How Netflix Increases Customer Engagement Utilizing Big Data
Data has become a precious commodity for businesses across all sectors. Netflix, the streaming giant with over 100 million subscribers, has mastered the art of harnessing big data to enhance user experience, improve content creation, and drive business growth. This article explores how Netflix utilizes big data and what marketers can learn from their approach.
What is Big Data?
Before delving into Netflix’s strategies, it’s crucial to understand what big data is. Big data refers to extremely large datasets that can be analyzed computationally to reveal patterns, trends, and associations, especially relating to human behavior and interactions. The three Vs characterize these datasets: Volume (the amount of data), Velocity (the speed at which data is generated and processed), and Variety (the different types of data).
How Netflix Gathers Big Data
Netflix collects a vast array of behavioral data from its users, including:
- Ratings given to movies and shows
- Search queries
- Viewing dates and times
- Devices used for watching
- Pausing, rewinding, and fast-forwarding actions
- Whether credits are skipped
- Viewing patterns across different devices
This wealth of information gives Netflix deep insights into user preferences and behavior.
How Netflix Uses Big Data
- Content Creation and Acquisition: Netflix’s data-driven approach to content creation exemplifies its decision to invest $100 million in House of Cards. By analyzing viewer data, Netflix was confident that the show would appeal to fans of the original British series and those who enjoyed works by director David Fincher and actor Kevin Spacey.
- Personalized Recommendations: Netflix’s recommendation system influences about 80% of the content streamed on the platform. The company employs several algorithms to enhance user experience:
- Personalized Video Ranker: Orders the entire Netflix collection for each member profile.
- Top N Video Ranker: Picks out top personalized recommendations from the entire catalog.
- Trending Now: Highlights videos trending with a mix of personalization based on viewing history.
- Continue Watching: Sorts recently viewed titles and estimates whether the member will continue watching.
- Video-Video Similarity: Suggests similar content based on previously watched videos.
- User Interface Optimization: Netflix’s algorithms determine which artwork or thumbnails to display for each title, tailoring them to individual user preferences to increase the likelihood of engagement.
- Customer Retention: Netflix estimates that its algorithms save $1 billion a year in value from customer retention. By providing personalized content recommendations, Netflix keeps users engaged and less likely to cancel their subscriptions.
Takeaways for Marketers
- Prioritize Data Collection: Implement robust systems to gather comprehensive user data. The more you know about your customers, the better you can serve them.
- Invest in Analytics: As Gary King, Professor at Harvard University, stated, “Big Data is not about the Data. It is about the Analytics.” Develop strong analytical capabilities to derive actionable insights from your data.
- Personalization is Key: Use data to create personalized experiences for your customers. Netflix’s success shows that tailored recommendations can significantly impact user engagement and retention.
- Test and Iterate: Netflix constantly tests and validates changes to its product. Adopt a similar approach of continuous improvement based on data-driven insights.
- Use Data for Strategic Decisions: Let data guide major business decisions, from product development to marketing strategies. Netflix’s “House of Cards” investment demonstrates how data can inform high-stakes decisions.
- Focus on User Experience: Use data to optimize every aspect of user experience (UX). Small improvements, like Netflix’s personalized thumbnails, can have a significant cumulative effect.
- Balance Algorithm and Human Input: While algorithms are powerful, human creativity and intuition still play crucial roles. Strive for a balance between data-driven decisions and human expertise.
By adopting these data-driven strategies, marketers can enhance their decision-making processes, improve customer experiences, and drive business growth. Netflix’s success is a powerful example of how big data can revolutionize an industry and create substantial value for the company and its customers.
