Netflix cofounder Marc Randolph on the 3 questions entrepreneurs should ask before starting a subscription business
," where he advises other entrepreneurs on growing their businesses. Many of the entrepreneurs come to him for advice on tackling the subscription model that Netflix so successfully built.
For example, a year after he and Hastings launched Netflix, several thousand DVDs were on the warehouse's shelves. When they asked themselves why Netflix charged customers each time they wanted to replace a disk, they saw an opportunity to pivot to a monthly fee, with the option to rent as often as they wanted.
"The problem is how badly do you have to completely contaminate your product to make it work that way?" Randolph said."Product contamination is the biggest mistake a business can make in shifting to a subs model."A subscription model must offer a product that a customer will continually want, Randolph said. For example, he added, if someone buys a house, they likely won't want to purchase another for at least seven years.
Another way to determine whether the subscription model is right for your business is to explore different levels of membership.
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