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by Harry Buckle on 12 Sep 2019

What can we learn from Netflix's attention to customer experience? Against the odds, Netflix has achieved an astonishing rise. How did we get to spending an evening chilling, 'with Netflix'?

Netflix
Netflix

The ultimate example of a company disrupting an industry with customer experience?

Netflix, in 2016, represented 35% of all internet traffic in North America, boasting around 75 million subscribers worldwide. An impressive feat, considering the company not too long ago was a small upstart facing up against the goliath of it’s time in Blockbuster. The rise of the entertainment platform is a true tale of disruption.

In this article, we’ll dig deep and explore what lessons you can learn from Netflix. The goal of the post is to distil some of the actionable key takeaways for customer experience practitioners. Shedding light on how Netflix ensure that customer experience is at the heart of their business and decision making.

netflix

Netflix is customer obsessed

Netflix is obsessive in its pursuit of customer satisfaction.

A lot has been written about Netflix’s approach to creating a personalized experience for its subscribers. It’s well documented how Netflix helps viewers whittle down those choices through personalization of the website.

Netflix has developed cutting edge algorithms to serve up custom artwork for its thumbnails to entice viewers to watch content. Serving content that caters to their tastes to create a personalised experience when exploring TV and film on the platform.

The level of personalization experienced by users is what keeps them coming back for more. They’re shaking up the entertainment industry and offer a blueprint for delighting customers. Imagine if you clicked on to your favourite travel website you could book a stay, in a hotel in your preferred type of room. The perfect climate, pool facing, on the fourth floor with a balcony overlooking the sea?

Netflix doesn’t stop it’s efforts at personalisation. They work hard to remove any friction for the customer. They fully buy into the view that the customer’s experience begins as soon as they come into contact with your brand. Being customer centric means delivering a great experience with every interaction you have with the customer not just in customer facing roles.

“We own the Netflix customer experience from the moment they sign up, for the whole time they are with us, across TV, phone and laptop”. - Todd Yellin, Netflix’s VP of Product Innovation

A lesson that is applicable across verticals, for example, your customer’s expectations of what constitutes an excellent customer experience has shifted radically. Netflix, Amazon and Spotify have trained us to expect a smooth customer journey with little to no friction. Your customers will automatically see friction when you fail to live up to the experience they’re used to elsewhere.

Netflix keep customers engaged

Customer retention and engagement essentially determine whether a subscription company lives or dies. If the customer falls out of love with the product, gets bored or starts to doubt the value of the offering, then they churn. Worse still, they probably don’t inform you why they are leaving or give any indication that they are about to unsubscribe.

So tailoring your touchpoints becomes invaluable. Most of you reading this post will be familiar with Netflix’s recommendation system. From the email updates, personalised landing card and the recommended shows. Netflix runs over 250 A/B test each year, gathering data to see how we respond, trying to create the ultimate mechanism for finding shows. Data informs every decision they make at Netflix.

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The data led strategy is is well founded in research with over 80% of what people watch comes from Netflix recommendations (Gomez-uribe & Hunt 2016).

We’ve all been there endlessly flicking through the various categories. Until finally, you eventually settle on the same episodes of your favourite show that you’ve binged watched five times already.

So where’s the payback for the tailored content?

Well, compared to Netflix competitors, such as Hulu and HBO Now, around 60% of their subscribers pay for other streaming services compared to 80% that solely pay for Netflix subscribers. Netflix takes a further slice of the market when looking at these services as the mainstreaming service, both Hulu and HBO Now subscribers tend to also subscribe to Netflix.

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How do you personalise and optimise for your customer?

Research on personalisation carried out by My Total Retail, found that tailoring the product experience to a customer’s preferences can deliver a 6 per cent increase in revenue per visitor (RPV).

So by not only tweaking the thumbnail to suit you as a viewer but Netflix also ensure that you’ll likely enjoy their suggestion. The chances of you making the right choices are maximised, resulting in happier viewing and more satisfied and engaged customers. And with a relatively low 9% churn rate (lower than any other subscription streaming service by some margin), Netflix maximises lifetime revenue.

Today, personalisation has never been more attainable with the collection of massive data sets, but many businesses still fall to capitalise on this new trend.Putting it bluntly bad personalisation is often more annoying to customers than something more generic, so how does Netflix maximise the data that they obtain?

It begins with data collection. Ensure you collect data points across all customer touchpoints, across the entire customer journey such as complaints, support requests, transactions, social media and customer feedback. The average business has the average company has over 20 customer touchpoints.

The next step is to make sure that customer data is easily sharable and accessible internally. Lot’s of companies have data stored in silo’s, keeping customer insights that encourage empathy with the customer to be locked away from sight. You need to break down those silo’s and arm yourself with the right tools to overcome the problems traditional companies face.

Netflix has full visibility of their experience, and it empowers its employees to build better customer experiences and optimise touchpoints.

A clear path is visible for employees to understand and take action on what needs be improved to prevent friction for the customer. For example, Netflix, through optimising customer touchpoints, has developed an extensive FAQ with the sole purpose of removing friction.

If that doesn’t satisfy customer needs Netflix has made getting in touch by phone easy and couples this with a live chat that has built up a reputation for being effective in solving problems. Transforming unhappy customers into satisfied customers or even better into advocates.

Share customer insights company wide

We’ve already mentioned this previously, but it’s so important it deserves it’s own section.

There has already been a mention of teams within an organisation becoming siloed, but much like the ease of talking about personalisation - true company wide focus on improving Customer Experience is equally difficult to enact. Particularly in hypergrowth and scaling phases.

So how did Netflix manage this? Well, an initial focus on data from inception meant that customer experience permeates the Netflix DNA. When CX data is at the heart of your organisation it ensures all wheels are turning in the right direction.

Netflix also incentivises employees, between 2006 and 2009, a prize was offered where if a 10% improvement could be gained a $1 million reward would be awarded. How many brands do you know value customer experience to the extent their willing to payout $1 million? It’s a clearcut sign Netflix view customer experience as a key differentiator in a competitive market.

At Chattermill, we find that providing insight from customers is utilised best when it is passed across numerous teams, to give a full picture of how your customers think and feel. The more people who have access to insight the higher number of satisfied customers. We work with lots of super fast scale-ups to established brands, and when we perform analysis internally,the data shows a clear pattern.

Don’t ignore customer feedback

This is where we have the classic Henry Ford quote is often touted,

“If I had asked people what they wanted, they would have said faster horses.”

As a reason to ignore customer feedback (thankfully, this is becoming less common). Perhaps, if you have a product comparable to the first affordable motor vehicle that enables mass movement and changes society, the statement may hold.

But as a word of caution, Netflix found to its detriment that this wasn’t the case. During the early days of streaming, the business looked to split DVD rentals and streaming with a separate price structure for each.

The result was around a 60% increase in price for customers, this was considered (without reference to data or surveys) a mere obstacle and that generally there would be no ill effects. The result? A fierce backlash from 800,000 customers who churned acting as the catalyst for a plummet in the stock price of nearly 80%. Netflix recovered but learnt the hard way that ignoring your customers will see them jump ship.

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But the key takeaway here is how and when you ask for feedback. The classic question following a positive NPS rating “what could we have done better today?”, very often leads to “cheaper” or something relating to reducing the price this is Mr Ford’s 21st Century, “faster horse” response.

So asking with broad open questions, “Tell us about your experience” or “How did we do” will lead to the customer sharing what is most important to them at a specific point in the customer journey. Over time, with the right analysis you’ll begin to see a pattern of apsects of the customer’s experience that isCouple these responses with the unsolicited feedback (your traditional detractors and promoters) and you’ll begin to build a full picture of your customer’s experience.

Finally

So to conclude, customer experience is integral to growth. Not only does a best in class customer experience enable you to disrupt large or established competitors but also companies that lead in CX typically have 1.5 times as many engaged employees as CX laggards.

So not only are your customers benefiting from your focus on their needs and sufficient personalisation, but your employees are also able to leverage all of that customer data in a highly motivated way. Happy customers and motivated employees are the base of all growth.

Sources:

  • https://www.slideshare.net/justinbasilico/recent-trends-in-personalization-a-netflix-perspective
  • https://www.slideshare.net/SudeepDasPhD/deeper-things-how-netflix-leverages-deep-learning-in-recommendations-and-search
  • https://informi.co.uk/blog/lessons-blockbuster-vs-netflix
  • https://www.mycustomer.com/service/channels/what-netflix-teaches-us-about-using-ai-to-create-amazing-customer-experiences
  • https://www.mytotalretail.com/article/applying-the-netflix-customer-experience-to-retail/
  • https://www.retently.com/blog/companies-high-nps/
  • https://engagecustomer.com/netflixs-customer-experience-transformation-revolutionising-the-world-of-online-entertainment/
  • https://www.slideshare.net/SudeepDasPhD/deeper-things-how-netflix-leverages-deep-learning-in-recommendations-and-search
  • https://www.nunwood.com/excellence-centre/publications/uk-cee-analysis/2019-uk-cee-analysis/

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    Harry Buckle

    Client Executive Lead at Chattermill