Netflix, bringing in the “world-class” segmentation

                                                                               Deborah, Que Yuen Ying, 1155082157

Netflix began its journey of business process innovation in 1997, disrupting the traditional video rental business by introducing a new twist on the home movie service.

“Our appeal and success are built on the most expansive selection of DVDs; an easy way to choose movies; and fast, free delivery”, Hastings, CEO of Netflix. 

The first step of the seven-step process used by Netflix involved the identification of the unmet customer needs. This set of underserved needs stemmed mostly from processes dictated by traditional video rental businesses. The movie rental industry had already established methods surrounding video rental, late return policies, and membership rules. Netflix believed that without competition, these brick-and-mortar movie rental companies would never have a reason to change.

Following the problem recognition step, Netflix needs to identify the target audience. Segmentation for Netflix includes identifying customers using geographic, demographic, and psychographic segmentation approaches. The target audience for Netflix expands beyond the regions and primary market areas that typically define traditional brick-and-mortar businesses. The Netflix target audience is not limited by geography, but rather bound by technology and psychographic.

The relative advantage to Netflix competitors begins with the use of technology. An Internet-based system allows a user to find movie titles easier than strolling the aisles of a video rental store. The entire supply-chain of the Netflix system is more desirable than issues surrounding weather, store hours, and drop boxes. Netflix began its business with a distinct competitive advantage.

Apart from the use of technology, Netflix imposed a strong value proposition, "an easier way to choose movies, fast and free shipping, and no late fees or due dates”. Netflix’ segment choice encompasses all existing competitors" customers as well as individuals beginning to desire movies-on-demand. The benefit choice revolves entirely around the convenience of making movie selections online. The resource choice is based on a strong distribution network and supply chain that rivals the competition.

The online experience of Netflix is their differentiator in the market.  Netflix expanded the scope of their offering to include several levels of membership. Rounding out the business model, Netflix created an online community where member could contribute by offering and sharing reviews. 

Netflix also follows the best practices across all 7Cs, which are context, commerce, connection, communication, content, community, and customization. Content on the Netflix website consists mostly of movie imagery, descriptions and storylines, and member posted reviews. The member community enjoys a user-specific experience. The movie titles presented to each member are relevant to his or her likes and dislikes, based on individual movie reviews. The content includes static information regarding the Netflix organization, its affiliates, career listings, and social networking links. Other customization features include the movie suggestion section. Every member receives an interactive list of movie titles that can be added to their playlist. Analyzing the member’s previously watched movies and the associated ratings provide enough information to create a suggested playlist.

Netflix provides a robust community design element to their site. Members are invited to participate in reviews, forums, and blogs. Additionally, the tell-a-friend option creates a viral element. The functionality that allows member-to-member communication. The users provide movie ratings are real-time, but the written reviews are moderated before posting live to the site.

As new technology becomes available, such as faster connection speed, Netflix finds new opportunities. Netflix has had a negative impact on several mainstream brick-and-mortar movie rental chains. And the reason of bringing Netflix to success is mainly due to its “world-class” segmentation, meaning that almost everyone segments to some extent, targeting different customers with different marketing, but typically those segments are big, macro-level segments. By creating "segments of one”, micro-segments that target each customer uniquely, allowing Netflix to convert visitors into long-term, high-value customers at very high rates.