t really explain why that is.

This left room for a lot of people to speculate. Wired offered one narrative for the price hike — that it will drive people to drop the DVD portion in favor of streaming-only, where, Wired speculates, Netflix ultimately wants people to go anyway, because it’s more profitable. A blogger, whom I know nothing about but who did get tremendous buzz on Twitter, offered a different take: that bundling artificially inflated the number of streaming subscribers, and Netflix was about to get hit with huge increases in license fees for streaming content as a result — when the real audience numbers are actually lower. Having some experience with the movie rental business, this is a narrative that I find much more plausible than Wired’s. Unbundling allows Netflix to protect its current license fees, giving the company room to add more subscribers profitably. But the decision to unbundle leads us to the next cautionary tale.

2. Make sure your price changes make rational sense to consumers.

You can’t please everyone, and you can’t please them all the time. But when you raise your prices, you want at least a majority of your customers to say, “Yeah. I get it. That makes sense. “ That’s not happening with Netflix, and as a user of the service, I can give you one reason why. Netflix will now price its streaming service at the same price as its single DVD service (you get as many DVDs as you can watch, but only one at a time). But these two offerings are not the same at all.

I can’t tell you the number of times I’ve searched for a movie on the streaming service only to find that it’s available on DVD, but not on instant play. But I can tell you that it far exceeds the number of times I’ve actually found a movie I’ve searched for and been able to stream it right away. The worst part of it is, as a streaming-only customer, I have the streaming service’s inferiority demonstrated to me time and time again because I can see that Netflix has the movie — just only on DVD. I know it’s not Netflix’s fault that the movie isn’t available, but every time it happens, I question the value of the service I’m paying for. Plus, unlike Amazon, where I can click a button that makes me feel better (Tell the publisher that you want this as an eBook — whether it goes anywhere or does anything, I have no idea), I have no such option on Netflix.

In fact, I would hazard a guess that the issue with Netflix isn’t about the DVD pricing at all. It’s about the streaming price. Netflix is saying that streaming and 1 DVD at a time are worth the same. When they first introduced streaming, the price wasn’t presented as $7.99 per month for streaming plus $2 more for DVDs. It was introduced the other way around — You already get a DVD for $7.99/month, and now you can get streaming too for only $2 more. That kind of pricing made sense when streaming consisted of a bunch of movies no one really wants to watch and some okay TV shows where you might’ve missed a couple episodes. To now pay just as much for streaming as for a DVD? When there are still huge holes in the library? Even for me, where my price didn’t change, I’m kind of upset by that.

Prices say something about the value the retailer thinks the item or service has — make sure it matches reality.

I could easily go on, but this is long enough for one day’s work. The net of it is, consumers really can be rational creatures. You should trust them with the truth, and you should price as much based on customer expectation as on cost (sometimes when you price purely on cost, you leave value on the table) — and if customer expectation doesn’t match the reality of costs, it’s probably worth it to educate them. Bottom line, angry customers can end up costing a lot more. And nowadays, they vent their wrath very publicly in social channels for everyone to see. A car wreck, indeed.