Winning the Customer Journey Battle: Netflix vs Blockbuster Case Study

By Stratability Academy

Published: April 25, 2019

Last Update: May 4, 2020

We know a brand has established a strong position in customers’ mind when its name becomes a verb, like Google, Uber, Skype. And one such brand that cannot be ignored in this digital age is Netflix. Netflix has come a long way, starting from an online DVD rental service to the world leader in the streaming industry. The company completely changed how people watched movies and, consequently, destroyed the throne of Blockbuster, once the giant brick and mortar video rental store in the U.S. Interestingly, in 2000, Blockbuster turned down the $50M offer to purchase Netflix, just to find itself decease under the reign of Netflix 10 years later. How did Netflix flip the table and nail the customer journey as of today? How did it master the art and science of digital transformation on its strategy journey?

Let’s explore what happened based on the pains and gains in the customer journey.

Blockbuster’s Customer Journey

Before Netflix, the age of Blockbuster…

Back to the late 20th century, when Netflix was just a small start-up, Blockbuster dominated the video rental industry with over 9,000 stores around the globe. With the emergence of DVDs as the new video medium, Blockbuster managed to get exclusive deals with big Hollywood studios to rent new DVD releases after cinema showings ended. At that time, almost every household had a videocassette recorder (VCR) for the purpose of video watching, and Blockbuster rental stores were people’s frequent destination for movie selections.

Then, at one point, people realized they went to Blockbuster stores not because they enjoyed the experience but just because it was the only choice for them to watch new movie releases. With that being said, Blockbuster store visits were far from convenience. Imagine one Sunday afternoon, your kids were home and you wanted to watch a movie with them. Then you would probably spend the next few hours driving them to a nearby Blockbuster store, going through hundreds, if not thousands, of DVDs on the shelves without a catalog or any recommendations from store attendants, except for the new releases which were charged out at a premium, getting eyestrain from reading the titles, and arguing with your kids what to watch. By the time you got home, you realized you had not cleaned up the VCR machine’s video head after the last watch, so you do that first, before sitting down on the couch to play the DVD you brought home earlier. How much enjoyment was left then? But it was not the whole story. After some days of watching the movie, you were too caught up in your work and forgot to return the DVD on time, thus you had to pay the store an exceptionally high late fee. In fact, late fees comprised of a large pie of Blockbuster profits. It was an unpleasant experience that actually drove people away from the business.

Netflix’s Digital Transformation Customer Journey

Then Came Netflix – a Market Disruptor

As a former Blockbuster customer, Netflix CEO Reed Hastings thoroughly understood the issues with that customer journey, and he initially started Netflix as a mail-order DVD subscription service to eliminate the lengthy in-store visits and annoying late fees. To make up for the lack of physical customer interaction, Netflix offered lower prices (monthly subscription fees for unlimited rentals) and implemented efficient order-processing computer systems. After just a few years, from a small business, Netflix steadily grew its revenues and got Blockbuster on guard.

Nevertheless, it was when Netflix launched its video streaming service that saw the end of Blockbuster. Netflix, again, took a deep dive into the consumer journey and foresaw the future demands for instant-access entertainment at the convenience of Internet devices. With the new streaming service, Netflix customers could browse a detailed digital movie catalog and press play in a second with no need for a physical DVD. The streaming service of Netflix is so successful that it accounts for one-third of downstream Internet traffic during peak hours in the U.S.

In 2013, upon discovering the potential hype of binge-watching, Netflix started to produce in-house content, known at Netflix Originals, and released all the episodes at one time. Its first original series House of Cards still remains one of the best dramas on Netflix. Besides, Netflix took on customers’ desire for personalization and came up with the smart content recommendation system which was backed by machine learning. Each customer now has a customized experience on Netflix based on their personal habits and preferences. This is where Netflix built up its sticky service to get customers addicted and keep them coming back for more.

Netflix’s popularity can be exposed by impressive numbers: circa. 150M users, almost double the runner-up Amazon Prime; two-thirds of Netflix users share their accounts with others, increasing the actual viewers by 2.5 times; 10 hours spent on Netflix weekly by average U.S. users; 23 languages used and 57% of international users; etc… Considering the recent increase in the share of users outside the U.S., Netflix is drastically growing its international content in the library.

And it gets that the customer journey doesn’t stop changing either. Netflix has been extending the customer journey via cross-platform partnerships. It has teamed with telecommunications and media companies like Vodafone, BT, and Sky in the UK, who all offer Netflix as part of their mobile or cell phone packages, or TV packages, and you can now control your Netflix accounts with voice-activated home automation IoT apps like Amazon Alexa, and Google Home. All of these customer journey extensions are there to save customers time and to provide convenience, and continue to provide better customer experiences.

Hasting could not have applied all of these digital transformation changes to the Netflix business model so successfully without closely following and predicting the customer journey and even testing with customers via co-creation. For a service company like Netflix, customer experience is king, thus the importance of the customer journey mapping process when it comes to lifting a business or an organization to another level, and changing the ‘game’.

Digital Transformation success through the customer journey

Netflix’s success results from the continuous effort of understanding the customer journey and delivering value driven; customer co-created; and network connected services; three digital transformation approaches introduced in THE STRATEGY JOURNEY Framework. The customer journey mapping process and digital transformation approaches, go hand in hand with each other, which explains the failure of Blockbuster to digitally transform due to its customer experience blind spot.

So when it comes to innovation and defining any new service, don’t forget to ‘map the customer journey‘ as Reed Hastings and Netflix did.

Stratability Academy

About the author

Stratability Academy is a provider of strategic management, innovation and digital transformation learning materials based on the THE STRATEGY JOURNEY Framework, and is the publisher of THE STRATEGY JOURNEY book (2019) by Julie Choo and Graham Christison.

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