Like clockwork, 1.5 million DVDs arrive each day via mail at the homes of Netflix subscribers. Even in an age of broadband internet access and streaming video services, the parade of Netflix’s trademark red DVD sleeves through the United States Postal System continues unabated.
Netflix, of course, is only the most recent example of a business whose shrewd commercial mailing operations catapulted it to success. Drawing on Netflix and other success stories, the real question is, how do you become the next Netflix?
Know that Times Will Change
In the more than 100 years since the Sears catalog first started criss-crossing the continental United States to reach mailboxes everywhere, it hardly needs to be said that the marketplace and consumer behavior have changed dramatically. Today, in a world of e-commerce websites, Sears has stayed in the game. Log on to Sears.com and find all of the functionality provided by the old catalog, plus much, much more.
The same could be said for Netflix, which has maintained its sunny fortunes even as streaming internet video reared its head several years ago as a nominal challenge to its business model. In 2007, however, Netflix pivoted from its dvd-by-mail core business model in announcing the rollout of its Watch Now service, which made available a catalog of videos to any subscriber.
Indeed, that very flexibility and forward-thinking was built into the business from the very start. “We named the company Netflix for a reason; we didn’t name it DVDs-by-mail,” says CEO Reed Hastings. Had Netflix not known the future was coming (and coming soon), it would have been a much more messy transformation.
Wal-Mart. Largest US retailer, corporate behemoth, Netflix competitor???
Believe it or not, at one time, it was absolutely the case. Wal-Mart wanted to topple Netflix from its perch and struck off into the dvd-by-mail business before realizing it was spending too much money on what was not a core constituency of its market audience. By 2005, Wal-Mart had sold its DVD rental business to Netflix and was out of the game.
The lesson? Netflix can do many things better than the competition because it has focused on one core audience and service. It’s a benefit it has used to its advantage in its rivalry with Amazon Prime, a joint shipping and content-streaming service that suffers from a schizophrenia of purpose to some degree.
Same reasoning applies to Netflix’s decision thus far to remain outside of the video game-by-mail service that are the domain of similarly built companies like Gamefly.
Ensure Customer Needs Drive Innovation
Netflix is currently following a hybrid strategy (in offering both dvd-by-mail and online streaming services) that could represent a risky straddling gambit. Yet that innovation was borne of customer needs. For now, it has allowed them to remain dominant. In the past, though, they’d failed to follow their own sage advice in branching out on a plan to divorce those two services within the company, a move that was met with howls of disappointment from their customer base.
Netflix ultimately backed off the decision and pushed ahead with its house undivided. While many analysts applauded Netflix for considering a (perhaps necessary in the long term) business decision, the company rued the day it unceremoniously announced a development that would complicate the lives of its customers.
Given the changing shape of Netflix’s business and the many prosperous decisions (the Qwikster debacle aside) it has made, it’s no surprise that the looming proposal to suspend Saturday USPS deliveries has barely registered as a blip for the company. It stands to save expenses in a world where the Postal Service delivers 5 days per week, but with its diversified offerings and focus on meeting the most important customer needs (more content offerings, rather than less at a reduced price) its business model is hardly dependent on the whims of Congress and USPS. Not bad for what was once a dvd-by-mail company.