NetFlix, Lunch, and Customer Engagement

Evergage Blog

Ideas and Strategies for Real-Time Personalization

June 15, 2014 by

Apptegic is a cloud-based service that tells you how engaged each of your customers is with your business. That engagement is directly related to your customers’ experience with your business.  

 

An acceptable experience

An acceptable experience is where

  • I get what I wanted
  • With the amount of effort I expected to put out

For example, I go to a restaurant for a business lunch meeting

  • I get a decent meal at a decent price
  • And I am in and out in and hour
  • I’ll go back to that restaurant again.

NetFlix started out providing DVD movies.  To provide an acceptable experience, they needed to have a big selection, be less of a hassle than driving to Blockbuster, and be comparable in price.   They achieved this.  

A good experience

A good experience is where I put in less effort than I expected.   In most cases, spending less money in the restaurant than I expected makes for a good experience.

NetFlix’s DVD business delivered a good experience because they let you get a DVD with less driving and less thinking.  Your next movie popped off your queue and showed up.  Your old movie could be dropped in any mailbox.  

They were able to ride these two LESSes for a long time.

A great experience

I think a great experience is if, on top of less effort, I receive something more ... something beyond what I wanted or expected

In the restaurant, this might be really good food.  But in other experiences, it might be that I learned more, had more fun, saw something more beautiful, made more connections with others.  This is what we are striving for in our customers’ experience with our business.  

 

Complications and Segments

But right away, there is a complication.  I want to provide a better experience, a great experience, but different groups of people are going to want less of different things, more of different things, and some will want more of what others will want less.  

For example, if the restaurant, had the bill on my table after the complete meal in 20 minutes, I would have been frustrated.  I was having a meeting.  But if I had been eating there alone, I would have been happy. 

Hence the well-known concept of market segments and the need to tailor the customer experience we provide to the market segments we want to go after.

 

NetFlix and Segments

NetFlix started by doing DVDs with less effort.  But then downloadable movies arrived, and NetFlix faced a segmented market with different price points:

  • Downloadable movies are even less effort than fast DVDs.  Some people wanted that.
  • But DVDs have more selection.  And some people don’t have fast internet or big screen tv’s connected to the Internet.  So some people wanted DVDs

NetFlix’s made a bold response to these two segments and the reality that you can’t serve two masters.  They would have two companies working to optimize the customer experience of the two separate segments.  

But, with the benefit of hindsight, it looks like they made two mistakes:

1) There are actually 3 segments and the third segment of people who want both DVDs and downloads is a large one.  

2) They didn’t realize the importance of the less-thinking part of their value prop.  One of the best parts of the NetFlix experience was the queue.   It was the less thinking that many people wanted even more than the less cost or the less waiting.    And here NetFlix went and made them have to think a whole lot about which company to go to and how to maintain two queues!  

You don’t always know what a great experience is and neither do your customers

The reality is much more complicated than simply picking our market segments to go after and the tailoring a customer experience to them.   There is so much we don’t know.  After all, we are trying to provide a great experience which means giving customers something new or more, something beyond what they want.  We don’t know what that is and neither do they...until they have seen it.... or had it taken away.

 

So run experiments

With the right tools, your web-based business can:

  • See how different segments of customers are engaging with your business
  • Try experiments quickly on all customers, segments of customers, or limited cross-sections
  • Measure what people do in response to the experiments by segment

NetFlix could have:

  • Seen which customers are ordering DVDs and downloading movies.  
  • Offered a subset of them a fully implemented or even faked-out experience where they come to a home page, choose between two companies, and set up two queues for their movies
  • Measured the behavior (engagement, drop-offs) and captured the written and verbal response. 

I think doing this experiment, they may have gotten a taste of the rebellion that they have recently experienced. 

  

Know your customers to deliver great experiences

Great customer experiences come from giving customers more than what they expected with less effort than they expected.   This requires knowing your customer.

In an online world, good ways to get to know your customers include:

  • Understanding the details of their interaction with your business through customer engagement analytics.   
  • Segmenting customers -- but doing this flexibly and testing your assumptions about segments
  • Trying limited experiments to understand how changes in price and product affect their experience and engagement with you.    
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