“In the early days we were a smallish start-up and we employed maybe 75 people. We lacked in-house research facilities and there was no finance to travel to do market research,” Netflix’s former Director of Global Marketing, Barry Enderwick told the crowd at August’s AMSRS conference.
But that changed with the commencement of a partnership – one originally designed as a retail arrangement – with Best Buy in the US, it turned out to be a pivotal early moment for the fledgling DVD retail business.
“The most beneficial side of this partnership was it enabled us to do market research in their stores. And we learned a tonne,” Enderwick said.
Even when the company received bad news it often yielded important insights. “We started to do exit surveys with people who stopped using Netflix. We tracked why they were leaving, but also got a glimpse into their future intent, which was an essential learning,” he said.
“The growth phase of Netflix was really between 2004 and 2012. Part of this growth was finding out what Netflix was to consumers. ‘An efficient vending machine’ was the feedback we got,” Enderwick said.
“An Investigation needed to happen with the larger entertainment public. So we did a deep dive of respondents. We looked into what it was people hated about renting from Blockbuster.
“We distilled these learnings into a promise of ‘Movie enjoyment made easy’. There was no mention of renting or anything transactional. Convenience was the key. Everything had to convey a sense of ease to it,” Enderwick stressed.
On the back of these game-changing, research-driven insights, Netflix subscribers went from 30 million in 2004 to a staggering 200 million in 2012.
But new challenges arose even as growth skyrocketed. “In 2006 we launched videos via streaming,” Enderwick recalled. “The quality was terrible, but studios had nowhere to go with their assets and it meant revenue for them. But then they started charging Netflix higher amounts.”
It was very revealing, Enderwick said: “We were suffering headwinds, particularly as we launched in new markets overseas.
“Take South Korea. They had fast internet and there was no stigma around piracy because they paid for everything already. Consumers there encountered Netflix and basically thought, ‘why pay them for existing content when we can get a new movie for 80 cents’?
“In Germany there was a similar issue with content. They already had a similar offering to what we had. Very memorably in a focus group, our moderator said to a reluctant member, ‘But 50 million Americans are already using this’. The respondent retorted, “If 1000 flies go to sh*t, I don’t go to sh*t”.
Ultimately, more in-depth research was the key to the next growth phase. With foreign markets largely unimpressed with the existing product, the solution for Netflix was simply to create its own. Netflix Originals was born.
“With House of Cards we had great content that we owned the rights to. With it, they could truly expand, go international and go to the world,” Enderwick said.
Basically the story of Netflix was one of three phases, Enderwick concluded. “The startup phase, growth phase, and international phase. And it was all enabled by qualitative and quantitative research.”