Two Netflix Party examples show how the DHM strategy model can assist product managers strike a balance between delight and margin.
Netflix has reduced its monthly cancellation rate from 10% to 2% during the last two decades. They achieved this by balancing delight with profit margins while creating a long-lasting, difficult-to-copy advantage. The DHM model is what I call it: Delight customers in unique, margin-boosting ways.
The following are some of Netflix's difficult-to-copy characteristics today:
technology that is unique (personalization, streaming encoding)
effects of networks (a large device ecosystem)
Economies of scale (an annual content investment of $20 billion) and a well-known brand Netflix Watch Party
Along the way, you'll face a challenge: How do you weigh the benefits and drawbacks of joy vs. margin? When do you think you'll choose to lose money in order to pleasure your customers?
We decided to optimise for the long-term rather than building up an excess of newly released DVDs to satisfy that short-term spike in demand. As a result, some consumers had to wait a week or two for a fresh DVD release during the first few months after its introduction. We dispatched the next movie on the client's movie list if the new release wasn't available when the consumer requested it, then sent the new release when it became available.