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Analysis

Netflix: The Biggest Innovator in Marketing?

Remember when the successful streaming company was delivering DVDs to your inbox? Take a look at the marketing moves that made Netflix the powerhouse it is

Matt Duczeminski
February 14 2019

You’ve heard of Netflix, right?

With 58 million subscribers in the US alone, there’s about a one-in-six chance that you have an account yourself (without even taking into consideration those who use their friend’s accounts).

The content streaming company is the champion of the streaming world: as of last year, 51% of US consumers use Netflix as their go-to streaming choice.

In fact, the company’s 2018 revenue and profit numbers demolished the previous year’s earnings. But Netflix’s success isn’t due to a series of happy accidents. On the contrary, the company owes its staying power to co-founders Reed Hastings’ and Marc Randolph’s innovative approaches to marketing. Let’s look at five major initiatives that have led to massive gains for the company.

Netflix Disrupts the Video Rental Industry

You probably remember Netflix’s evolution from mail-order service to online video-on-demand brand. For consumers, the transition was pretty smooth. For the company, the shift was a serious gamble; Netflix’s new streaming video venture would operate in direct competition with its tried-and-true DVD rental service, leading to a massive drop in mail-order subscribers. In Q3 2011, mail-order subscriber numbers were over 14 million; by Q3 2015, they were down to 5 million.

But over this same period, Netflix’s revenue shot up from $3.2 billion to $6.7 billion. As the company brought in fistfuls of cash from new subscribers, it reinvested the vast majority of this income back into the business as it shifted its focus to streaming. The brand’s profit margin has hit record numbers as of late – so the gamble obviously paid off big-time.

An important lesson here is to look at your product or service not in terms of what it “is,” instead examining the value it provides customers.

The main reason Blockbuster failed is because it saw itself as a video rental provider instead of a convenient way to watch movies. This is why Netflix could evolve with relative ease: whether delivering movies via mail or the internet, the company has always focused on identifying the most convenient way to bring television shows and movies to consumers.

A Major Focus on Customer Data

Netflix uses its data – both broad, high-level numbers, and specific, granular information – to inform almost every business decision. Let’s start off where Netflix’s use of customer data is most evident: the system’s ability to provide personalized movie suggestions to its users.

Many users might assume that Netflix offers suggestions based on rudimentary data points, such as genres watched, viewer ratings, and so on.

But this is only the tip of the iceberg.

Among many other pieces of data, Netflix collects info regarding:

  • When viewers pause, rewind, or fast-forward
  • Completion rates for all content viewed
  • Logisticals such as the device used, time of day, and current location

Netflix knows you like to watch Big Mouth while on the treadmill at your local gym and that you binge-watch Arrested Development reruns at least once a month. They base their recommendations on this and everything else they know about you.

Back in 2013, when Netflix had 33 million subscribers, Joris Evers, Netflix’s Director of Global Communications said, “There are 33 million versions of Netflix.” Everyone’s Netflix experience is personalized based on factors specific to the individual user.

Beyond using data to provide laser-focused content recommendations, Netflix also relies on it to make major business decisions – such as whether to purchase certain movie rights or invest in new original content.

In fact, the US version of House of Cards came into being after the Netflix team realized their audience base would eat it up – and cause a buzz that would bring many millions of new subscribers on board.

Data analysis shows when users are most satisfied, engaged, or happy while using the service. As former Netflix employee John Ciancutti explains:

“Netflix seeks the most efficient content… ’efficient’ here meaning content that will achieve the maximum happiness per dollar spent. There are various complicated metrics used, but what they are intended to measure is happiness among Netflix members.”

Your customers’ happiness should be the first thing you consider when making business decisions. While it may cost more upfront to invest in an initiative that will maximize their happiness, the cost of ignoring customer satisfaction can sink your company.

Ensuring Authenticity Throughout Customer Relations

In today’s media ecosystem, brand authenticity is key. Netflix’s marketing team understands its core demographic well enough to speak their language. Scrolling through Netflix’s social media posts feels like a conversation you’d have with a friend – light-hearted and relatable.

By approaching customers from a place of scientific insight yet in a down-to-earth manner, Netflix manages to stay true to its audience – and its brand voice.

Content Marketing – Marketing Content

Can you guess how the company originally marketed its new original content?

Content.

The conventional method of promoting movies or TV shows usually involves billboards, commercials, and trailers. But Netflix took a different route when promoting its original series Orange is the New Black. With the cooperation of the New York Times, Netflix created a native ad in the form of a paid post examining female incarceration in the United States.

(Source)

The piece isn’t overly promotional. Netflix basing a new series around Piper Kerman’s book is part of a bigger story, not a branded press release. The content’s quality matches everything else you’d see in the Times. It’s not a phony, half-hearted advertisement pretending to be hard-hitting journalism; it is a piece of hard-hitting journalism.

The content earned major play on social media at the time, providing Netflix with some nice free publicity in the process. While it’s impossible to draw a correlation between the ad’s reach and viewership, we’re probably not going too far out on a limb by guessing that a good amount of readers ended up checking out the first episode of OITNB.

The takeaway here is twofold:

Always look for innovative and creative ways to market your brand. Don’t just get generically creative for the sake of being creative; be sure your initiative makes sense to your brand and to your audience. Secondly, always provide value for your audience. Netflix could just as easily have created a full-page poster ad for the Times’ website. Instead, the team created an informative and insightful piece that set the stage for viewers as they tuned into Orange is the New Black for the first time.

An Omnichannel Omnipresence

While multichannel marketing can lead to major publicity and awareness, it’s not the end-all-be-all and Netflix knows this. The company focuses heavily on providing an omnichannel experience to its customers as well.

In addition to actively engaging with its audience on social media, Netflix also reaches out to its customers through email and push notifications – and fans love it.

(Source)

If such an announcement had been made via conventional entertainment press release, it’d be nothing more than your run of the mill promotional announcement.

But since it was delivered to current customers’ Netflix-ready devices, all recipients needed to do to watch the show was to tap the push notification or click the link provided by email. By promoting their offerings to the same devices on which users watch their content, Netflix ensures their next branded experience is moments away.

Wrapping Up

Netflix’s rise to dominance wasn’t due to sheer luck. The brand approaches every business decision strategically – be it developing new content, a new marketing campaign, or otherwise – focusing on how customers will benefit.

Perhaps the most important lesson to take away from Netflix’s success story is that innovation and evolution are the keys to longevity in the business world. Had the company not evolved into a digital on-demand provider and continued focusing on its mail-order services, there’s little chance it would have transformed into the powerhouse it is today.

No matter your industry, your customers’ needs will evolve over time. Rather than letting them outgrow your company, grow your company with them. It’s the difference between becoming a Netflix… and staying a Blockbuster.

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Matt Duczeminski

Matt is a professional writer specializing in helping entrepreneurs improve relationships with their customers. He lives in Philadelphia with his wife, Sarah, and he'd probably get a lot more work done if his cat would stop bothering him.

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