The Product Strategy That Made Netflix 📺
Morning! We are back in the swing of things after an awesome TechCrunch Enterprise, you can check out the highlights here and see our favorite part of the event a bit further down. And while we are on the topic of SaaS conferences, here’s a reminder to grab your SaaStock tickets (October 14-16) while you still can—use the code SCALEWORKS-25 for 25% off tickets.
Let’s get right to it!
📺 Former Netflix VPO Gibson Biddle is now a consultant, and we’re going to run you through his workshop free of charge. Step #1 is to apply the DHM model, which asks how your product delights customers, what makes it hard to copy, and how will it generate margin. Determining how your product delights customers is easy enough, but not everyone can provide Biddle’s required 8 hard-to-copy advantages. He’ll then have you list pricing and business model experiments which could be applied over the next 5 years. The Netflix pedigree is evident here, as their original model sold/rented DVDs, which was 90% of their revenue.
📋 After you're done brainstorming and comfortable with your answers to the three different sections of DHM, it’s time to create an overarching strategy that addresses all of them. Netflix brainstormed these 15 strategies and threw them in a table to see which criteria of the DHM model they satisfied. The only strategies that applied to all three were: personalization, streaming, original content, and sound/video quality—all of which made Netflix the massive success it is today. That’s really just the tip of the iceberg. For a complete rundown of Biddle’s genius, take it from the man himself.
🤖 We all strive to be our most productive selves, but in the age of A.I. and machine learning, productivity alone doesn’t cut it. Creativity is about the only thing humans bring to the table that bots and algorithms can’t replicate, as technologies have improved to the point where humans can’t compete on repetitive, mundane tasks. This increases the value of inventive employees such as designers, but also those in more traditional business roles who can think creatively. The challenge then becomes appraising creative talent in the hiring process, beyond the creative disciplines.
🎨 UX lesson of the day: The Von Restorff effect (or the isolation effect) believes that visually contrasting items have a better chance of being seen and remembered. It’s the same reason we choose to highlight sentences in a textbook, and something all designers lean on to draw users’ attention to areas of interest. Jeremiah Lam points out that the law is most commonly used on pricing pages, and can be used to achieve a reverse effect as a way to get a user to evaluate all options, like Slack does below.
🍿 If you want to build a business, you will have to step away from freemium at some point. The truth is that users value paid products more than free ones, and switching to paid will force the uncomfortable but important question: what do customers actually think your product is worth? Founder Coach Dave Bailey proposes these 4 concepts to help determine pricing, including decoy pricing (aka the popcorn trick). Most importantly, he advises to hold your horses and think about pricing before building product, which you’ll see is a common trend.
📙 If you haven’t noticed yet, we love pricing. So it should come as no surprise that Madhavan Ramanujam’s pricing war stories were the highlight of our TechCrunch Enterprise. We’ll spare you his 9 principles for pricing since they’re addressed in his book, Monetizing Innovation. What you won’t find in the book: nearly all participants in Ramanujam’s recent survey said their pricing strategy is based off of future innovations. He also found that 72% of these innovations failed, and those that succeeded tackled—you guessed it—pricing strategy before building their product. Just remember, price comes before product in the dictionary, and in business.