By now, everyone on the planet knows Netflix. I have had my share of people over the years say to me, “man, marketing Netflix back in the day must have been easy because it was such a no-brainer from a value standpoint.” Nope, that wasn’t the case at all. In fact, we were not only trying to get people to buy into the service but modify their behavior (the process by which they rented movies). Perhaps some context and an example of how we went about it are in order.
The business environment in 2001
By April of 2001, when I was hired at Netflix, the dotcom bust was in full swing. Company after company with either flawed business models or poor execution were imploding. Mainstream consumers hadn’t been buying online all that long and this didn’t help win them over.
There was no social media yet. Friendster was founded in 2002, MySpace in 2003, Facebook in 2005, Twitter in 2006, and Instagram in 2010. So no free or paid marketing opportunities there.
The smartphone, which has changed not only the way we interact with the internet, but how we watch entertainment didn’t really exist. It wouldn’t for another 6 years until the iPhone ushered in the smartphone era.
And DVD players, while starting to mainstream, were still a bit expensive and as such still very much had an early adopter audience.
As you can see, marketing the subscription-based, DVDs-by-mail was not necessarily a slam dunk.
Renting movies in 2001
If you wanted to rent a movie, you went to the video store. The largest operation was, of course, Blockbuster. In hindsight, it was painful. You had to drive to the store, hope they had a copy of the movie you wanted, wander the aisles looking for alternative if not, deal with surly counter folks (ok, not all were surly, but plenty were in my experience), drive home, watch the movie (or not, sometimes you didn’t get around to it), drive back to the store to return it before you were hit with late fees that cost almost as much as the rental itself (btw, as of 2000, Blockbuster made 16% of it’s revenue off of late fees — not exactly customer-focused)
What Netflix was in 2001
At the time, Netflix was DVD-only with just one distribution center in California. Which meant if you were a customer on the East Coast, it took four days to get your DVD because we shipped via the USPS.
There were around one hundred and twenty five employees when I started but just three months later that count was reduced to seventy five due to layoffs.
Marketing Netflix in 2001
So, now that you have context, let’s look at marketing the service itself.
Today, marketing at Netflix is best summed up as “Netflix as content.” But back in 2001 (and really up until Netflix Originals) we didn’t own any content so we had to market “Netflix as a service.” In other words, we had to build a brand out of whole cloth. And unlike today, the only movie assets we could use without going through the onerous process of procurement and approvals from the movies studios was cover art itself. Under the law, we could legally use cover images to market Netflix.
But even then we didn’t have carte blanche. Which we found out first-hand when yours truly used a cover from Tom Cruise’s Vanilla Sky on a co-promotion with Pop Secret. Turns out, mega-stars like Cruise have right of refusal over all uses of his image and thus we had to destroy around $900,000 worth of already printed boxes.
Naturally, we used every paid and earned marketing channel we could afford in an effort to increase our subscriber base. But without the ability to highly target our efforts, how were we going to get in front of those early adopters?
Enter the Red Ticket.
Honestly, I’m not 100% sure who created this program but I believe it was our then VP of Marketing and future CMO, Leslie Kilgore. She approached the OEMs (Original Equipment Manufacturers) in Asia who were making the DVD players with an offer.
If they placed our big Red Ticket on top of each DVD player inside the box before it left the factory, we would track sign-ups that resulted from those tickets and, if they converted from the free trial to a paying subscriber, we would pay the OEM a bounty.
Sure enough, that got us in front of the right audience at the right time. After all, when would a person who purchased a DVD player be most open to Netflix? When they are unboxing said DVD player.
And it was smooth sailing after that!
Nope. While that red ticket did a tremendous job for us, we still had to battle ingrained DVD rental behaviors, battle big competitors like Blockbuster, Walmart, and potentially Amazon, and build a brand at the same time.
That last part brings me to my final point. It’s easy to look at Netflix and say, “I want that!” when it comes to brand. But we worked at building the Netflix brand via everything we did from customer experience to marketing. And it took years. Granted, today there are more channels than ever, but it’s also increasingly hard to cut through the noise. Which is why it might be tempting to build brand by buying it via “brand marketing.” The thing is, that only works if you have a ton of money to spend on sustained brand campaigns (which most startups do not). Without brand recognition, your money (along with your brand messaging) just evaporates.
Instead, establish your brand position (brand promise, brand attributes, and brand story) and have it inform everything you do including performance marketing. Ideally, your brand position would be based on consumer research. Can’t afford to do consumer research? Not a problem, make your best guess, get it down on paper, and go. After all, you started the business because you’re solving a problem for someone so you should have some idea what you want consumers to think of when they think of your company (but don’t forget to do the research as soon as you can — at Netflix, it was transformative).
When you establish your brand position and apply it to everything you do — from performance marketing to PR, you start to build brand. It’s what we did at Netflix and it works.