As today’s business world continues to evolve into a more digital landscape companies are increasingly realizing the need to wear multiple hats and leverage an assortment of marketing channels to deliver efficacious digital marketing campaigns. Two models of digital marketing spaces are widely applied, that is, the business-to-business (B2B) model and the Business-to-Customer model (B2C) model. B2B involves transactions conducted between two or more standing businesses, for instance, a wholesaler and a retailer. A good example of B2B can be found in the supply chain where a manufacturer may purchase raw materials from another company, source labor from another, and use the transportation services of another company to transfer finished products to the consumer. One limitation of B2B is that it takes some time to bear fruits due to the complexities involved in the entire process. Following the internet boom in the late 1990s, the B2B business model gave way to the B2C business marketing model through which customers can reach and purchase goods and services from the manufacturer directly. B2C is a modern standard (Bridges et al., 2005). This paper will therefore evaluate target marketing adopted by the B2C model with the case example of Netflix Inc.
Netflix Incorporated – Description
Netflix Inc. is an American-based leading entertainment service provider with headquarters in California. It was founded in 1997 by Reed Hastings and Randolph Marc. The primary business of Netflix is subscription-based online streaming services for television series, documentaries, and films among others. Currently, Netflix has 204 million paying subscribers (73 million in the United States alone) in over 190 countries. Some countries where Netflix is unavailable include North Korea, Syria, and Crimea owing to US sanctions and Mainland china owing to local restrictions. According to 2020 statistics, Netflix has over 2400 employees worldwide and generated US$24.99 billion in the closing quarter of 2020. The operating income as of 2020 was US$5.6 billion. Net income was US$2.761 billion, Total assets amounted to US$39.28 billion and Total equity was US$11.065 billion by the end of 2020. Other than on-demand online streaming of films and television content, Netflix also has a DVD distribution division and engages in film production and distribution activities. Netflix is ranked top in the on-demand streaming business (42% market share), with the closest competitors being Amazon prime video (22%), YouTube TV, HBO, Sling, Apple TV, Sony Crackle, VUDU, HULU, Disnbet plus, and Popcornflix. See figure below.
Delegate your assignment to our experts and they will do the rest.
Netflix's Business Model
Netflix makes money by offering on-demand; subscription-based online streaming services for movies, films, and documentaries. Using three subscription plans, that is, basic, standard, and premium plan with a price range of US$ 8 –US$ 14, Netflix has turned into a multibillion-dollar firm, within a period of just under 2 decades. Consumers from over 190 countries can stream content from a wide array available. This implies that Netflix employs a business-to-customer model to market its services.
There are several activities that Netflix engages in to ensure that the company maintains its current lead in the entertainment market. Some include; using multi-channel marketing, employing big data analytics powered by artificial intelligence and machine learning to recommend content and make viewing more memorable, embracing customer-centric service delivery to enhance the user's experience, and making interactive products and services. Netflix can offer personalized content via web, app, or mail-delivered DVD channels. Netflix segments its markets to filter consumer interest and deliver content that customers are likely to enjoy according to their needs. Netflix has strategic partnerships with smart TV companies, gaming developers, TV network companies as well as Google and Amazon which help expand the company’s reach to various market segments.
Segmentation for Netflix
There are four bases to segmentation, that is, demographic, psychographic, behavioral, and geographic segmentation. In demographic segmentation, consumers may be divided according to age, gender, income, family situation, education, or ethnicity. Netflix may segment their market demographically based on age, by having adult content and children content. Psychographic segmentation categorizes consumers based on their character and personalities. These include values, interests, lifestyles, motivations, priorities, and conscious beliefs. Netflix may achieve this form of segmentation by using interest as the segmenting factor. Most Netflix customers have a common interest in either movies or TV series and documentaries. Behavioral segmentation focuses on how the customer acts. Segmentation metrics may include buying or spending habits, user statuses, etc. Netflix may use this segment to design target markets for the basic, premium, or standard packages. Finally, geographic segmentation usually categorizes clients based on their geographic lactation. Since Netflix operates globally, markets may be segmented across various regions as in the figure below (Jain, 2021).
Based on this analysis it is more logical for Netflix to use psychographic segmentation as well as geographical segmentation. Psychographic segmentation is for people who have an interest in similar film genres and demographics for the various regions. Netflix uses machine learning, big data analytics, and artificial intelligence to develop recommending algorithms that enhance the delivery of personalized content based on psychographic interest. Geographically, Netflix categorizes its subscribers according to the following regions Europe, Middle-East and Africa, the United States and Canada, Latin America, and the Asia Pacific segment. This is done by tracking the total number of subscribers making regular subscription payments across the four regions.
Segmentation and Target Marketing
Choosing a segmentation base influences the marketing strategy to be used by the company. Depending on the nature of the market segment and the capability of the organization to efficiently serve the target market, differentiated, undifferentiated, or concentrated target marketing may be adopted by the organization (Hopewell & Deege, 2000). Netflix Inc. prides itself on delivering personalized content to every user globally. To achieve this form of differentiated target marketing across the globe is not an easy feat. This is why Netflix has also adopted geographic segmentation, to serve subscribers more effectively. Netflix has many promotional strategies influenced by both the geographical locale of the subscribers and their specific interests.
Netflix's main promotional strategies include; nimble and innovative modern marketing based on big data analytics, machine learning algorithms, and artificial intelligence technologies that can determine the interests of the users based on historical viewing trends and recommend similar content to the users. Another promotional strategy is the use of search engine optimization, social media engagement, and email marketing to reach web users across various regions. These campaigns are run of specific target segments on web visitors and active social media users. By offering personalized content, using data to enhance customer service delivery, engaging with users at a personal level, embracing machine learning, and focusing on priority customers continue to make Netflix the market leader. See figure below (Business strategy Hub, 2020).
Conclusion
From a humble beginning as a DVD-by-mail service provider, Netflix has evolved into the leading online video streaming service in the world. By deploying the potential of technologies such as ML, AI, and big data analytics, the company has transitioned into a video-on-demand subscription-based service provider towering above its competitors. Since adopting these modern marketing technologies, Netflix revenues have grown from 1.3 billion in 2007 to 24.9 billion in 2020. This revenue growth is due to an unprecedented increase in the number of paying subscribers from 22 million 92011) to 205 million (2020).
References
Bridges, E., Goldsmith, R. E., & Hofacker, C. F. (2005). Attracting and retaining online buyers: comparing B2B and B2C customers. In Advances in electronic marketing (pp. 1-27). IGI Global.
Business strategy Hub. (2020). Netflix Marketing Strategy 2021 – Business Model Canvas, Partners, and Activities. Retrieved 5 th March 2021 from https://bstrategyhub.com/netflix-business-model-how-does-netflix-make-money/
Hopewell, L. D. (Producer), & Deege, R. (Director). (2000). Segmenting, targeting, and positioning [Video file]. Retrieved from https://libraryresources.columbiasouthern.edu/login?auth=CAS&url=http://fod.infobase.com/PortalPla ylists.aspx?wID=273866&xtid=10141
Jain, V. (2021). Netflix: Subscribers by Segment (2018 – 2021). Retrieved 5 th March 2021 from https://businessquant.com/netflix-subscribers-by-segment
