interested in innovation and creativity

The hidden value in Netflix

Posted: June 28th, 2005 | Author: | Filed under: Marketing | 5 Comments »

I just noticed this little snippit on the Netflix site today:

Now Netflix has 2.3 Million subscribers, so with each subscriber having rated an average of 150 movies that is 345 Million movie ratings. Now those ratings are valuable to three key stakeholders, Netflix, potential customers, and current customers.

  1. Netflix gains a valuable resource that is hard to duplicate, that is almost the dictionary definition of a “strategic resource”, or a resource that can lead to a sustainable competitive advantage
  2. Potential customers will perceive a way that they will get recommendations of movies they might like, and therefore contributes to customer aquisition
  3. Current customers have invested in co-creating value with Netflix, and reap the rewards with movie recomendations and tools to help them discover new movies, contributing to deep customer loyalty

I’m sure many people were scratching their heads when wal-mart backed out of the race, well I think these factors contributed to wal-mart realizing that they could not compete. Netflix did not just create a ‘good’ customer experience, it wasn’t just ‘usable’ or ‘easy’ to navigate, the actually designed a system that co-created value with their customers creating unique and valuable resources that helped them acquire customers and build customer loyalty.

Other companies/organizations that are doing this, off the top of my head:

  • flickr.com
  • Amazon.com
  • del.icio.us
  • wikipedia.org
  • google.com
  • 43things.com
  • dodgeball.com
  • upcoming.org

Anyone else think of some good examples of co-creating value with customers, email me or drop a comment?

  • http://noisebetweenstations.com/personal/weblogs/ Victor

    Karl, great topic and nice call on NetFlix.

    It seems like much of what Google does — search, gmail, API, Froogle, News, Groups — is building tools to facilitate access to and social use of content. Talk about value!

    It’ll take a while before personal information use behavior on the larger scale (i.e. beyond early adopters) changes to make this a societal trend, but once it does I think this aspect of interactive media will be a given for new products. But until then it’ll be hard for many big companies to relinquish control over their content.

  • karl long

    Yes, control, the recent article by Peter Merholz is very pertinant regarding this topic. How I Learned To Stop Worrying and Relinquish Control.

    Another aspect that is going to drive mass adoption is ‘motivation’, it’s all very well to relinquish control and put tools in place for your customers to be ‘creative’ and ‘productive’, but unless they are motivated to contribute there will be little co-creation. Netflix is a great example because the work provides direct and tangible benefits to the user, it’s not just an altruistic act.

  • http://www.marketallica.blogspot.com ??zg?ºr alaz

    Hi, i an your keen reader from Turkiye. Here is some other examples of collaborative filter

    a9.com
    Tripadvisor.com
    newsbot.msnbc.msn.com

  • http://www.goalsetting1.com Michael the Goal Setting Dude

    In Japan the most famous community site is http://www.gree.jp. Its a friend networking site. Its amazing that you cant actually register yourself. A friend has to invite you instead. This is truyl amazing.

    Also very famous is Rakuten.co.jp the biggest shopping website in Japan. Like Amazon.

  • http://www.giantant.com/antenna/ Nadav

    Do you guys actually use Netflix? The recommendations are a joke. And yet I keep rating movies (530 so far) in the hope that someday some value will actually come back to me. I’m not disagreeing with you, just pointing out that it’s a little more complicated than “everybody benefits.”