Valuable lessons from Netflix about user behaviour

Courtney Govindan
18 February 2021

What is user behaviour?

User behaviour - A person holding a remote points it at a Netflix screen.

Understanding user behaviour helps us find out how a user interacts and communicates with a product. It is crucial to have interface tests to assess usability and functionality to evaluate user behaviour. You can track and evaluate numerous user metrics such as clicks, browsing, session length, and conversion rates.

A basic example would be if you experience an increase in usage of your product before the previous months, how can we find what changes may have occurred? 

We can identify the interface variables that could have impacted user behaviour changes. For example, is there a new begin button? Is there a change of colours, or possibly a brand new animation that was introduced?

A cultural phenomenon

Giving viewers a digital catalogue of movies to stream knocked Blockbuster out of business and made Netflix a cultural phenomenon. Viewers quickly embraced a new way of experiencing entertainment on demand. In 2009, Twitter users began using the phrase “Netflix and Chill” to describe the popular practice of hanging out with Netflix like a friend. The phrase “Netflix and Chill” became an internet meme and discussion point of much analysis and controversy. Similarly, Netflix was shaping how we communicate just as Google has done.

Binge Watching 

Netflix made the pivotal decision to release all episodes of its new TV shows at once instead of distributing one episode at a time. In addition, this has resulted in Netflix giving birth to the phenomenon of binge-watching, where people sit down in front of their TVs and watch episode after episode of a show for hours at a time. 

Netflix initiated personalization in 2013 by activating the multiple “profiles” feature through which customers may add up to five personal profiles to help Netflix better understand their preferences. This would allow for friends or family members sharing the same Netflix account to customize preferences to their liking. Netflix has popularized the use of machine learning to make smarter content recommendations based on your habits, likes, and dislikes.

“Don’t find customers for your products, find products for your customers.”
– Seth Godin

How Netflix uses user behaviour and analytics to reduce churn

By leveraging behavioural customer data and analytics, Netflix can identify the amount of usage activity an individual customer needs each month to receive enough value to continue subscribing. If a customer’s monthly content consumption falls below that threshold, the likelihood of them churning increases.

With the influence of a behavioural segment for all customers that fall below the minimum product usage value threshold, Netflix can easily identify customers who are at risk or discover insights that may lead to low usage and monitor this over time.

Subsequently, this helped Netflix gain insight into how they needed to find more ways to keep users engaged and consuming more content each month.

User behaviour - two graphic figures look at a large computer screen.

Automation by pch.vector.

They started a series of initiatives to improve their recommendation algorithms and find new opportunities and channels to provide personalized content recommendations based on user interest behaviour. These recommendations are delivered to subscribed users as well as through targeted email campaigns and push notifications.

Netflix also uses customer behaviour data to make decisions on what content to produce and license. This also helps them to prevent churn, as well as improve customer acquisition. This allowed Netflix to significantly reduce their churn rate to a great extent below many of their top competitors.

In addition to increasing the lifetime value of their customers, this allows Netflix to spend more on customer acquisition while having to acquire fewer new customers. Netflix executives estimate that this saves the company $1Billion a year.

Conclusion

In conclusion, analysing and collecting user behaviour data is important. Collecting data is a good foundation for building a well-functioning product, in addition to an indicator of a successful company organization.

If you want to find out how we collect and analyse data at Integrove, contact us! We specialise in helping your business thrive by building bespoke digital solutions. Whether it’s data analytics or data science, we’ve got you covered.

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