NETFLIX has completely disrupted the entertainment industry model. Ironically, in marketing, the most visible part of any business, that disruption has gone less noticed than in more conventional areas, such as original content development.
Netflix has helped usher in the new era of people-based marketing, which is already transforming industries, such as retail, and is now coming for entertainment. Today’s relevant question: Who is my customer and what’s my relationship to them?
Since the first TV broadcast, to cable and pay-per-view, entertainment has been about mass media — the most possible reach to drive brand awareness. Entertainment marketers, whether for movies or television, wanted to reach the most eyeballs for the least amount of money. They focused on channel marketing and making broad allocations to mass media — at most using intuition to guess which media corresponded to their audience. Either things were, in aggregate, a blockbuster hit or a flop. Who cared about the individual consumer?
Each campaign was transactional in nature: “Please buy this entertainment product, whoever you are.” Entertainment marketers developed their practices in business models where producers did not own distribution or the retail point with the consumer — that was for theater owners, cable companies and retailers.
Netflix, by its very nature as a direct subscription business, has had to think about who the customer is and how to sustain that relationship over time. By not only producing the content, but actually distributing it, Netflix collects data on what was actually watched, by whom and how they rated it. Netflix has built cross-channel customer recognition into its platform because customers have to log in to their devices to watch, giving it the ability to determine identities. So what does Netflix do with all this data that’s so great?
Up Close and Personalized
Personalization is probably the most visible application of the data. At its core, personalization is about moving from mass creative to a place closer to individualized creative. Netflix recently shared it goes as far as to change the cover art of shows and movies based on factors such as which actor a viewer seems to like. Because they know what you’ve watched and liked before, they can infer which actors you like.
Compare this tactic to the static movie and television art from most entertainment makers. Studios need to begin creating profiles through their distribution partners or begin creating their own entertainment media that includes registration data. With simple registration data like email or phone numbers, studios can build a permanent CRM marketing database that can be onboarded to different media for people-based ad targeting and allow for levels of personalization similar to Netflix.
Media buying is another area where Netflix is leading by bringing programmatic in-house. Netflix can model the lifetime value of a customer because of its subscription model, which means it also knows exactly how much it can spend to acquire a customer. Leveraging its own logged-in customer identity graph, Netflix can also waste less money on mass media, which will inevitably hit existing customers, and invest the right amount in retention of customers who may not be logging in to watch often enough. In essence, Netflix is now buying and measuring individuals, not mass media.
Competing entertainment companies will now need to think beyond how they assign value to reaching an individual and measuring whether they were successful. Assembling or renting a cross-channel identity graph, which resolves multiple devices and logins to one universal ID to keep track of individuals, is a start. Tying that graph to conversion events, like whether a viewer who watched a promo for a specific show had the same ID as someone who later watched the show, would be the ultimate goal, and it is possible through people-based ad serving by the publisher or advertiser.
It can be a challenging environment going against Netflix. Competing media companies need to produce strong results next quarter and that means a relentless focus on making the newest content a mass hit that moves the needle now. Unfortunately, that often means ignoring the long-term creation and leveraging of data assets. It’s time to break the cycle and invest in the right people and data to make people-based marketing the norm in entertainment.
Ka Mo Lau is chief operating officer of Thunder Experience Cloud.