The Netflix Advantage

By Peter DeHaan

January 31, 2007

Go back with me a few years.  Internet-centric companies were the next big thing.  It was purported that they would change how business was done, render traditional commerce models obsolete, and usher in a new way of valuating companies -- at historically unfathomable and untenable levels.  They were the dotcoms!  Their basic premise was insightful, if not somewhat simplistic and naïve.  With the pull of the ubiquitous Internet and the support of massive server farms, their business models (that is, their technological infrastructure) would be infinitely scalable, while customer service would be strictly self-service.  This would keep costs down and the employee count even lower.  Page hits and profitability would be the inescapable conclusion.  Unabashed euphoria was everywhere.

The problem was that most people were not ready for and did not embrace self-service via the Internet.  Not surprisingly, the dotcom bubble burst.  Stock prices plummeted, bankruptcies ensued, and computer hardware was peddled for pennies on the dollar.  Most dotcoms dematerialized even quicker than they had materialized.  Some companies tried to retool, admirably adhering to the faltering dotcom mantra; it was an effort in futility.  A few insightful innovators listened to their customers and changed their paradigms, wisely supplementing their limited and lacking self-service Websites with full-service human beings.  Call centers were built and staff was hired.  The clamoring dim of the masses was largely satiated and these adaptable entities survived.  Some even thrived, having found the perfect mix of massive computer technology and the personal touch.  Call centers, not surprisingly, breathed a sigh of relief, sensing that the dotcom threat of self-service efficacy had been found out to be nothing more than implausible fantasy.

But what about Netflix?  Born in the dotcom era, Netflix (www.netflix.com) embodies the highly scalable, self-serve model that had failed most.  Not only has it succeeded, it has done so exponentially and most effectively.  For the uninitiated, Netflix is an Internet-based DVD movie rental service.  Members log into the Netflix Website, browse a selection of 70,000 titles, putting requested titles into their personal queue, where they prioritize their preferred delivery order.  The first movie generally arrives via mail the next day.  There are no due dates, no late fees, and no shipping charges.  Once viewed, the DVD is returned via a prepaid self-mailer.  Upon receipt, Netflix automatically sends the next movie in queue.  Netflix's 42 regional shipping centers manage 42 million DVDs and ship 1.4 million a day.  Their website includes movie write-ups, reviews, member ratings (1.5 billion of them), and recommendations for titles similar to what has been enjoyed by that member.  Interestingly, Netflix customer service is 100% self-serve.  [Netflix does have a toll-free number for prospective customers and an email address for media queries -- which is how I found out about the toll-free number; I never did find it on their Website.]

With Netflix, there are no call center agents, no email support, and no text chat options.  Its Website does have a help section that is actually helpful.  Its list of FAQs that are truly questions that one might want to ask (I did); there is also context specific hints, instructions, and explanations.  The site is quite intuitive and easy to use. 

Given all this, is Netflix an anomaly or an indication of what is to come?  Although is atypical, it is also a model on how to effectively and successfully design a Website, support customers, and engage visitors.  It is, or at least it should be, a peek into the future.

So what does Netflix have to do with call centers?  Not much -- and everything!  The overall failure of the dotcoms buoyed concerned call center owners and managers whose future is predicated on callers needing assistance.  This reprieve, however, is not long-term.  Although wide-scale defections from full-service call centers to self-service Websites is not an eminent threat, it is one, nonetheless. 

Call centers are therefore advised to pursue a two-prong strategy.  The short-term -- and continuously ongoing -- initiative should be to look for ways to differentiate oneself from the competition.  This includes other call centers and contact centers, as well as self-serve Websites.  Make your services stand out; do what others don't -- or can't; position yourself to be indispensable.

Long-term, be aware that commerce, in general, and customer service, specifically, will migrate to the Web.  What can your call center do to capitalize on this?  Certainly offering email support and text chat service will mitigate this trend, but, as indicated by Netflix's success without those services, this is a limited, albeit necessary, solution.  For the ultimate answer, ask yourself what services -- any service -- could you provide to the likes of Netflix and its future followers?  The answer may have little to do with the call center business you currently run, but it will have everything to do with your long-term viability.

Fortunately, there is time to consider, study, and plan for these eventualities, but preparation is requisite because this is a threat that won't go away; ignoring it will be to your peril