Newsletter: Friday 29 September 2023
It’s Friday story time.
And this one is the tale of Netflix’s growth.
“Netflix was a slog,” says co-founder Marc Randolph.
You know what cracked it? Customer acquisition by word-of-mouth.
Netflix started out in an old bank building in San Jose, with a walk-in safe housing 900 or so DVDs.
Local customers received their DVDs overnight; for those on the other side of the country, it took three or four days.
This didn’t seem to affect customer retention, so for years, Netflix operated out of San Jose. If the speed of shipping didn’t make a difference, why invest in more warehouses?
One day, the Netflix team decided to test this theory. They introduced fast shipping to customers used to slower speeds – and in true startup fashion, they had someone drive two hours to Sacramento every morning to pick up the incoming DVDs and drop off the customers’ next movies.
What did they find?
That it didn’t impact retention at all.
BUT acquisition of NEW customers went through the roof.
Existing customers in Sacramento got excited about the speedier deliveries and told their friends and family. Those people were nudged to subscribe. In Netflix’s words, “Word-of-mouth was off the charts”.
Here’s the thing. This didn’t happen by accident. In fact, it’s exactly the same way that Facebook, Uber and AirBnB grew – one local community at a time, with the right product fit and message, to scale globally.
Regional word-of-mouth communities unlocked their growth, because only 8% of us buys without recommendation.
To speak to one of our team about harnessing your brand’s communities, hit the link below.
Until next time,
Book some time with us Harness your brand’s influence: The untapped potential of offline communities awaits.