Friday, November 29, 2013

BIG’s Blog: Zowie!

Talk about a two-by-four to the side of the head! That is how you get a mule’s attention. I just learned that Netflix stock price closed last week at $347.85/share.

Some of our clients and long-time readers will remember that when I started giving presentations and writing blog posts about our new model of fundraising, we actually used Netflix as an example of a 100% online company, and compared Netflix to Blockbuster, since both delivered movies for personal viewing. In those early presentations, we showed Netflix stock price at $35/share and Blockbuster at $1/share. The point of the comparison was obvious: “the market” viewed Netflix as much more valuable (35 X more valuable) than Blockbuster.

Blockbuster’s business model was to maintain its brick-and-mortar stores that had made them highly successful in the past by adding online ordering tools, but you still had to go into the stores to pick up your movies. The point of my comparing Netflix to Blockbuster was that operating 100% online gives you not only a “convenience advantage” but a “cost advantage” as well. Convenience is for the customer. Cost advantage is for the enterprise.

This point was not lost on those at our presentations who later became clients and are today building a new fundraising model that is 100% online.

It was not too much of a leap from my Netflix vs Blockbuster comparison to understand that fundraising really needs to move 100% online. I mean, let’s just take a look at what Netflix charges to access their vast online library . . . it’s only $8/month. I used to spend more than that in late fees at Blockbuster! Today’s direct mail oriented fundraisers get excited that their “average gift amount” is going up even though their absolute number of responses is going down. Would someone explain to me how this is a good long-term trend?

Netflix understands that a “low monthly amount” from many customers is a far superior economic model than trying to get a larger dollar amount from fewer. Ever heard of “elasticity of demand?” As the price declines, demand increases. Hello fundraisers?!? Somehow you don’t see that this applies to donation amounts?? How many of you are complaining that too many people send you $2 to $8? I understand THAT LOW DOLLAR AMOUNTS ARE NOT COST EFFECTIVE for your expensive direct mail programs today . . . but online???

No wonder Netflix’s 100% online strategy is more convenient AND allows them to make more money charging less . . . which allows them to GROW and PROSPER.

Question? Could Netflix have used direct mail to solicit customers and grow their business? Of course they could have. So why didn’t they use direct mail?

Two reasons:

  1. It was much less expensive to build a base of customers online and they could charge less and PROSPER.

  1. Online is where people are today and they wanted to GROW.

Keep your mail appeals going to my 86-year-old mother, but resolve to build a new 100% online fundraising model in 2014 to reach my baby boomer wife and millennial daughters.

Learn the lesson from Netflix about growing and prospering 100% online.

Join us.
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