Beware the Sample of One!
Andy Tarczon, Founding Partner
July 29, 2011
We had an interesting comment submitted to TDG’s website this week (name removed for obvious reasons):
“Just recently read an article on MSN website that stated TDG conducted a survey of 500 Netflex consumers and that most will stay with Netflex. Well for the record, I was not one of those survied, but I am telling you in September when the increase will begin, I will be cancelling my service with Netflex and subscribing to Blockbuster instead!”
This submission made me a bit frustrated, and not just because of the poor spelling.
Too often we (both you and I) sit in meetings where product and strategy decisions are being made without a complete picture of either the market into which we are selling or the end user of our product/service. I recall one of the worst offenses being at an investor meeting where the allocation of funds was determined by the activities of someone’s niece with their portable device. Millions of dollars resting on a sample of one…
With almost two decades observing new technology and products, these things shouldn’t surprise me...but they still do.
Such was the case with the reaction surrounding Netflix’s recent price hike. Yes, Netflix raised prices for those that use both DVD-by-mail and streaming. Yes, you’ve probably seen our recent research on what dual-service Neflix subscribers will do — if not, you can read it here. The person who submitted the above response obviously had read the material, then sought us out on the web to submit this comment. But taking this note at face value would be dangerous. Read more deeply and you will see:
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This person took the time and energy to find our website and respond. Kudos for the effort and thanks, but check back with me in a couple months and we’ll see what you did. Better, I have your contact info, so I’ll call you.
While I may be picking on this one comment (we received a bunch), the media hype surrounding this announcement certainly focused on the disappointment and anger. A reported 80,000 people posted messages on the Netflix Facebook page - some supported the move, but the majority were negative.
Let’s run some basic math. Netflix has 25 million subscribers, 60% stream (according to TDG’s consumer research) meaning 15 million people are estimated to use the streaming service. Divide by 80,000 (let’s assume all comments were negative and everyone only posted once – work with me here) and we end up with 1 in every 188 streaming customers having complained on the Facebook site — in other words, 0.5% of Netflix streamers voiced a gripe on Facebook.
But, if judged by the number of press outlets and analysts that cited Facebook comments and e-zine polls, you wouldn’t know that these consumers were in no way representative of the dual-service Netflix subscribers in general. I'm not discounting that volume, but people who reach out and express their comments - in social media forums or even in contact us forms - are but one small audience of overall subscribers. That’s why TDG went to the expense of surveying a random sample of actual Netflix users. And guess what? While their disappointment with the price increase was obvious, there was nowhere near the animosity and anger expressed in the media.
Ladies and gentlemen, at the risk of infuriating people further, this is not the last time we are going to see these price hikes or model adjustments. As we examine the impact of the Netflix announcement, as we discuss Fox’s new 8-day online delay, and as we ponder Nielsen’s announcement that OTT is actually impacting viewership (as TDG long ago predicted), we had better all brace for more changes ahead.
If you’d like to voice your opinion on my opinion, please feel free at www.facebook.com/tdgresearch.
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