Netflix is a global leader in on-demand video streaming, with an increase in subscribers of nearly 16m in the last quarter alone – much driven by the COVID-19 crisis.
Netflix broadcasts TV series, feature films and documentaries (including those produced in-house) across a wide variety of genres and languages in more than 190 countries. It earns revenues of close to $USD20bn annually by charging a monthly subscription (no contract) for access to these programs via a range of digital touchpoints.
Despite only having access to a fraction of the world’s filmed content, it is successful because it is available on millions of different devices, designed beautifully, and it’s just as easy to quit as it is to join. Other companies might follow their success if they had such ruthless user-centred simplicity.
However Netflix didn’t start with 45 different platforms and never envisaged that on-demand streaming was even going to be a thing. Netflix started in 1997 as a subscription-based DVD mail-order service — sending out DVDs in the mail in an all-you-can-eat model. It was cutting edge at the time, as physical video rental stores were still the primary mainstream provider of video rentals.
Marc Randolph, one of the co-founders of Netflix, was previously a co-founder of MicroWarehouse, a computer mail-order company. He knew distribution and saw it as a differentiator. He and co-founder Reed Hastings admired how the then-fledgeling e-commerce company Amazon found a business model based around shipping books – which are durable, small, relatively unbreakable and don’t require pre-purchase inspection – and wanted to find something similar. The Netflix founders considered VHS tapes but rejected this idea because they were too expensive to stock and too fragile to ship. DVDs, however, were different. Slim, light, sturdy and “new”, Randolph and Hastings decided this would be the media channel that would form the core of their business. The content was not the differentiator, the distribution and medium was.
Lessons learnt from the disruption of the music industry were well heeded: Why make people get into a car, drive, find a car spot, try and find the movie of their choosing in a limited range retail outlet, drive home, only to have to return the movie the next day? In retrospect this user journey seems ridiculous, but this cumbersome customer experience still exists in the vast majority of businesses today.
It wasn’t until 2007, when DVD rentals were massively declining, that Netflix pivoted to online downloading and streaming of video content. Visionary digital strategy and user experience drove this pivot. Netflix realised that by improving their physical availability via digital touchpoints, they would be able to improve their sales. The content hadn’t changed – Netflix was still distributing videos – but the channel had.
Effective business growth comes from two things: mental availability and physical availability. In classic marketing terms, physical availability is improving your distribution, sales, access or consumption points. Coca-Cola is one of the biggest brands in the world due to excellent mental availability (superior advertising so that people recall and recognise), and also due to its ability to put a Coke within arms’ reach of almost every person on the planet. They set the benchmark in physical availability.
Netflix delivers reasonably well on mental availability, but it is their physical availability that has driven their success. In being willing to cannibalise their existing DVD mail-order business and offer instant online streaming of all content, they made it easier and more satisfying for users. To coin a PENSO phrase, they turned a red-tape experience into a red-carpet experience – something we seek to achieve in all engagements.
Netflix touchpoints are EVERYWHERE, from smartphones to game consoles to smart TVs to web browsers, and they even have distribution partnerships with traditional subscription TV providers, which gives them real-estate on millions of classic TV remote controls. Every household has a range of Netflix-ready devices, all of them with the same features. There’s no compromise or feeling of dissatisfaction when moving between devices, users can access all features on all hardware and apps. This ubiquity and consistency makes it easy and welcoming for anyone to buy and use Netflix. It drives consumption, drives ritual, and drives purchase habit. Netflix is simply much easier to access than any competitor. It’s there. It’s everywhere. All the time. So it ends up gaining millions of new customers, easily, during the times of the COVID-19 lockdown.
As a business, ask yourself, how easy is it for your users/consumers/customers to access/buy/use your products/services? If people can access and buy from you in a matter of moments on any number of beautifully designed digital channels, you’ve put yourself in a wonderful position to thrive.