Addressing a Customer Pain Point as the Basis for a New Business

What’s at the heart of a good customer-centric business model? We believe that it has four significant components:

1. Ensure that the model is designed to address or mitigate customers’ moments of truth.

2. Ensure that you address those moments of truth with innovative approaches that take full advantage of available technology.

3. Hone an efficient execution engine that: a) lets you make money while you’re meeting customers’ moments of truth, and b) builds barriers to entry through experience, scale, and distance traveled on the learning curve.

4. Entice customers into contributing value to your business as they reap the benefits from the products and services you provide

Back in 2003, we described Netflix as a good example of a company that built its very successful business by addressing moments of truth in the “I want to watch a movie at my convenience” scenario. Netflix’s innovation was to eliminate the guilt and inconvenience associated with returning rental movies and the affront of being charged late fees. The new Netflix customer scenario was a big hit: Pay a monthly fee. Rent as many movies as you want each month. Return them when you’re done with them and get a new one in the mail within 2 days. No pain. No fuss. No bother. And a great database of movies to choose from.

Now that digital downloads are easy, NetFlix still continues to thrive, having built customer loyalty by addressing the rental movie convenience issue and by embracing digital downloads aggressively. Although I have lots of other choices for digital downloads (on demand from my cable supplier, Amazon, etc.), I still think of Netflix first when I want to watch a movie or a television re-run.

Most NetFlix customers now enjoy both forms of movies—the ones they receive in their physical mailboxes each week and the ones they download on impulse. (The fact that Netflix is still thriving is reinforced every time I go to my local U.S. Post Office, which has three mail slots: Our Town, Out of Town, Netflix.)

I interviewed Netflix founder, Reed Hastings five years ago, and asked him what he thought Netflix’s most enduring “secret sauce” was. What he said surprised me. He said that it was his millions of customers’ ratings and reviews of movies. When I thought about it, I realized that he was right. There’s a lot of value to me in Netflix’s ability to recommend movies that I will like. There’s also a lot of value to others in being able to recommend movies that I have watched and enjoyed to other people who have watched some of the same movies.

The fact that my movie watching behavior and ratings helps both me and others find more movies we would like is a virtuous circle that benefits Netflix, me, and other customers.

Another Customer Pain Point: I’m Not Home When the Package Delivery Arrives
Kinek is a new company with a new service that is just rolling out. It too is designed to solve a customer pain point. Providing alternate locations for packages to be delivered is not a new idea (neither was movie rental). But there is definitely room for someone to “nail” this scenario in the U.S. In Japan, customers are used to stopping by their local 7-11 neighborhood store to pick up packages that are mailed to the store to be held for them so they don’t miss a delivery when they’re not home. In North America, there isn’t one player that everyone thinks about when they want to have an important package delivered without waiting at home to sign for it.

Ronni Marshak took a look at the Kinek Package Delivery Service that is just now rolling out in the U.S. and soon in Canada and other countries. She evaluates the customer experience as well as the business model. The service delivers peace of mind as well as packages by using simple technology well.

Kinek relies on multiple business partners to serve as its package pick-up locations. The other thing it looks as if they’ve done right is to make it easy for partners to join their ecosystem. Link to Ronni Marshak's Report

Comments

[Bill Self]

Patty,
Thanks for your thoughts. They are an excellent reminder that customer-centered ideas can be found by overcoming the challenges with existing services. (Movie rentals and alternate package deliveries already existed, but were improved upon). Organizations don't fully understand their product and service offerings unless they explore and correct the pitfalls that their customers face.

Great post. -Bill