A Lesson From Netflix for You

Peter : On Rad's Radar?
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

A Lesson From Netflix for You

Netflix lost 800K customers last quarter. In this article, Netflix explains that it made some errors in communication and branding. Netflix did a poor job of communicating the price increase to its customers. It did a poor job of explaining its value proposition as well. I would suggest that many companies in our space have similar issues with customer communication, especially of the value prop.

One thing that came out of this situation for Netflix is that they raised their rates; hence, raising revenue even with almost 1 million customers left. One way to increase revenue is to raise your rates. One thing that companies fear is that if they raise prices they will lose customers. So what? Even losing 800K out of 24M, Netflix gained a big revenue jump.

One thing I try to stress is that it isn't really about how many customers you have, it is how many profitable customers you have!

Ask Kodak. In its fade to black, Kodak in 2001 lost $60 per camera sold. Many companies try to break even on hardware to make huge margin on consumables (like Xbox, printers, cameras, etc.).   

In the move to managed services, carriers are realizing that customer interaction is very important. We don't know how this will scale, but I do think that the company that is most effective at delivering these services, especially ironclad security, will ultimately command the most customers and ARPU. At the end of the day it is about value that translates into ARPU (average revenue per customer) for any company. That value needs to be communicated effectively and clearly. Some of that is called Branding. 


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