From Red Envelopes to Red Carpets: Netflix’s Todd Yellin Talks Innovation and Personalization

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The story goes like this: Netflix founder Reed Hastings found himself slammed with a late fee for returning his copy of Apollo 13 to the video store late. And out of his frustration, the concept of a subscription model for movie rentals—one that eliminated late fees altogether—was born. Since its somewhat humble beginnings mailing DVDs back-and-forth with customers in red envelopes, Netflix has evolved into an iconic digital insurgent known not only for its seamless entertainment experience, but also for its award-winning studio and production output.

And while Netflix’s meteoric rise might look smooth, Todd Yellin, vice president of product at Netflix, says its success resulted from relentless focus on customer happiness to ensure users come back for more.

“You want to be very consumer-centric in any business, and certainly in a subscription business,” Todd says. “To be blunt, we're practically on our knees every month saying, ‘Please stick with Netflix another month.’ It makes you humble. You’re really at the whim of the customer, and it's very important to please them.”

Pleasing Netflix subscribers, Todd says, requires ongoing, close attention to customer feedback and behavior. Netflix works hard to personalize the experience for each user, and through its relentless quest to understand customers, the company has made huge strides in providing them with the content they truly want in a seamless and effortless way.

But achieving personalized simplicity like this is a difficult task that often comes down to moments of truth.

“We only have a fleeting moment for someone to decide if they want to watch Squid Game or The Queen’s Gambit and to see if there's something that will catch them,” Todd says. “I might want to watch Squid Game because I like that Hunger Games, survival-of-the-fittest, edgy, somewhat violent, exciting content. You might want to watch it because it's a social satire about the class system and the ‘haves’ and ‘have nots.’ So, we recognize there are very different reasons to want to watch something and how we position our offerings accordingly.”

Innovation comes in both small packages and large at Netflix. When the company discovered users scrolling aimlessly through an overwhelming list of titles, it introduced a feature called “Play Something.” Taking into account revealed preferences based on what the user has already watched, it generates a personalized suggestion.

As the company continues to innovate, one thing remains certain: Netflix serves as a shining example of how even a start-up insurgent can—if it is consistently, persistently focused on discovering customer needs, desires, and pain points—upend whole industries and become a powerhouse. Netflix has forever changed the landscape of customer experience and entertainment.

In this episode, Todd shares his perspective on Netflix’s history, a few of the company’s latest developments, and how customer analytics and feedback enables the company to keep raising the bar and improving the value it delivers to customers.

In the following excerpt, Todd and I discuss Netflix’s vision to improve the consumer experience.

Rob Markey: One big challenge that organizations like yours face is a short-term, long-term trade-off. A lot of the things you do that improve customer experience play out over very long periods of time, but the investments are all made today.

Todd Yellin: Yeah. You have to discriminate between short-term data and thinking about the business long term. There are obvious things when you set up metrics that you're going after. How much does it move retention, acquisition, and consumption? Here, retention is very important.

So, the obvious thing to do is to not make the “cancel” button so obvious by burying it. Services literally do this. They make it super hard to cancel a subscription service because that moves your metrics. A product manager wins the day by going, "See, I moved retention!"

But that is the worst thing. We don't do that because your brand will start declining. So, we'll do the opposite. Instead of hiding the cancel button, we make it more obvious. Does that help short-term metrics? No. It hurts them. But does it help customer trust and long-term brand reputation and in the end, long-term revenue and profit? Absolutely.

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