The Netflix Account team needs to choose: should we add more Netflix subscription tiers or focus on existing plans?

Introduction

The Netflix Account team is facing a critical decision: should we expand our subscription offerings by adding more tiers, or focus on optimizing our existing plans? This trade-off involves balancing user acquisition and retention with operational complexity and revenue optimization. In my analysis, I'll examine the key factors influencing this decision, propose an experimental approach, and provide a data-driven recommendation.

Step 1

Clarifying Questions (3 minutes)

• Context: I'm thinking about our current market position. Could you share our subscriber growth rate and churn rate over the past year?

Why it matters: Helps understand if we need to focus on acquisition or retention Expected answer: Moderate growth, slightly increasing churn Impact: High churn would lean towards optimizing existing plans

• Business Context: Based on our financial reports, I assume subscription revenue is our primary income. What percentage of revenue comes from subscriptions versus other sources like merchandise or licensing?

Why it matters: Determines how critical this decision is to our overall business model Expected answer: 80-90% from subscriptions Impact: High subscription dependence would increase the stakes of this decision

• User Impact: I'm curious about our user segments. What's the distribution of our subscribers across our current tiers, and how has this changed in the last 6-12 months?

Why it matters: Identifies which tiers are most popular and if there's a shift in user preferences Expected answer: Basic and Standard tiers growing, Premium stable Impact: Growth in lower tiers might suggest an opportunity for intermediate options

• Technical: Considering our current infrastructure, how much additional complexity would adding new tiers introduce to our billing and content delivery systems?

Why it matters: Assesses the technical feasibility and potential risks of adding tiers Expected answer: Moderate complexity increase, 2-3 months of engineering work Impact: High complexity might favor optimizing existing plans

• Resource: What's our current team capacity for developing and marketing new subscription tiers?

Why it matters: Determines if we have the resources to effectively launch and support new tiers Expected answer: Limited bandwidth, would require reallocation of resources Impact: Limited resources might lean towards focusing on existing plans