The Netflix Business Model – How Marketing and Analytics Helped Make a Media Monster

The current Netflix juggernaut has been a long time in the making. Hatched from humble beginnings in 1997, the membership-based streaming service recently surpassed Disney as the number 1 media company in the USA.

It’s commercial-free, always available and lets you indulge in lengthy binge sessions without a soul-crushing hangover – as a boredom-buster, it’s really second-to-none. As strong as the Netflix product is, the media empire did not grow through word-of-mouth alone.

So, what exactly is behind the resounding success of Netflix? We have looked into the marketing endeavours, value propositions and analytics of the Netflix business model to explain the exponential growth of the streaming service.

Strong Content Marketing and a Willingness to Take Risks

Netflix was the world’s first streaming service, and it took some time for consumers to be won over by the concept. More than a decade later, Netflix is well-and-truly a part of the worldwide lexicon – if you describe a television show to a peer, they will more than likely ask you if they can find it on Netflix. Netflix has even entered our language in other, immediately recognisable ways – for example, no-one is ever asked around for some ‘Hulu and Chill’.

Much like Google’s association with search, Netflix now dominates the streaming landscape. A large part of Netflix’s marketing success can be attributed to their innovative approach to content marketing. They’re all about big ideas, even if there is a significant element of risk.

The Netflix business model includes a big budget for original content – this in itself is a strong form of content marketing, as they can produce work that speaks directly to audience demand.

By controlling the content, Netflix can market their original programming as they see fit. Targeted campaigns for shows like Stranger Things and Orange is the New Black have yielded great streaming results.

A Significant Value Proposition Wrapped in a Membership Model

The Netflix business model has come a long way in terms of the value proposition it offers. Once a DVD-by-mail service that couldn’t disrupt the rental industry, the Netflix streaming juggernaut now offers an endless sequence of television shows, films, documentaries and more for a modest monthly outlay. For audiences who can’t deal with commercials on regular television, sticking with Netflix is an absolute no-brainer.

By curating a huge catalogue of mainstream and niche content that appeals to a variety of audiences, Netflix has essentially locked in a guaranteed audience for the foreseeable future. Their formidable budget means they can keep diversifying and stockpiling content to further improve the value on offer.

A Forward-Thinking Approach to Analytics and Algorithms

Netflix is next-level when it comes to their appreciation and leveraging of data and analytics. With more than 120 million subscribers worldwide, Netflix has a huge repository of data to draw from when constructing effective algorithms

The below graphic from FrameYourTv demonstrates the data metrics that Netflix uses to develop their algorithms.

Armed with information like this (and a whole lot more), Netflix are able to customise user experience and showcase content that is likely to be popular. It’s an important tactic – the recommendation system they use influences approximately 80 per cent of total content streamed.  

This aspect of the Netflix business model is a clever one – the company themselves think their algorithms save approximately $1 billion yearly in customer retention. If you have the power to do so, why would you not invest money in keeping your customers happy?

Clever Social Media and Email Marketing

Much like your Netflix home screen, the email marketing message you receive from Netflix is personalised. You’ll get suggestions for new content based upon your viewing habits and reminders when relevant new material is uploaded.

As for social strategy, the Netflix business model is about having fun. With 81 million plus social subscribers, Netflix are certainly doing something right. As with most things Netflix does, big data can even play a role in social strategy.  

A lot of their social strategies involve original content like this Tweet. By building strong fan followings around original programming, Netflix remain at the top of the class for streaming services, and that doesn’t look likely to change.  

Build an Empire with Studio Culture

The success of the Netflix business model shows that it’s possible to nurture an oak tree from an acorn. Studio Culture offers innovative digital marketing services for those in the early stage of their entrepreneurial journey.

To learn more about how we can help bring your idea to the world, give us a call today on 1300 200 113.

 

David is Studio Culture’s Head of Digital Marketing.

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