Netflix as a Model: How Innovative Business Owners Are Cashing in on Netflix-Style Success

Watching trends in consumerism is important for businesses of every type. Looking at what is today's "luxury" points to what tomorrow's "necessity" will be. And while we continue to operate from offices, storefronts, and warehouses, the Internet has become an integral part of how we do business - because consumerism demands it.

In recent years, there has been a very real trend that affects Internet-operating businesses most strongly: the Netflix model. Start-ups that tweak the Netflix model, the rent-not-buy concept, in innovative ways are reaping huge rewards - and they're doing it with very little overhead.

What is the Netflix Model?

When Netflix began their service, it was a stroke of genius. Regardless of where things might lead, as a business model Netflix revolutionized the way we rent movies - and movie rental services had to scramble to compete by mirroring that model.

The true genius behind the Netflix Model is the way it plays into the way customers view goods. More and more, we're becoming a society that practically worships the temporary. If we can spend less but still have the feel-good associations of a luxury item, we'll take it. If that luxuy item is a temporary thing, which we don't have to update or maintain, we're even happier. Using the Netflix model, a customer gets just that - a product that doesn't take up a large part of their budget, that they don't have to mess with, and when they're bored with it they can get a new product without any hassle.

Broken down, the Netflix Model looks something like this:

PRODUCT
Membership Levels
Rentals based on levels
Exchange product as little or often as needed

Beginning at the top, using the Netflix model would begin with focusing on a very specific type of product. Movies, games, designer handbags, baby clothing, baby toys, fine kitchen items, even luxury cars all work with the model. The product must be luxury in some way - in other words, it should be something that the average person either couldn't afford to purchase outright, or couldn't afford to purchase as many as they'll be able to rent and experience.

Membership levels are then determined based on the product. The higher-end luxury item you're looking at, the more membership will cost. Factored into this cost are things like the full cost of the product, maintanence of the original product, replacement of the product, and delivery fees.

Next step down the ladder is the number of rentals a member is eligible for, based on their membership level. In terms of a product that isn't like movies, which can be counted in the number of items, you can change this to mean the quality of rental based on membership level. For example, baby clothing could easily be worked in terms of quantity. At level A, the member will receive 25 pieces of clothing each time that they return the "rented" items. At level B, the member will receive 30 pieces of clothing, designer shoes and a diaper bag. You get the idea. If you're looking at a product that can't really be valued in quantity, go for quality. Luxury car member A pays to have an Audi each month. Luxury car member C pays to have a Ferrari each month.

The genius behind the model is simple: customers are entertained by discovery, freeing themselves from the hassle of ownership and possessions. Business owners reap rewards based on the fact that membership pays more than what most customers will ever actually use.

Examples of the Netflix Model

Creative business owners have been adapting the Netflix model increasingly over the last year, but they're few enough that the entrepreneur definitely has a chance to get in on the trend and make a serious impact. Want a few examples of successful Netflix model users? Here you go:

BabyPlays - http://www.babyplays.com/ - This website operates a toy rental service that cashes in on the fact that parents are in constant need of new toys for their quickly growing child. During the first formative years, baby's parents spend thousands of dollars encouraging play - and then groan with frustration when the child has grown out of the toy in three months. It's a fact of parenthood. Using the Netflix model, BabyPlays offers monthly subscription rates that range from $36.99 to $64.99. For the cost of membership, parents receive four to six toys by mail each month, keep the toys as long as they like, and send them back to receive a fresh batch.

Lütte-Leihen - http://www.luette-leihen.de/ - A German website and company, the owners of Lütte-Leihen have also found a way of cashing in on the age group that grows in to and out of products the most quickly. Their service is based on membership levels that start at $26 per month, allowing parents to choose a layette set that is based both on quality (brand name) and quantity for their membership level. The layettes come in a limited range of natural, neutral colors and patterns created from 100% organic cotton. So parents aren't just getting a good deal because they're set in the baby clothes department, but they're also getting clothing that is good for their baby and the environment.

Bag, Borrow or Steal - http://www.bagborroworsteal.com/ - A designer handbag firm located in Seattle, this company raked in 8.25 million in venture capital during the month of April, 2006. For a very reasonable fee that starts at $19.95 a month, members have access to designer handbags that they pick and order online and get to borrow for as long as they like. Last spring, the company expanded to also offer women's jewelry and watches by Tiffany, David Yurman, and other big-name designers. Based on the success of Bag, Borrow or Steal alone, businesses have sprung up around the world mimicking their success - From Bags to Riches, Secret Boutique, and Bag, Steal and Borrow have all used the original concept as their own "Netflix Model" to success.