Mastering Digital & Other Lessons from Netflix: When is a Customer a Fan?

Analytics, Big Data, Big Data and Analytics, Digital Strategy, Innovation

Digital Lessons from Netflix: When is a Customer a Fan?

25 Nov , 2016  

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:

  1. Measurement – Digital makes fully measuring the customer interaction possible. Even if you search and do not buy that is critical information. Because digital platforms strictly require that the customer sign-in, the customer is always measured, even if the customer doesn’t realize it. Expect more detailed measurement of customers, especially as mobile platforms look to predict what users will do next.
  2. Analytics – Successful digital platform operators use the data created for analytics. It is amazing what LinkedIn has done with views, trends, and job applications. Expect analytics to become embedded and for cognitive analytics to take over the process of analyzing customer data.
  3. Execution – Successful digital platforms also allow for full execution of the customer’s choice. Think about Uber, Airbnb, Facebook, and Amazon (to name obvious digital leaders). You never call anyone. You never type anything (unless you want to make a post or review). The digital platform fully executes based on your choices. This is super-convenient, but convenience is only possible because the site can execute. Digital platforms that lack an execution show headwinds. I very much enjoy using Yelp and Tripadvisor, but neither has created a compelling execution function to secure reservations. It explains why their growth is under question and Kayak, Priceline, Hotels.com, and Booking.com are dominant in making reservations.
  4. Customization – We are entering the realm of mass customization in all things digital. It will mean great things in health care, with each of us benefiting from customized health care solutions. Mass customization will also allow us to have unique and enjoyable experiences online. It happens to some extent already, but I expect more. I think someday (soon) political parties will figure how to craft and send customized messages to would-be voters. You see one message, and I see another, from the same candidate, based on our unique interests. Netflix has figured out how to do this in media and it is changing more than movies. We will be tracked, measured, and successful digital companies will use that to put the products and services that we most want and need in our easy reach. Remember, the customer is King and expects you to recognize that, too!

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.

Professor Walker provides keynote talks, seminars presentations, executive training programs, and executive briefings.

Recent talk topics enjoyed by clients have included:

From Big Data to Big Profits: Getting the Most from Your Data and Analytics”

“Leveraging Artificial Intelligence and Automation at Work”

“Winner Take All – Digital Strategy: From Data to Dominance”

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“FinTech, Payments, and Economic Trends and Outlooks in Consumer Lending”

“The World in 2050: Risks and Opportunities Ahead”

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“Master Course on Operational Risk: Measurement, Management, Leadership”

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Professor Walker has provided these talks and programs to leading firms and governmental organizations. Click here to learn more about his talks, references from clients, options for customized talks and programs, and details on scheduling a program for your organization.

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.

You can find him at @RussWalker1492 and russellwalkerphd.com

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Russell Walker helps companies develop strategies to manage Risk and harness value through Analytics and Big Data. As Clinical Professor at the Kellogg School of Management of Northwestern University, Russell Walker has developed and taught leading executive programs on Big Data and Analytics, Strategic Data-Driven Marketing, Enterprise Risk, Operational Risk, and Global Leadership.

He founded and teaches the popular Analytical Consulting Lab and Risk Lab, experiential classes, which bring Kellogg MBAs together with real-world projects in Analytics and risk evaluation.

His is the author of the book From Big Data to Big Profits: Success with Data and Analytics (Oxford University Press, 2015) which examines data monetization strategies and the development of data-centric business models in the new digital economy. He is also the author of the award-winning text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management as a competitive advantage.

Dr. Walker consults with firms on the topics of Big Data and Analytics, Risk Management, and International Business Strategy.

Russell Walker can be reached at:

russell-walker@kellogg.northwestern.edu
@RussWalker1492
russellwalkerphd.com



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