Lessons we can all learn from the sharp rise of Netflix.
Industry
Above | Subscriber enjoying online streaming during lunch break
Regardless of what industry you’re in, what product you provide, or who you serve, everybody can learn a lesson or two from the last twenty-five years of the American juggernaut, Netflix.
Market share favours innovation
The power of differentiation.
It’s impossible to talk about streaming TV today without mentioning Netflix. No other provider is shaping the streaming revolution more than the company from the small Californian town of Los Gatos, and this all began with an idea that today seems relatively unspectacular. In 1997, Netflix was launched as an online version of a video store where customers could rent DVD films over the Internet.
Ultimately, this was the start of the digital transformation that continues to this day; this was necessary because, with the original business model, the company of founders Reed Hastings and Marc Rudolph would have quickly disappeared from the market. Just ten years after its launch and five years after the IPO, Netflix again stirred up the market and itself at the same time. In 2007, the company broke the barrier of one billion delivered DVDs and simultaneously launched the end of its own business model with its first streaming model.
Our shared thoughts
Transformation is endless.
Today, we know that this bold decision was the right move; Netflix is available in over 190 countries and currently has over 230 million subscribers. This example also shows us that digital transformation is not a project with a start and a finish; it’s an ongoing process. The takeaway, digital transformation never ends.
Pricing models carry much weight.
Competition is not only decided by the best price; new price models are sometimes even more convincing. At Netflix, for example, there were no late redemption fees right from the start, as seen in early 1999 when the flat-rate model, which is still current today, was introduced. With one fixed price, you can watch as many movies as you want, and the basic monthly subscription package continues to cost less than a single visit to the cinema. The final promise of quality comes in wavering adhesion contracts, as the subscription can be cancelled anytime. Essentially, the all-you-can-see-model makes the already low price increasingly more attractive.
Exclusivity affects loyalty.
In 2010, Netflix purchased the rights to online distribution of films from renowned American studios (including Paramount Pictures and Metro-Goldwyn-Mayer) for around $1B. However, this meant the company was still competing with the strong cable providers in the USA. This only changed with extremely successful in-house productions such as “House of Cards” or “Orange is the New Black”. There was even a term in the USA used for the increasing number of people switching from classic TV to streaming: cord-cutters. It’s evident that exclusivity is an outstanding sales instrument and binds customers.
Personalisation gets preference.
“There are 238 million different Netflix versions,” explains Boris Evers, then head of communications at Netflix. This means the entire streaming portal is personalised, and every user gets their own version to suit their preferences. Personalisation continues to demonstrate the desire for individual benefits.
Analytics can personalise experience.
User data tracking is frowned upon by consumers, but Netflix uses it to generate such a unique customer experience that subscribers benefit directly. Users can not only control their recommendations with their behaviour but can even influence future productions: Netflix looks very closely at where users fast-forward or rewind, pause, and stop watching. A/B testing also plays an important role. One finding, for example, was that users like to view series as complete seasons and not just one episode per week. Today, we know this behaviour all too well as binge-watching. User data will continue to offer online streaming services optimisation potential for the entire value chain.
In conclusion.
Netflix is a company in constant flow and has, therefore, basically made its product, streaming fluency, its corporate philosophy. The use of state-of-the-art technologies, some of which have been developed in-house, does not primarily serve to maximise profits but to consistently develop them further to provide the best possible customer experience. Ultimately, this is what we should learn from Netflix, that the customer experience is the way to success.