In the early days of Netflix, the company was trying to be the Amazon of DVD movie rentals. To get feedback on how to improve their service, the execs held a number of focus groups with customers.
After one such focus group, Mitch Lowe and the rest of the executive team overheard something that changed the course of Netflix forever. A young man said that when he rented a DVD online, he had been in the mood for a comedy, but by the time the comedy arrived in his mailbox he was in the mood for a drama. It was a lightning rod moment.
By listening to customer feedback, Lowe and the other execs were able to dramatically improve the Netflix experience for customers. Speed was important. So Netflix built more warehouses over the United States between 2005-2008 to make the mailing time shorter so customers could get that comedy movie when they were in a comedy mood.
Customer convenience was also critical. So Netflix let customers keep a movie as long as they wanted to avoid late fees and so if they were not in a comedy mood when the movie arrived, they could wait until they were to watch it with no financial penalty.
In his winning culture keynote talk and business interviews, the CEO of MoviePass explains the two principles every entrepreneur should follow to ensure startup success: listen to customer feedback and simplify the process.
Listen to your customers
When Netflix was founded in 1997 by Reed Hastings and Marc Randolph (Lowe was hired soon after), Blockbuster was the biggest movie rental company in the United States. But people hated the experience: the rental process involved long lines and having to return the movie to the same rental location.
Instead of listening to their customers, Blockbuster tortured them with late fees. This opened up an opportunity for Netflix to succeed by eliminating long lines, return trips, and late fees. If you listen to your customers, your business can beat the competition.
Lowe tells another customer experience story during the time he was a consultant for McDonald’s. Yes, McDonald’s. In 2002, McDonald’s food sales were decreasing. So they brought in Lowe in 2003 to advise them on their Redox DVD rental kiosks they were installing in restaurants to attract business.
But movie rentals didn’t significantly increase McDonald’s food business; neither did creating healthy menu choices. The customers hadn’t asked for these things.
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When McDonald’s finally asked what their customers wanted, it turned out to be clean bathrooms. The principal customers for McDonald’s were mothers (buying happy meals for their children) and these mothers were turned off by the dirty bathrooms in the restaurants.
When McDonald’s finally listened to their customer feedback and made sure the bathrooms were clean, their food business rebounded. The stock went from 14 to 90 dollars.
Simplify the process
Cable companies are notoriously customer unfriendly. From waiting for days to have cable installed to a user-unfriendly, video access menu, the process of viewing a movie or show is difficult. If you like a show on cable, you may be able to watch it anytime, but after you finish watching, you cannot easily select the next episode.
The menu process is too complicated. You have to click several times on the remote to find the video menu again to start the next show in the series.
Netflix understood customers didn’t want to have lots of steps before watching the next episode in a series. So the company simplified the process by immediately bringing up the next episode and starting the video automatically.
Lowe states that the startup companies that succeed simplify their internal and external processes. Amazon has one-click purchasing, Southwest flies only one type of plane, and Apple integrates all of its products.
At Redbox, Lowe says the company succeeded by simplifying the transaction process. Customers either rent or return. There’s no reserving, purchasing, or rating of films. Instead of endless movie choices, Redbox only offers the 140 most popular films (which make up 80 percent of all DVD rentals in the U.S), making it simpler and faster to choose.
If you want to succeed, Lowe suggests simplifying your business by cutting out the clutter. Each step you put between a customer and a transaction leads to customers dropping out.
Therefore, Lowe advises you examine each step in your business process (selling and internal) and get to the shortest possible route possible for customers. And the best way to do this? Simple, listen to the customer.
