How Netflix Could Use Recommendations To Increase Subscriptions

One of the challenges of highly customer-driven systems like the iPod, Tivo, and Netflix is the keeping it fresh. I wrote about my experience with this problem last fall (New, Unexpected Music on Your iPod).

I’m sensing the same “2,000 songs and nothing’s on” wall with Netflix. Sure, there are 50 discs in our queue right now. But that’s down from nearly 80 a few months ago. This means, we’re adding movies at a slower frequency. Though we’re watching them at about the same frequency.

To add to this, the only reason I visit the Netflix.com is to add an item to my queue. I get the queue as an RSS feed and my ratings are posted via email. I never checkout their recommendations

This is a recipe for burnout.

Tivo solved this problem by developing recommendation engine that records things it thinks you’ll like. Though Netflix also offers recommendations, it doesn’t go the extra step – sending me the disc.

Since Netflix makes the bulk of their revenue on a tiered subscription model, the discs in each of their tiers could default to a ‘Netflix Suggestion’ with additional membership dollars going to override their recommendation engine with a something I’ve selected. The upshot is, of my 3-at-a-time subscription – 1 or more of them could be selected and delivered by Netflix – thereby guaranteeing new stuff is always in the queue.

The Buzzword Blacklist

Here’s a small (and growing) list of meaningless, negative words that I’d like to strike from my world.

  • User
  • Consumer
  • Content
  • Sticky
  • Leverage
  • Synergy
  • Facilitate

Doc Searles has a nice follow-up on these terms and language in Relating to Customers

…customers don’t like being “consumers” or “targets.” Being “reduced” doesn’t stir their hearts, either. Least of all do they wish to be “acquired.”

Doc, as always, gets right to the point with:

“…we’re living in a world where customers will only become more and more independent and self-reliant. And — even more importantly — that they can often supply themselves.”

A second Buzzword blacklist from Fortune magazine
Ask Annie – Business Buzzword That Make You Gag

McDonald’s Learns From Best Buy

In the Star Tribune’s recent “Best Buy Copes with Costs” article, they report that Best Buy’s customer-centric format roll-out (and here) has been scaled back 40%.

The customer centricity strategy has its costs. Operating expenses as a percentage of revenue were 2.2 percent higher at the test stores, the company said. But the test stores’ sales and gross profit rates also outpaced traditional locations.

That’s right – even with slightly higer operating expenses, Best Buy has dramatically increased sales by focusing providing an excellent experience to specific customer segments.

In a related development – McDonald’s has also declared that one brand experience doesn’t fit all

“…no single ad tells the whole story,” Larry Light, McDonald’s chief marketing officer.

He continues:

“We don’t need one big execution of a big idea. We need one big idea that can be used in a multidimensional, multilayered and multifaceted way.”

There you have it – 2 big names declaring mass marketing is not longer effective and moving their organizations to a more individual customer experience model. Is this the end of mass marketing and the return of local specialization and identity as Seth Godin recommends? I hope so.