Surprising ways companies like Netflix & Amazon conduct market research!

Companies like Netflix and Amazon are leveraging the subscription business model to discover what their customers want next. I imagine that 90% of you reading this have experienced the precision of Amazon or Netflix processing your habits. And, believe it or not, this precision is available to most of you!

In a traditional business, the customer buys your product or service once, and it is up to you to try to convince them to buy again in the future. You often have no idea if they liked what they bought and what would have made them buy more, so you’re left having to guess or invest in costly market research.

In a subscription business, you have “automatic customers” who agree to purchase from you into the future, as long as you keep providing your service or product at the quality and price expected. Whilst this may feel obvious to some of you, what is missed by most, is that this data, when combined with simple NPS data, contributes massively to the value of your business.

Long-term, direct relationship

Unlike a transactional business model, subscribers are opting into a long-term, direct relationship with you. You know who your customers are and which of your products and services they use, so you have a much better understanding of their preferences than an industry competitor relying on a traditional business model.

A subscription business gives you a direct relationship with your customers and an ability to track their preferences in real time. It’s how Netflix knows which television series to produce next and how Amazon figures out what products their Prime subscribers are dreaming of buying next.

But you don’t have to be a sophisticated media giant or billion-dollar e-tailer to track customer preferences through the subscription model.  Look at subscription-based ContractorSelling.com, run by Joe Crisara. In return for a fee of c. £89 per month, you can subscribe and get information, tips, and advice on how to run a successful contracting business. Plumbers and electricians subscribe to ContractorSelling.com for Crisara’s insight, and as they start to read articles and contribute to the forums, Crisara can see what’s on his subscribers’ minds.

That’s important because Crisara also makes money from conferences. Seeing which articles are most popular and controversial among his members gives Crisara insight that help when he’s picking speakers and topics for his live events.

Another example of a simple product being turned into a subscription model would be Graze. Started 2008 here in the UK by seven friends, Graze got many of us to subscribe to healthy snacking so we could avoid the alternatives.

“What happened next?”:

·        2012 – sold the majority stake to The Carlyle Group for an estimated £50M

·        2013 – trials in the US

·        2014 – reported £68M in revenue

·        2017 – reported £76M in revenue and 7,500 stores across the US

·        2019 – Graze was acquired by Unilever

·        2019 – Graze withdrew from the US and reverted to the UK website

So, from my perspective, I reckon the seven friends avoided a load of headaches and got out for a cool ROI over four years’ work.