How Analytics can be a Game Changer: A Netflix Case Study
As per Netflix, around 80% of the viewer’s activity is
As per a study by SAS, more than 70% of organizations
believe that data analytics plays a vital role in getting
precise insights. The study also said that out of ten
organizations, six of them said that leveraging analytics
makes them more innovative. Analytics is slowly but
steadily evolving in the competitive landscape. Industry
leaders are using analytics to make decisions that can
help them to stay ahead of their peers, besides exploring
better revenue opportunities, new markets, and building a
better relationship with their customers.
The very reason why business models of Uber,
Airbnb, and Spotify are sustaining is data and analytics.
When you digitize your interactions with customers, you
create a window to get immense information. This
customer information could be utilized for making
effective marketing strategies, better products, and
making more sales.
A lot of C-suite leaders now understand the
importance of data and understand the risk it carries if not
secured correctly. What is startling is and makes
investment in data and analytics even more important is
the kind of ROI it gives. In the Journal of Applied
Marketing Analytics, Jacques Bughin says, the ROI on
data and analytics is better than the investments done in
computers during the 1980s.
The power of data and analytics is also
harnessed to improvise core operations or create new
business models from scratch. The most exceptional
example is Netflix. Netflix has efficiently used its customer
data to refine its recommendation engine and give a
better experience to the users. Not only that Netflix has
surpassed Disney as the most valued media company in
the world with a valuation of more than $160 billion. One
of the biggest reasons for their success is their
impeccable customer retention rate. Their customer
retention rate is more than a staggering 90% which is far
better than Hulu’s 64% and Amazon Prime’s 75%.
The second most important reason why Netflix is
way ahead of its competitors is- Content Creation. The
kind of quality shows and movies it makes like “Orange is
The New Black”, “Sacred Games”, and “BirdBox”. These
shows have received a thunderous response across the
globe resulting in a steady rise in subscription rates. One
of the primary reasons why they succeed in making better
content is that they understand what their audience wants
to see leveraging data and analytics.
So, how does Netflix leverage big data ad analytics?
Netflix has digitized its interactions with its 151 million
subscribers. It collects data from each of its users and
with the help of data analytics understands the behavior
of subscribers and their watching patterns. It then
leverages that information to recommend movies and TV
shows customized as per the subscriber’s choice and
preferences.
triggered by personalized algorithmic recommendations.
Where Netflix gains an edge over its peers is that by
collecting different data points, it creates detailed profiles
of its subscribers which helps them engage with them
better.
Netflix collects information on how a user interacted
and responded to a TV show or a movie. If we go into
details, it collects the following data: –
 Time and date when a user watched a show
 The device used to watch the show
 If the user pauses the show, do they resume
watching
 Does the user binge-watch an entire season of a
TV show?
 If they do, how much time does it take to binge
watch it?
More than that, Netflix has ratings that the viewer
gives to the content they watch, the number of searches
they do, and what they search. The information collected
is enough for creating a detailed profile of a user, and this
is exactly what Netflix does. It leverages data analytics to
make a robust recommendation algorithm that suggests
the best content to the subscriber as per their needs and
preferences. The user no more must endlessly search
through streams of content to find out what he or she
wants to watch. Netflix makes the job easier for them in
the process, giving them a better and customized viewer
experience.
The recommendation system of Netflix contributes to
more than 80% of the content streamed by its subscribers
which has helped Netflix earn a whopping one billion via
customer retention. Due to this reason, Netflix doesn’t
have to invest too much on advertising and marketing
their shows. They precisely know an estimate of the
people who would be interested in watching a show.
Apart from monitoring the online behavior of their users,
Netflix has a feedback system in place. They encourage
feedback from their audience, which further helps them
understand their preferences and helps them in
suggesting better shows and creating better content.
Why investing in data analytics is important?
There is a data explosion today, and the need for
analytics has been growing exponentially. Tools and
software are being developed to get precise insights from
data. If you want to know your customers better, find
revenue opportunities, and tap into new markets. You
need to have a mechanism that helps you gain better
insights. As an organization, investing in data analytics
will give you four significant benefits.
1. A deeper understanding of customers-
Earlier companies would generally categorize customers
based on age, gender, and location. Now with the help of
AI, one can map the digital footprints of their customers.
Decision-makers can go through crucial behavior patterns
of customers like price sensitivity, brand affinity,
affluence, and preferences. These kinds of data mapping
help in understanding your customers better enhancing
your ability to build better products and services for them.
2. Early detection of problems in products and
services-
More than half of the professionals across North America
and Europe are heavily dependent on analytics to
enhance the quality of their products and services as per
research from Forbes Insights and Cisco. Analytics can
give you precise insights on the kind of concerns
customers have, their changing needs, and based on
that, you can innovate your offerings.
3. Identifying better marketing strategies-
With various digitization channels for customer interaction
available now, businesses are adopting an omnichannel
approach to engage with customers. Using analytics,
marketers can get inputs on how to have meaningful
engagements with customers across all channels. Also,
analytics can help analyze successful marketing
programs and identify strategies that yield better ROIs.
4. Finding ways to reduce expenses-
Once you start getting insights at departmental levels, it
will help you identify areas where you can curb your
costs. Insurance companies saved a good amount of
money by identifying patterns of fraud and dismissing
false claims.
How to harness the power of data?
As an organization, do not be afraid of change. If you are
yet to use analytics as an organization, start with small
steps, fail faster, and make a steady transition. Do not go
for overnight results instead practice consistency and
prioritize your efforts.
The first step you need to do as a decision-maker is
incorporating data and analytics into the core vision of the
organization, focus on nurturing a data-driven culture.
Slowly but steadily create a powerful data infrastructure
and hire talent to operate it, make sure to highlight your
data-driven culture in your employer branding campaigns.
Your success doesn’t lie in adopting the most powerful
technology rather digitization of your organization from
the bottom. Companies like Netflix, Amazon, and Google,
who are leading the analytics game, gradually
transitioned to a data-savvy culture. It wasn’t all overnight
but a gradual process that took a few years. Not only did
they heavily invest in analytics but they have also kept
themselves observant of the changing trends of artificial
intelligence. They are putting the case strongly before all
other organizations- if you want to survive in the market,
you need to invest in data analytics, and that is not
negotiable at all.