How Netflix acted like a first place brand (and why you should too)

In the early days of Netflix, we were an underdog to say the least. Our competition was every single place that rented DVDs — from gas stations all the way up to big video stores. But clearly our number one competitor was Blockbuster (followed by Hollywood Video in a distant second).

As we set out to become the best and biggest DVD rental company in the world, we consciously avoided naming Blockbuster, or any other competitor, in our marketing materials. Instead, we played up our strengths and worded them in such a way as to draw immediate comparison to the rental experience itself (e.g. “No Late Fees — Ever!”) and attack the process of renting DVDs. And since the entire industry had modeled itself like Blockbuster, it applied to all competitors.

When we made that decision to not name-check the competition we were following the tradition of companies that act like “first-place brands.” What does acting like a “first-place brand” mean? A brand that is in first place is confident in it’s position such that they only talk about their strengths and never the competition’s weaknesses. So when a company “acts like a first place brand,” even if they aren’t in first place, they are basically dressing for the job they want.

But it feels good to go after the competition, right? Sure, but that gotcha feeling fades quickly and the pitfall of naming your competition in market materials brings with it pitfalls.

1/ It elevates the competition

At the very least, you place the competition into the consideration set of potential customers who otherwise may not have heard of them before. At the very worst you accidentally send consumers to them. A great example is when Blockbuster tried to paint Netflix as the “wait by your mailbox company.” So they released TV commercials that not only mentioned Netflix in their voice over but also showed our logo on their TV commercials. Wow, thanks for the free advertising, Blockbuster!

Acting like a second place brand: Blockbuster

By way of contrast, check out this commercial we released as part of “There’s a movie already waiting for you at home” campaign to answer their campaign. Notice how there is no reference to Blockbuster. Not even once.

Acting like a first place brand: Netflix

2/ It signals that you are the challenger brand which is good until…

Not being in “first place” means that brands can take up the mantle of “challenger.” A great example of this is T-Mobile. Their “Un-carrier” positioning, first launched in 2013, cast themselves as the rebels in a space dominated by AT&T and Verizon. Everything from the CEO’s use of twitter to their ad campaigns reinforces that message.

 Screen grab from a T-Mobile TV commercial.

Screen grab from a T-Mobile TV commercial.

But if T-Mobile is successful at moving into first place brand they will no longer be the underdog or challenger. Not the worst position to be in, by far. But as a company they will have to unlearn how to act as a challenger brand and learn how to act like a first place brand lest they come off looking like a bully. And if your company’s entire brand position is rooted in being the challenger, that is not an easy thing to do.

3/ It may insult potential customers

While you might not like the competition or think that the way do things is antiquated or even dumb, the people you are trying to lure to your specific product or service may not actively think so. In fact they may be just fine with a bad experience on the conscious level because they don’t know any better. So if you name your competition and rake them over the coals you run the risk of accidentally insulting the behavior of your potential customers.

Case in point, if we asked people if they liked Blockbuster back in the early days of Netflix, to a person, people would likely say yes. But when we got them to describe the process of renting from Blockbuster suddenly a different picture emerged. A picture of frustration with the process and even anger when it came to late fees. But if we were to say, “Renting from Blockbuster is dumb, rent from Netflix — the smart way!” we would have been telling the potential customer that the action they participate in on a near weekly basis was dumb. And yes, consumers are that literal.

“But what about Apple? They did it!”

Many people cite Apple’s famous “I’m a Mac and I’m a PC” as them going after Microsoft. Except, they didn’t name Microsoft, did they? Nope. They went after “PCs.” Of course the company most associated with PCs at that point was Microsoft but at no point did Apple go after them by name. That distinction makes all the difference.

How about a great, current example?

I give you Tuft & Needle…

See how they attack the process, not a specific competitor? That’s how you “act like a first place brand.” (and no, I am in no way affiliated with Tuft & Needle).

Bottom Line

With the exception of Uber/Lyft, or more recently Bird/Lime, most startups are not creating a new space to operate it. Most startups are challengers seeking to disrupt established players. That said, it is never too early to act like a first place brand. How?

1/ Reframe the negatives about your competition into positives about your product/service

2/ Attack the process, not the competition.

3/ Stay positive

By taking this approach you will be poised to be in a leadership position built on your strengths, not your competition’s weaknesses.

Thanks to James Parks, Vincenzo Landino, and Christine Nagel for the editing help.

I am a marketing guy who, among other things, was part of the team that scaled Netflix from a small startup to an international brand (’01 — ‘12). I write here, on LinkedIn, and Quora. Occasionally on Twitter and sometimes a public speaker.