February 15, 2005


Apparently Netflix's ranking algorithm (for deciding which customer gets those DVDs first when they're scarce) favors new customers and those who return their DVDs less frequently -- at least, according to Will Baude and some informal research he's dug up.

Attending to new customers (especially those in the free two week trial period) seems logical enough, as does skewing the model toward more profiable customers, ie those who return their DVDs less frequently but nonetheless pay the same flat fee. Baude, a real consumer's consumer, wants to take action on this, but says he's stuck in "conflict aversion" about the situation. Does the situation really warrant action? Calculations about the profitability of different customers aside, doesn't it make sense to take care of those who use the service less? And why is a system that gets movies to the least frequent users more quickly any less fair than one which takes orders on a first come, first served basis? To my mind, there's a certain logic to a system that prioritizes users in this way.

Of course, none of this precludes a challenge from an irate Baude, based in whatever logic he can muster -- and probably Netflix should be more transparent with its algorithm if it wants to keep customers. But the implication that a system that weights some customers over others is unfair will have to be defended.

UPDATE: Baude has more.

Haggai  {February 16, 2005}

Interesting, I just re-joined Netflix this week, having first been on it a few years ago. Because I really need to watch MORE movies than I already do...yeah, that's it...

barrett  {February 16, 2005}

I could argue that Netflix is being completely ass-backwards. I would think the customers that use Netflix less are the ones whose accounts may be more profitable but that the high-volume Netflix users are the ones more likely to evangelize and pull new customers in, making them more valuable customers.

Also, I'm guessing if a high-volume customer doesn't get what they want from the system they're more likely to know enough to switch to another system while a low-volume customer is less likely to have the information about those other systems. Customer acquisition is expensive and much pricier than customer retention.

no milk  {February 16, 2005}

while i think this may be the "profitable" way for netflix to handle scarce titles, it may be a dealbreaker for many more prolific borrowers and may end up causing them to jump ship to other services when they continually do not get their preferred titles.

to me, the optimum solution is to review the borrowing rates per title and make sure you have sufficient inventory. also, a ranking of how desireable a title is to you in terms of priority may be useful.

paul  {February 16, 2005}

It would seem to make sense to coddle your most enthusiastic/outspoken customers, rather than the other way around -- at least for profitability's sake. I was more interested in the question of fairness that Baude seemed to be bringing up, because it seemed underdefined. Also, it has interesting PR implications.

But no milk is right about the optimum solution... I've personally found the waits (which have only recenly started to appear -- I'm a pretty new customer) annoying.

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