Netflix has long been heralded as a leader in the use of analytics and even the creation of novel big data. That is all true. Nobody knows more about movie tastes than Netflix, with its some 1 billion reviews in its database. The graphic above shows that Netflix can use such data and customer behavior data to predict when a customer becomes fanatical for a program. Moving from customer to fan is a powerful transformation, and all forms of media and entertainment want fans. Fans, often pay more, are loyal, are inclined to forgive operational failures, and are often economically irrational. Fans appear in the automobile industry, media, airlines, alcohol, and, of course, sports! In media, Netflix knows how and when customers become fans and has the ability influence the process of converting customers to fans. Highly critical to this capability and its growth and dominance in digital media, is its creation of a successful digital platform.
We live with digital platforms everywhere – social media, retail websites, apps, and even sensors and wearables. Digital platforms are critical to measuring customers and understanding their preferences. However, we do not accept all digital platforms; some are big winners and many fail to achieve scale and success. I expect many health care apps and wearables will go extinct when superior health care digital platforms arise. What makes a successful digital platform? Digital platforms must offer an economic trade with the customer. In the case of health care wearabales, this will mean giving users a real economic benefit. In the case of Netflix, we tune into Netflix to get better movie recommendations and similarly rely on eBay and Amazon for recommendations. LinkedIn is a great example of a digital platform that brings people together job prospects. These examples show important features in a successful digital platform, which are:
This past spring, I presented on how sports franchises can better leverage digital strategies at the Sloan Sports Management Conference. The sports industry is about $500 billion in revenue and related marketing, yet it is a business that largely does not know its customer. With few exceptions, most teams offer paper tickets and it means, of course, that the teams do not know the fan or even if they are in the stadium or arena. The paper ticket (analog) format has given rise to secondary ticket brokers and a host of inefficient marketing efforts. Any hope of leveraging analytics, making offers, or customizing on the customer is virtually impossible in sports. The sports industry should embrace digital ticketing and the use of digital platforms including team and league apps to engage with customers in meaningful ways. An app, after all, is a digital platform. Provide customers (fans) an economic reason to join. That does not have to be a discount. These lessons in digital are equally at work in entertainment, leisure, and startups looking become the next digital leader.
Explore these lessons and more in our upcoming executive program in at Northwestern in Evanston, IL : Big Data to Big Profits: Strategies for Monetizing Social, Mobile, and Digital Data with Data Science on June 15-16, 2017. A limited number of slots are still available.
About Russell Walker, Ph.D.
Professor Russell Walker helps companies develop strategies to manage risk and harness value through analytics and Big Data. He is Clinical Professor of Managerial Economics and Decision Sciences at the Kellogg School of Management of Northwestern University. He has worked with many professional sports teams and leading digital and marketing organizations through the Analytical Consulting Lab, an experiential class that he founded and leads at Kellogg.
His most recent book, From Big Data to Big Profits: Success with Data and Analytics is published by Oxford University Press (2015), which explores how firms can best monetize Big Data through digital strategies. He is the author of the text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management through business case studies. He co-authored a leading business case on Netflix, which is available through Kellogg and Harvard Publishing.