How did Netflix grow so fast? — To 200 Billion dollars and beyond

The story of how Netflix got 200 million paid subscribers by applying a scientific approach to customer-obsession.

Reed Hastings — Chief Executive Officer of Netflix

It’s started in……

……the Blockbuster.

Reed forgot to return a copy of Apollo 13 at the right time and he was fined $40 at a Blockbuster store.

This led Reed and Marc to found their own store — Netflix.

In August 1997, Netflix launched as the world’s first online DVD-rental store.

Netflix decided to build its brand on flat-fee unlimited rentals without late fees, shipping, and handling fees. All the pain points of using Blockbuster.

The rocket launched!

It’s near Christmas. Sales of DVD players skyrocketed. These $200 devices have become one of the most popular Christmas gifts.

The next year Netflix become an IPO.

In 2005, Gibson joined Netflix as a VP of product. He asked Reed, “What would you like your legacy to be?”

Reed answered: “Consumer Science.”

What the heck is Consumer Science?

Consumer Science is a scientific approach to customer-obsession.

  • Netflix using existing quantitative data (e.g. Google Analytics and previous A/B tests) to understand past and current people’s behavior.
  • They doing qualitative (e.g user research and one-on-ones) to listening to their customers.
  • Netflix running surveys to understand who exactly the customer is (e.g. preferences and demographics).
  • Then, They’ll come up with hypotheses. These are ideas for solving today’s problems and fulfilling future needs.
  • Finally, they start A/B testing hypotheses.

Consumer Science is about experimentation and constantly learning from customers. It’s about having “Let’s test it!” mentality. It’s the process of creating great experiences.

Above all, Consumer Science is the culture of Netflix. Not a single department.

Get started:

  • If you have enough data (e.g. 1000 conversion/month), start collecting data from specific events with Google Tag Manager to build a comprehensive database on Google Analytics. Do user research and surveys. Then, go through all of these data to identify a problem/opportunity in the customer journey. Many experts say this is the most important part. Be patient. Do your homework.
  • The second step is coming up with hypotheses. The goal is to have solutions with big impacts.
  • The final step is A/B testing hypotheses.

PS … subscribe to CGX and every Friday I’ll send you a 2-minute story about how the world’s best companies creating great experiences.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store