How Netflix got its first customers?

Netflix MVP

Netflix business strategy was focused around renting DVDs.

During its beta period, Netflix was known as Kibble. People browsed through its online library and ordered DVDs with movies.  The packages included the requested movies as well as a sleeve for returning the DVDs. All  shipping costs were covered by the company.

First, Marc Randolph shipped a used CD to Reed Hastings' home. Reed confirmed that the disc arrived safely. They knew then that it could work, so they launched the website. 

Netflix movie ordering was completely automated. When someone ordered an out-of-stock film, they got in a line. Netflix business strategy functioned  on a subscription model. The membership was $20.

Renting DVDs containing movies was nothing unusual at the time, but Netflix allowed people to do it online, and the whole process was easy, which increased Netflix user acquisition.

$1.9 million came from Reed as an angel investor, and another  $100,000 was from Marc. Next, Marc asked investors for at least  $25,000 from each. Some agreed, and Marc's mother was his last investor.

The guys needed to generate interest in renting DVDs. Marc traveled to Las Vegas for the Consumer Electronics Show to meet with various DVD producers, such as Sony, Toshiba, and Panasonic. Customers were hesitant to purchase DVD players because DVDs were not readily available.

Marc made a clear business offer to the manufacturers. They got an increase in their devices sales, and the guys got more customers.  In order to make people sure that purchasing DVD players was worth the cost and boost Netflix user acquisition tactics, the company added free coupons to each Toshiba DvD player sold. Toshiba agreed.


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