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Experiences of very customer were uniquely customized, and every time they visited the website, further
customizations were done.
The next movie that a customer gets was decided by complex algorithms. The algorithm decides which
movies are in demand and which movies to be recommended to which customer
Ratings that the customers gave were used to understand their movie preferences.
Friends allowed movie buffs to share reviews and recommendations
Created audience for movies Hollywood would not bother with
Recommended lesser known movies due to precision of preference knowledge of subscriber
Maintained and leveraged partnerships with movie houses to release movies sooner on video rental
services.
Helped in product acquisition costs, by estimating its demand based on customer preferences.
Q3. What opportunities data and analytics might provide to Netflix if the company
switch from DVD to VOD? Can Netflix best leverage this competency as a competitive
advantage in VOD and is it sustainable?
Enhance Customer Satisfaction: Data analytics will allow Netflix to reduce risk of renting movies that
customers wouldnt enjoy
Inventory Management: It will help Netflix manage its inventory in a better way by avoiding recommending
movies that are out-of-stock.
Customer Clustering: Netflix can cluster its customer and using different parameters like age, demography,
geography etc. and push relevant offers to retain and acquire customers.
Recommendation Optimization: With Friends component, Netflix can optimize its recommendation
engine to suggest movies based on friends reviews and their recommendations.
Cost Effectiveness: Netflix can use data analytics to predict which movie will have approximate how many
rentals and thus can negotiate better rates, hence saving expenditure and gaining cost advantage.
Competencies of Netflix Competitive Advantage to Netflix
Moving from DVD => VOD existing database will prove beneficial
Huge Database: Recommendation Engine: Will become means to better customer
satisfaction
Recommendation Engine:
Wider and Relevant Offering: Netflix can offer movies and
Wider and Relevant Offering: documentaries that never got released in theatres
Cost Advantage: Cost Advantage: Subscription business model ensures steady
R&D Budget: stream of Cash Flows
Cost Effectiveness: R&D Budget: RE optimization and better promotions
Cost Effectiveness: Knowing assured rentals for any movie, Netflix
can better negotiate rates for the movies.
Physical film rental market grew @ 1.22% where as Digital film rental market grew @ 27.62% yoy from 2007
to 2008. Netflix has right competencies to take advantage of changing market environment and should sustain
in new market space.