Filed under: Community Building, Marketing & PR, Personal Technology, Web 2.0
I’ve cited Netflix in the past as a Web 2.0 site - they provide an incredibly easy interface for users to rate movies they have seen. They then use this data to enhance their content as well as target additional movies to each user. This is certainly a win-win; the customer not only sees broad-based movie ratings, gets better personal recommendations. Netflix gets more useful content and happier customers.
Having been a member for a month or two, I find it interesting to see how Netflix deals with the biggest issue that vexes the video rental business: very high short-term demand for new releases.
If you visit a video store like Hollywood or Blockbuster, you’ll probably see a variety of marketing tools. Using my closest Hollywood Video store as a case study, you would see the following:
- large, exterior facing posters for major new releases
- a wall-mounted list of the newest hits in stock
- a wall-mounted list of new titles due soon
- video screens playing promos for a recent release
- new releases displayed face-forward on exterior perimeter, with major releases occupying entire shelf section
- major new releases highlighted by “guaranteed in stock” or other signage
Clearly, brick and mortar video stores are geared to promoting the latest and greatest videos to hit the shelf. Of course, the corresponding problem is that they need a large amount of inventory to handle the first few weeks of demand. After the initial surge, they have to dispose of these movies by selling them at a discount. That may or may not be a good business model, but Netflix takes a different tack.
When a customer visits the Netflix site, the first thing he’ll see is NOT a display of the hottest new titles. Instead, he’ll see a list of recommendations - these are likely to be movies from a few months to many years old - all of which, no doubt, are in stock. On a recent visit, I saw recommendations for The Godfather, Big, Close Encounter of the Third Kind, and other “classic” titles.
Hmmmm… if these suggestions seem a bit hoary, why not click “New Releases”? The movies there are, indeed newer. But don’t expect REALLY new releases. Hollywood Video, for example, lists Cinderella Man, Madagascar, and Mr. and Mrs. Smith as this week’s new releases. On the Netflix New Releases page, though, these are nowhere in site. You can find these titles if you search Netflix, but it doubtful you’ll find them recommending them until the stock-depleting surge is over.
The strategy of Netflix, clearly, is to funnel customers AWAY from hot, new titles to older ones where stock won’t be a problem. This has a double benefit - it reduces need for new titles, while increasing demand for slow-moving old titles. The real question is whether the difficulty of accessing new titles irritates customers. Perhaps the irritation is reduced by on-target recommendations. That five year old movie may actually be a better fit with the customer preferences than the title that everyone is checking out this week at Blockbuster.
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[…] In Netflix - a Different Approach, I began the discussion of how Netflix has solved the video rental shop dilemma - huge demand for the newest hit releases, and low demand for thousands of other videos in each store’s inventory. By using a recommendation system skewed to older titles, they can slow demand for the hottest titles in those critical early weeks. While customers can still request those titles, they are unlikely to see them promoted at Netflix, a direct contrast to what one finds in the corner video rental shop. […]
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