In most of our minds, Netflix is it—the apex of at-home entertainment. It was the first movie streaming service on the scene and we assume, after 20 years of being a household name, it will forever hold its spot at the top. However, for the people behind Netflix, the company has always been, and always will be, a work in progress.
Since the days of mailing DVDs to customers, Netflix has been the first—the first to rent movies by mail, the first to stream movies online, the first to personalize recommendations . The company has taken many different shapes throughout the years, but it always seems to be exactly what we want. And there’s a reason for that. Former VP of Product Management for Netflix Gibson Biddle explains the three driving questions at the heart of Netflix’s constant innovation in customer experience.
1. Delight the Customer
The first and foremost goal of Biddle and his team was to delight the customer. Biddle says your best bet is to “double down on delight” because a customer who’s had an amazing experience will introduce your product or service to a friend.
Many companies have a similar mission, but with this simple concept as its true north, Netflix went on to apply two fundamental principles to delight that set the company apart.
2. Make it hard to copy
Biddle recalls during a redesign of Netflix’s website the homepage was changed to a family sitting on the couch around a TV. It was a great looking ad. It worked to improve conversion on the page, but Biddle wasn’t happy.
He knew in the following months, top competitors would have a similar family image plastered across their websites—and they did. It was too easy to copy and if others in your industry could do the same, the playing field is leveled and you lose your edge.
He went back to his team and asked what can we do that others will have a very hard time copying. This was when the company set their sights on personalizing the Netflix experience. The team put effort into developing many different ways to personalize the movie-watching experience. In the end, his group landed on the algorithms you see today that suggest “Shows you might like since you watched Paul Blart: Mall Cop 2”
3. Is it margin enhancing?
Behind every decision made, the question “Does it increase our margins?” was asked. In order to answer that question, a culture of experimentation was encouraged. Every new idea was put into place and A/B tested to figure out if it was better and how much it would truly move the margin.
Sometimes the company found while certain ideas were conceptually better, the delight it brought customers didn’t pay out in margin enhancing ways, and the idea was scrapped. For example, when Netflix was mailing out DVDs, it ran into an issue with new releases. Every time a new movie was released 100,000 customers wanted a copy the next day. But Netflix only had 50,000 copies because they were expensive and demand for them dropped off drastically in about six weeks.
But all the NPS surveys pointed to quicker access to new releases as their major pain point. Netflix tested it out, giving about 10,000 users next-day access to new releases and using the rest of the million users as a control group, receiving the DVD’s up to 20 days later.
The testers found the users in the control group only canceled their memberships .05% more often than the users who received next-day releases. Netflix decided this cancellation rate wasn’t worth the cost of stocking up on new releases.
Netflix’s decision-making break down can help you and your team innovate like an industry leader. If you want to emulate Netflix’s success, remember to strive for the maximum amount of customer delight in hard-to-copy, margin-enhancing techniques.
