Netflix: Success of Simplicity

Netflix is a potent example of simplicity working wonders. It operates on a very simple business model allowing subscription for home delivery of DVD movies. Why does it work? Primarily because it is an answer to the single biggest hassle to DVD rentals: sky-rocketing fines on returning the DVD late. Providing various schemes depending on period of subscription and number of rentals during that period, it allows the users to retain the DVDs as long as he wants to without worrying about late fines. The favorable consumer experience is extended by allowing online ordering and pre-paid return envelopes for the DVDs. Additionally, Netflix also mines user behavior to recommend movies to the user based on his previous choices.

The flexibility, ease of use and comprehensiveness of choices with Netflix have resulted in a faux ownership for the users. Any system which relaxes constraints on the user experience is going to achieve greater acceptance. Beyond this, a few eternal factors have also helped the company make hay. Sales of DVD players took off around the time Netflix switched to a subscription service in late 2000, and Hollywood studios signed deals with the company around that time to counter the growing power of Blockbuster.

Netflix’s business model has redefined the DVD rental industry in such a big way that retail giant Wal Mart has backward integrated to incorporate such a system and long time competitor Blockbuster has also worked towards a similar model. Back home in India, www.seventymm.com has worked on a similar model with some success.