The price it/speed it experience!

I remember meeting Reed Hastings CEO and co-founder of Netflix at a party a number of years ago and we talked about the differences in the customer experience Netflix proviced when compared to that of competitor chain video stores.  Two things stood out for me from that discussion, Reed’s wisdom to remedy growing consumer dissatisfaction with competitors “late fees” – something I call “bad profit” – and the fact that he thought the delivery of his product “through the mail” could still be improved.

Well we all know how the story has progressed through the ensuing years – Hollywood Video is gone, Blockbuster struggles, and Netflix has increased streaming content.  It is a tale of improving “service speed” and serving customers in ways that decreases their “effort and annoyance.”   Recently, Wharton School of Business marketing professors Peter Fader and Raghuram Iyengar were asked about Netflix’s ability to maintain a “one price for unlimited use” model. Here’s what Professor Fader, had to say:

“Many people refer to it as “the Netflix pricing model” — the fact that they own it, that it is so singularly associated with their brand, is a great credit to them for going against the grain 10 years ago and staying with it. Another big part of that is that they’re constantly changing their prices, sometimes up, sometimes down. People don’t seem to notice. People don’t seem to care. They’re into the content. They’re into the wonderful delivery mechanism and the association with the brand. People like to be seen with the red envelope. In many ways, they’ve downplayed the role of price, per se. That’s what every company aspires to do…”.

Professor Iyengar adds..

“I’m not exactly sure how long Netflix can sustain all-you-can-eat plans. My prediction is, I think you will end up seeing plans which may be differentiated in terms of the quality of movies that you are able to stream — for example, being able to stream movies in digital versus the standard format. Or Netflix could differentiate subscription levels in terms of what kind of inventory customers have access to; for example, some people might have access to newer movies versus older ones, and so on.”

From my perspective, while this discussion focuses on  ”future editions of Netflix’s customer experience” it begs an importance question for all of us.

What does the next iteration of your customer experience look like?

How will you improve delivery and innovate pricing to support that delivery?

Netflix has always been playing two moves ahead on their business “chess board”, if not their name would have been Mailflix…..

What’s your next move?