Netflix Finds Value In Contrarian Approach

Perhaps the best advantage Netflix has is the 10 million passionate subscribers spreading the word about the company. Netflix does all it can to enhance the customer service, the most notable feature being the algorithm it developed to deliver personalized video recommendations based on customer ratings and reviews, quite similar to the system used by Amazon.

"The biggest driver of Netflix marketing over the last 10 years has been solid, positive word of mouth," Swasey said. "People love to talk about it with their friends. They're evangelists for the service. It's an iconic brand fueled by those associated with it."

The Entrepreneurial Spirit

To maintain a competitive edge, Netflix gives its employees freedom and responsibility to maintain a sense of innovation that is lacking at bigger companies stymied by layers of rules and policies.

Following the contrarian thesis of its founder, Netflix treats every worker as an entrepreneur, which allows them unlimited vacation time and gives them some flexibility in arranging their compensation packages. In return, every employee is expected to perform at their very best.

Swasey puts Netflix on the same list as Facebook, YouTube, Google (GOOG Quote) and Apple (GOOG Quote) as companies that have changed the behavior pattern among consumers.

Following Southwest's Example

Swasey also said that Netflix is inspired by Southwest Airlines (LUV Quote) model of staying focused strictly on the core of the business. In other words, do one thing and focus on doing it extraordinarily well.

Netflix has strayed from the core a few times before quickly refocusing. For a time, the company sold previously-viewed DVDs, advertising space on their Internet site and DVD mailers, and it even purchased rights to films through its Red Envelope Entertainment subsidiary. However, Netflix decided the time and cost involved for each did little to address whether people were watching and enjoying movies.