Netflix Case Analysis

Chris Brittain
Amberton University
Marketing Management
Dr. Stepehenson
1/17/2021
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TABLE OF CONTENTS

CORPORATE SUMMMARY …………………………….……………………………………3

MISSION STATEMENT………………………………….…………………………………….3
STATEMENT OF CORPORATE BUSINESS STRATEGY.………………………………...4
STATEMENT OF CORPORATE MARKETING STRATEGY.…………………….………4
EVALUATION OF FIT…………………………………………………………………………4
SWOT ANALYSIS……….……………….………………………….….………………………5
STRENGTHS…….………………..………………………….….………………………5
WEAKNESSES….………………...………………………….….………………………5
OPPORTUNITIES………………..………………………….….………………………6
THREATS……….……………….………………………….….………………………..6
MARKET RESEARCH AND BUSINESS INTELLIGENCE ……………………………….7
ANALYSIS OF CONSUMER SEGMENTATION………………………………...………….7
EVALUATION OF MARKETING STRATEGY AND EXECUTION……………………...8
RECOMMENDATIONS AND CONCLUSIONS………………………………………….….9
REFERENCES…………………………………………………………………………...……..11
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CORPORATE SUMMARY
Netflix Quarterly Revenues
Netflix Inc. is the world’s largest $7,000,000
video streaming service. They have 167 $6,000,000
million paid streaming memberships in $5,000,000
190 countries. Their current stock price $4,000,000
is $497.98. Although Netflix’s fourth $3,000,000
quarter data and 2020 annual report have $2,000,000
not been distributed yet, we do have data $1,000,000
from the first 3 quarters of 2020 and $0
several years prior. Netflix’s year over Q1 Q2 Q3 Q4
year quarterly revenue and net income
2020 Revenue 2019 Revenue 2018 Revenue
has increased for each of the first 3
quarters of 2020 and have been steadily
trending upwards for the past several Netflix Quartely Net Income
years (“Netflix Third Quarter Financial
$900,000
Statements). These markers indicate that
$800,000
Netflix is in good financial health.
$700,000
However, the video streaming $600,000
industry is intensely competitive and $500,000
$400,000
subject to rapid change. In 2021, there
$300,000
will be more than 200 video streaming
$200,000
services available for consumers to $100,000
choose from (Cook). Netflix allows users $-
to stream movies and shows online. They Q1 Q2 Q3 Q4
also have a legacy DVD rental service 2020 Net Income 2019 Net Income 2018 Net Income
with 2 million subscribers. However,
Netflix has had liquidity issues in the past and faces several risks due to long term obligations
(“Netflix Annual Report”). This case analysis aims to evaluate Netflix’s current marketing
position, asses its marketing strategies, and make recommendations to improve its position and
performance.

MISSION STATEMENT
Netflix does not have a formal mission statement. However, their website states the
following on their about us page…
At Netflix, we want to entertain the world. Whatever your taste, and no matter
where you live, we give you access to best-in-class TV shows, movies, and
documentaries. Our members control what they want to watch, when they want it,
with no ads in one simple subscription. We’re streaming in more than 30
languages and 190 countries, because great stories can come from anywhere and
be loved everywhere. We are the world’s biggest fans of entertainment, and we’re
always looking to help you find your next favorite story (“About Us”).
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This was listed on Netflix’s about us page. While it is not a formal mission statement, I
think it encapsulates their mission. Netflix is an entertainment company. From this
statement, one can understand the passion and commitment Netflix feels towards
producing the best content.

STATEMENT OF CORPORATE BUSINESS STRATEGY

Similarly, Netflix does not have a formalized statement of their corporate business
strategy. However, the following is an excerpt from their 2019 annual report…
Our core strategy is to grow our streaming membership business globally within
the parameters of our operating margin target. We are continuously improving our
members' experience by expanding our streaming content with a focus on a
programming mix of content that delights our members and attracts new
members. In addition, we are continuously enhancing our user interface and
extending our streaming service to more internet-connected screens. Our members
can download a selection of titles for offline viewing(“Netflix Annual Report”).

STATEMENT OF CORPORATE MARKETING STRATEGY

Additionally, Netflix has not released a formal statement regarding their marketing
strategy. Formally creating a statement about their corporate marketing statements has several
benefits. It would help them refocus their attention on accomplishing future goals. Although
Netflix’s purpose may seem obvious, 64% of consumers find brands more appealing when they
communicate their purpose. It can also provide guidelines for how decisions are to be made in
the future and inform consumers about the values of a company (Manino).
One can attempt to infer some of their goals and the strategies they use to achieve them.
Netflix focuses on product differentiation. Moreover, they want to build brand loyal consumers
by providing them with positive interactions with the brand. They aim to provide content
suggestions that meet their consumers tastes. Netflix also aims to keep consumers attention by
having engaging ads and encouraging consumers to interact with the brand.

EVALUATION OF FIT
Netflix does not have formal statements regarding their mission, corporate strategy, or
marketing strategy. While Netflix lacks those formal statements, they have put considerable
effort into aligning their strategies and goals. Netflix’s corporate actions support its mission.
Creating more content and improving the access people have with the app demonstrate
commitment and integration between the supposed Mission Statement and Corporate Strategy.
Furthermore, their marketing communications with consumers demonstrate the thought
and consideration they have put into building and maintaining their brand. Their marketing
approach mirrors their passion for exciting and engaging content. They use social media to serve
a variety of purposes and they do them each very well. This allows consumers to more easily
recognize and associate value with the brand. When consumers watch shows, Netflix has the
capabilities to make personalized recommendations which demonstrates the coordination from
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corporate and marketing offices. Moreover, making adept recommendations is necessary to

entertain its viewers.

SWOT ANALYSIS
A) Strengths
Netflix has several strengths. It is currently the dominant player within the online
streaming industry. They have been able to leverage that position to build a high degree of brand
loyalty among its customer base. 80% of Netflix subscribers only subscribe to Netflix. Direct TV
Now placed 2nd with only 41.2% of its consumers maintaining exclusivity. Hulu was 3rd with
only 36.8% of its viewers only subscribing to their service (Stoll). Netflix’s brand loyalty is also
bolstered by their practice of not running ads during the streaming of its content. This is a huge
draw for their consumers.
Netflix has been able to produce new exclusive content that viewers will not be able to
find on other services and it contains the largest library of content for viewers. Netflix has
produced more than 1500 original titles including hits like: Tiger King, The Crown, House of
Cards (prior to Kevin Spacey’s arrest), Mindhunters, and the Witcher. Netflix’s original content
have received 430 award nominations and won 70 awards (Cook).
B) Weaknesses
However, Netflix currently relies on Amazon web services to store its content. Netflix
spends an estimated $9.6 million per month on Amazon web services. Amazon has also launched
it own streaming service. Amazon could attempt to terminate its contract with Netflix which
would cause Netflix considerable difficulty. Netflix likely does not have the capability to store
its content should Amazon choose to terminate service. This could cause service outages and
considerable harm to Netflix’s brand reputation.
Additionally, while Netflix’s decision not to have ads has been wildly popular with
consumers, it is also costing them income. Netflix could use their recommendations algorithm to
suggest the programs that potential consumers of ad space would advertise during. This could
also be done using Netflix’s existing technology and business intelligence. Many of Netflix’s
competitors run ads during their programming. Netflix could miss out on a large and significant
source of revenue that they could use to generate more original content. However, this problem
is compounded by the fat that they have previously chosen not to allow advertisements during
their shows so reversing course could frustrate their consumers and decrease consumer loyalty to
their brand.
Original Content can also be incredibly expensive and risky to produce. Netflix spent $17
Billion producing original content during the 2020 year. Netflix’s show The Crown cost $10
million per episode. Similarly, Stranger Things cost $8 million per episode to produce (Cook).
These costs can quickly become wasted if the consumer tastes change faster than Netflix is able
to accommodate them.
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C) Opportunities
Netflix should continue to contact the authors (or persons/organizations who own the
rights) of novels and/or comics published online using services like Amazon publishing with the
intent to purchase the rights to make movie adaptations of those books. Similarly, they could also
purchase the rights for novels published by larger companies. This would allow Netflix to
continue to make exclusive content with proven consumer bases.
Netflix could purchase smaller providers to build a larger library of exclusive content.
This would also prevent said providers from being able to get Netflix subscribers to switch.
Similarly, Netflix could purchase the rights to exclusively stream content from popular cable
stations that do not yet have their own subscription services. They could also purchase the rights
to live content like sporting events. This could attract more consumers or prevent their
consumers from purchasing other services in addition to their own.
Netflix could also adapt its service to allow its users to rent and play video games. This
would provide substantial appeal for a wide number of their consumers while capitalizing on
existing technological capabilities. Netflix can already be streamed using one’s console like a
PS5 or Xbox One. Moreover, this would reduce their risk for substitution as this would have
appeal to consumers who wish to entertain themselves using other mediums.
D) Threats
However, the internet streaming industry is intensely competitive. A wide array of
companies have revised or launched new services within the past 2 years or plan to release them
in the coming year. There are currently more than 200 streaming services available for
consumers. Streaming services have been developed for live sports, live television, television on
demand, channel specific, and niche options. Some of the providers of these services are free and
most of them offer a comparable price to what Netflix has to offer (Cook). This will also make it
more difficult for Netflix to acquire and keep the rights to stream content from outside producers
as they will likely have to pay more for outside content. An example of this threat would be
Netflix losing the rights to The Office. The Office was the most popular show on Netflix, being
stream for a total of 52 billion minutes which was more than double the amount of the next
closest show. However, NBC refused to sell the rights to stream The Office, so NBC could own it
exclusively on its own new streaming service Peacock (Guglielmi)
Similarly, Netflix runs a high risk towards substitute products and services. As stated
above, there are a wide array alternative video streaming services in the market. This prevents
Netflix from being able to significantly raise the price for its services. Additionally, consumers
may also choose to purchase or entertain themselves with alternate products like playing video
games.
Additionally, Netflix is vulnerable to online piracy and cyberattacks. If illegal streaming
websites can obtain content that is hosted on Netflix’s platform, potential customers could drop
or not purchase monthly subscriptions. Similarly, Netflix is an online business that stores both
content and consumer information online. If unauthorized third parties were able to access the
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billing or personal information of consumers, Netflix’s reputation would be significantly harmed.

Netflix could also face legal penalties resulting from the failure to protect consumer data
depending on jurisdiction (“Netflix Annual Report”).
Netflix is also vulnerable towards potential new regulations on the internet and must be
able to track regulations across many countries. There are also considerable regulatory risks for
copyright, trademarks, and intellectual property (“Netflix Annual Report”).

MARKET RESEARCH AND BUSINESS INTELLIGENCE

Netflix participates in several types of market research. The most prominent example that
they have is their recommendations. When users sign up for an account, they are presented with
a full screen of potential shows and are asked to select a few that they like. Based on the shows
the user highlights, Netflix will come up with suggestions. Moreover, these suggestions are
updated when the user watches and likes other shows. The suggestions are also updated in real
time with time-oriented weighting; the shows a user has most recently watched will have a
greater significance than those the user has watched months ago (“How Netflixes…”).
Their algorithm is highly effective for their viewers as 80% of its viewers take Netflix’s
viewing recommendations. Moreover, they estimate that the value of their algorithm may exceed
$1 Billion (Cook). Their algorithm also allows Netflix also to stay current on consumer tastes
towards movies and shows. This aids them in making better recommendations and also with
determining what type of shows they should produce in house.

ANALYSIS OF CONSUMER SEGMENTATION

Netflix does an excellent job segmenting their consumers using its recommendations bar.
As stated earlier, Netflix suggest shows to their viewers based on their stated preferences and
what they have viewed on the platform. These preferences are also time-weighted so that Netflix
can make dynamic recommendations that keep up with consumers’ evolving preferences. Netflix
can accomplish this using a process called collaborative filtering. Collaborative filtering allows
the user to make recommendations by placing users and products in groups. There are three
general types of recommendation algorithms:
1. User-user(people like you also like…)
2. Item-Item(if you like this, you may like that…)
3. User-Item(combines both previously mentioned strategies)
For new items, they may also use content-based algorithms where product features/attributes are
evaluated to make recommendations (“What Are…”). This allows Netflix to segment its
consumers based their psychographic and demographic characteristics.
Netflix also segments consumers geographically and by language spoken. Netflix
maintains separate libraries for geographic regions although there is considerable overlap
between them. Netflix produces original content in 20 other languages to increase their appeal in
foreign markets (Cook).
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Netflix tailors its marketing communications via social media channels like Facebook,
Twitter, and Instagram. Netflix engages with consumers online to promote its services, inform
their consumers, and appeal to cultural audiences. While the ratios of occurrence for each type of
ad are fairly similar across social media platforms and geographically, the content and intention
of their communications varies (Perez).
Type of content posted on Twitter Type of content posted on Instagram
US Spain US Spain
Promotion 66.7% 60% Promotion 77% 82%
Information 15.5% 17.8% Information 22% 16%
Culture 17.8% 22.2% Culture 0% 2%
External 0 0 External 1% 0%

Intention of content posted on Twitter Intention of content posted on Instagram

US Spain US Spain
Inform 61.1% 36.7% Inform 60% 40%
Humor 36.7% 60% Humor 40% 51%
CTA 2.2% 3.3% CTA 0% 9%

Moreover, Netflix is able to observe consumers viewing patterns including when they
watch and for how long they watch. They can tell if a consumer is binge-watching or unwinding
before going to bed. This allows them to understand why their consumers are watching and make
more nuanced recommendations for their viewers. This type of recommendation represents
behavioral segmentation.
Netflix has integrated many types of segmentation into their business model. They use
elements of behavioral, demographic, geographic, and psychographic segmentation. Moreover,
they apply it thoroughly across all potential points of contact within their business.

EVALUATION OF MARKETING STRATEGY AND EXECUTION

Netflix relies on several types of marketing strategies across several platforms. The first
type of marketing that Netflix uses is word of mouth marketing. Word of mouth marketing is the
strongest type of endorsement that a company can receive and is the most likely method to
generate sales conversions. Moreover, digital media platforms like Facebook and Twitter have
allowed Netflix users to make recommendations to their followers.
Netflix is wise to concentrate on generating positive reviews as this allows them to
benefit from the social elements of content consumption. Viewers frequently discuss their
favorite shows and movies with others who have also viewed them. Moreover, they often
recommend shows to their friends and family.
Netflix also advertises using social media platforms including Twitter, Facebook, and
Instagram. Its also adapts the content/intention of its posts based on the characteristics of the
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consumers they are interacting

with. Netflix mixes
information, humorous, and
calls to action.
Moreover, their social
media posts encourage users
to interact with the brand.
Tweet 1 made it easy for
people to interact with their
brand. Moreover, people like Tweet 1
to express their opinions and
tweets like this allow them to feel valued as consumers (Tas). Similarly, they will frequently
provide updates for their consumers when new content is added to their libraries. This practice
provides notification and
encouragement for their users to
login and view their content. Yet
Netflix is also adept enough to
come up with personalized
communications with their
viewers. Tweet 2 highlights their
capability at providing Tweet 2
personalized content in their
marketing communications. They are offering to recommend films to those who interact with
them. A strategy like this requires that a business possess immense expertise especially since
consumers would expect a response from Netflix within few minutes. Furthermore, Netflix
appeals to their consumers using humor (https://www.youtube.com/watch?v=_ATjXb2sGgc ).
The link is to an advertisement where Netflix plays on a typical television trope. This advertising
is genuinely funny which enables them to connect with their consumers on an emotional level.
Appealing to consumers with humor reinforces the positive learned associations that consumers
have with the brand.
Additionally, Netflix permits viewers to watch the first episodes of many exclusive series
online without a paid subscription. Similarly, Netflix will provide consumers with a free 30 day
trial to encourage them to try the service. These offers allow users to view the content before
making a purchase decision. It is also a great way to increase exposure for consumers who are
new to the brand or just exploring potential video streaming options. They can rely on the quality
of their content to gain more subscribers.

RECOMMENDATIONS AND CONCLUSIONS

Although it may harm their reputation in the short term, I recommend that Netflix
reconsider its position on paid advertisements during their programs. This will allow Netflix to
generate more income from its existing capabilities. This income could be reinvested in the
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company to produce more original content. It could also be used to alleviate some of Netflix’s
long term obligations.
Netflix should also strengthen online security measures against to protect themselves and
their viewers from cyber-attacks. If they are unable to protect their content or the information of
their viewers, they could lose high numbers of subscriptions and face regulatory penalties.
Netflix should also consider purchasing the rights popular cable channels and sporting
events. Similarly, they could also purchase one of their competitors in order to build a more
robust content library and prevent their users from purchasing other brands of online streaming
services.
Netflix already does an excellent job engaging with its consumers online. Their posts
contain content that encourages users to interact with or follow the postings (tweets, status,
pictures, etc.) brand. Moreover, they can personalize their communications with individuals.
Personalized communication with their consumers strengthens brand resonance.
Netflix also relies on word-of-mouth advertising. This allows them to capitalize on the
social elements of watching shows and movies as people will often discuss and recommend
programs to their friends, families, and coworkers. They can also recommend Netflix to
consumers who have not yet made a purchasing decision and Netflix has several options to allow
them to view the content to get them to join.
Netflix does an excellent job segmenting their consumers. They use behavioral,
demographic, geographic, and psychographic segmentation to improve their consumers
experiences with the brand.
Finally, Netflix possess a large amount of intelligence related to their business. They use
this intelligence to make informed decisions about what shows to recommend and produce for
their viewers.
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REFERENCES

“About Us.” Netflix, Netflix, about.netflix.com/en.

Cook, Sam. “The Complete List of Streaming Services in 2021 - 200+ Services.” Flixed, Flixed,
23 Nov. 2020, flixed.io/complete-list-streaming-services-2020/.

Cook, Sam. “50+ Netflix Statistics, Facts and Figures 2021.” Comparitech, 10 Nov. 2020,
www.comparitech.com/fr/blog/vpn-privacy/netflix-statistics-facts-
figures/#:~:text=Netflix%20has%20produced%20over%201%2C500,the%20exclusive%20
rights%20to%20broadcast.

Guglielmi, Jodi. “The Office and More Shows Leaving Netflix at the End of December.”
PEOPLE.com, 2 Dec. 2020, people.com/tv/the-office-more-shows-leaving-netflix-end-of-
december-
2020/#:~:text=As%20if%202020%20hasn't,the%20end%20of%20the%20year.&text=1%2
C%202021%2C%20all%20nine%20seasons,NBCUniversal's%20new%20streaming%20pl
atform%2C%20Peacock.

“How Netflix's Recommendations System Works.” Netflix, Netflix Help Center,

help.netflix.com/en/node/100639#:~:text=When%20you%20create%20your%20Netflix,titl
es%20you%20like%20is%20optional.

Mannino, Sergio. “Council Post: Why Every Brand Needs A Mission Statement.” Forbes,
Forbes Magazine, 25 Aug. 2020,
www.forbes.com/sites/forbesbusinesscouncil/2020/08/26/why-every-brand-needs-a-
mission-statement/?sh=1601187e1eb3.

“Netflix Annual Report.” Netflix, 29 Jan. 2020.

“Netflix Third Quarter Financial Statements.” Netflix, 20 Oct. 2020.

Perez, Elisa Paz. NEXT EPISODE, NEXT MARKET: SOCIAL MEDIA MARKETING FOR
SVOD: THE CASE OF NETFLIX. Journal of EU Business School, Apr. 2020,
www.researchgate.net/profile/Zaira_Pedron/publication/341134324_WHY_COMPANIES
_SHOULD_EMBED_A_GROWING_IMMIGRANT_MINDSET_IN_THEIR_CULTURE
/links/5eb05caf45851592d6b8bcce/WHY-COMPANIES-SHOULD-EMBED-A-
GROWING-IMMIGRANT-MINDSET-IN-THEIR-CULTURE.pdf#page=8.

Stoll, Julia. “Loyalty to Video Streaming Services in the U.S. 2017.” Statista, 13 Jan. 2021,
www.statista.com/statistics/778906/video-streaming-service-loyalty/.

“What Are the Top Recommendation Engine Algorithms Used Nowadays?” Medium, ITNEXT,
18 Mar. 2020, itnext.io/what-are-the-top-recommendation-engine-algorithms-used-
nowadays-646f588ce639.
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Tas, Gizem. “Key Takeaways from Netflix's Digital Marketing Strategy.” Digital Agency
Network, 24 June 2020, digitalagencynetwork.com/key-takeaways-from-netflix-digital-
marketing-strategy/.