We always talk about the importance of prioritizing user needs and building a product that solves these needs. What we don’t talk about as much, is how some of these features can negatively impact revenue. In this article, I explore that topic.
This week, multiple news sources reported that Netflix might be moving away from releasing all episodes at once, and will rather, like its competitors Disney +, Amazon, and Hulu, start releasing episodes weekly.
It’s easy to imagine why this would disgruntle some viewers.
More importantly, though, the question arises: when should you build what users require and when should you abandon what the user wants, in favor of what is best for the company?
Why do companies revert to revenue-generating ways?
Just like old clothes that are becoming popular again, companies are returning to old ways.
In retail, we went from personalization to mass production and now we see companies like Amazon pushing for personalization again.
But why?
1. Human needs remain the same
Over the ages, human needs have remained the same. Back in the day, people needed to quench their thirst, socialize and find shelter. Today, people still need to quench their thirst, socialize and find shelter.
What has changed is the way each of these needs is satisfied.
Although industrialization led to mass production, the need for personalization remained.
2. It’s good for the user, but not for the business
At times, we realize that although the action was good for the user, it doesn’t optimize ROI.
But, is there ever a time when you don’t need to optimize for revenue?
The simple answer to this question is contained in the answer long game vs. short game.
Let’s take the Netflix example (a simplified example):
Binge shows (short game)
User: user gets to watch all the episodes over a series in 2 days. They have high motivation to return to Netflix over this period.
Company: business revenues increase over this period (2 days).
Weekly episodes (long game)
User: users gradually watch the show over a period of 6 months because 1 episode is released a week. The user has a high motivation to return during this period.
Company: business revenues increase over this period (6 months).
So, to answer the question, solving the user’s problem is always the priority, but the method we use in solving the problem should be one that optimizes revenue (ROI/LTV).
