By Nikolas Vogt
Founder, Growth Academy | Ex-Growth Marketing Lead, Google | Guest speaker, Santa Clara University
Sometimes you have to take a step back to leap forward. Netflix is for the first time launching a pre-programmed, linear channel called ‘Netflix Direct in France what sounds like quite an unconventional move at traditional TV.¹ What seems counterintuitive at first is actually quite genius from a growth strategy perspective.
Let’s find out why, by taking a look under the growth hood. Here are three reasons why Netflix’s growth strategy of plugging into cable TV is so powerful:
1) Solving for “Paradox of Choice”
Seemingly obvious advantages of streaming services are the flexibility of on-demand entertainment and the sheer abundance of content. Especially in North American culture more options should always be better (as standard economics assumes). Now, have you ever spent hours browsing through the massive content offer of streaming services before you abandon your TV and grab a book instead? Exactly.
This is what scientists call “Paradox of Choice”². Oftentimes, less is more and consumers experience “choice overload” when facing too many options.³ Choice overload can result in spending less, decreased satisfaction after the purchase, and even making no decision at all.
This is why Netflix’s growth experiments with linear TV programming could be a game changer: It basically counteracts choice overload by programming the content for you (making your choice easier by decreasing the set of options). This makes even more sense when taking cultural norms into account. European markets like France seem to prefer a classical ‘I just want a lean back’ TV experience which could also explain why pay TV constantly struggled in countries like Germany or France.¹
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Browsing through the massive amount of Netflix content could sometimes cause “choice overload”
2) Reducing “cognitive load”
The above is related to “cognitive load theory”. Our brains have only limited memory resources and suggests that heavy mental efforts can get in the way of learning or making decisions.⁴
Looking at ‘Netflix Direct’, these limited resources could explain why some people struggle with picking a new TV show to watch in the evening after an already busy day at work. Additionally, finding something that your whole household enjoys can make things even more stressful, which makes decisions even more complicated. In such cases people might favor a more passive consumption like traditional TV because they already had to make decisions the whole day and probably do not want to make further decisions during their evening wind down.
3) Front-loading product value
And finally, let’s think about how this ties into entering new markets. It is tough to convince people of a rather new product category like streaming when almost every household already uses a competitive system that has OK, familiar content and on top of it is almost free, at least in most parts of Europe.
The classic strategies to tackle such challenges usually involve above the line marketing campaigns to raise awareness combined with limited trials and offers such as money back guarantees. Netflix already excels at both: It is hard to miss Netflix’s massive out of home campaigns and their sign up experience is designed to make it mentally easy to try.
But you can only go so far with this classical approach before you hit a ceiling that forces you to look for new distribution channels. And that’s where their cable TV launch in France comes in. The goal is basically the same: Get a foot in the door and have people experiencing the product value as soon as possible and with the smoothest user experience possible. A TV channel allows Netflix to ‘front-load’ a big part of their value proposition that was previously behind a paywall. It gives previously inaccessible audiences a smooth pathway to experience original Netflix content by simply switching on their TV without signing up for a subscription.
“A TV channel allows Netflix to ‘front-load’ a big part of their value proposition that was previously behind a paywall.”
Even if you cannot access the whole Netflix value proposition at once, chances are that the unique value of their original content might win you over to consider a full Netflix subscription. This shows you how a free ‘Netflix Direct’ channel offers a massive upsell potential to their paid subscription, similar to a freemium strategy. Even if this upsell will not work as expected they could still pivot and expand on this ‘cable channel’ opportunity and monetize their increasingly exclusive and original content with ads.
We hope the discussed concepts give you a good insight into the growth strategy behind Netflix Direct TV program. This was just a little excursion into the world of growth strategy, if you want to learn more about outcome-oriented growth strategies, check out Growth Academy and join our growth strategy courses designed by leaders from Silicon Valley and the European Tech Scene (Google, Amazon, TikTok, Spotify, Skyscanner, and more).