An Outage at Netflix

A lovely (to us, not so much to Netflix) example of how to make a value argument in sales arose after a recent Netflix technical problem caused their web site to go down, and shipments of movies to stop for days.

The unknown technical issue was rumored to be internal to a proprietary software solution Netflix uses to manage their movie reservation/shipping/check-in/check-out processes. The head of Netflix operations actually posted some status on their blog on Tuesday, apologizing for the problem. He posted again on Wednesday, then two more times on Thursday. All shipping function was not yet restored when we started this article.

How does this relate to value and sales? The best sales arguments compel action based on a reward if you take action (buy) or a risk if you don’t. If you read the various articles about the outage, a relevant set of facts can be easily found, and those facts provide the base not only to make such an argument, but to put a number on it (quantify it).

Some key info:

  • Up to 1/3 of the Netflix 8.4-million-person customer base was affected
  • Netflix ships around 2 million DVDs/day
  • Netflix has promised credits to those affected.
  • This problem has happened before, for a shorter time, and credits were up to 10% of a month’s fees.
  • Monthly fees range from $5 to $24, with the most popular plan at $17

First, as a seller, you need to have a solution. In this case, it might be a services offering that more rapidly fixes the problem, or (the option we will go with) a new software system to manage their distribution and reservations. Suspend disbelief for a few moments, since we don’t really know what the problem is or what caused it, and imagine further that Netflix is soliciting replacement solutions for their software systems.

Here’s your argument: “Our new distribution and reservation software provides you with the functions that you told us you needed at a price of only $2.3M – and it NEVER FAILS! Your most recent outage using your proprietary system cost you $4.7M. All of that was profit, which was brought up by shareholders at your annual meeting. Similar outages are happening at the rate of 2 per year. The ROI for your investment in our product is ½ an outage. Please sign here.”

Now, there are issues with the argument. You wouldn’t want to poke them in the eye quite so much and cause resentment. You would have to address a comparison to the costs of an internal solution, which are likely to be less than a total replacement (if technically feasible – you should try to find out). You would have to address the other competitive alternatives, if there were any. They are likely to ask for guarantees. And (this is a good one) if your argument is true, you might not be charging enough for your solution – the payback is too good. You might be able to match the price and value more closely (by which we mean, raise your price).

However, issues aside, this fundamental method of making the argument is a good one. You know the specific, quantified value of your solution, and you use this information in your sales argument. In our experience, most sellers fail in this step. They assume the buyer knows the value, don’t do their homework, and end up with a sales proposal that is significantly weaker than it could be.

You’ll raise your odds of closing the deal, and it will close sooner.