Netflix and its Web Analytics Usage

Web analytics are a tremendously helpful tool to better understand user habits and click patterns. By examining these metrics closely and converting numbers into reports , marketers can identify how consumers behave on the web and determine action items to improve that experience and find ways to boost conversions. Although most, if not all, businesses can find value in gathering and reviewing web analytics, online retailer may get the most out of this effort than others. Forrester Research senior analyst Joe Stanhope argues e-commerce sites are still where the majority of transactions occur and that mobile and social commerce are still fairly nascent. Consumers still go to the Web to complete the majority of their transactions. Since so much money is passing through the web, it only makes sense to optimize these channels. Incorporating analytics into the marketing mix can help marketers provide better services and more targeted experiences to customers.

E-Commerce and Netflix Overview

According to a study from DMB Media, only 50% of e-commerce businesses track main conversion points. This prevents marketers from measuring website performance against business objectives (such as purchases or leads) as well as end-to-end campaign effectiveness…[Additionally],30% of websites have incorrect e-commerce tracking implementation. It is important for all e-commerce sites to have the right tools in place and constantly monitor web traffic/habits to have a clearer understanding of both their site’s successful features and pitfalls.

From Internet Retailer, Netflix is the ninth most profitable online retail company today. With $3.2 billion in totalsales, the movie-rental giant continues to grow in both sales and popularity. Netflix has a strategic approach to its website. They offer a free 30-day trial to try and increase usage in hopes that users will fall in love with the product and stay on after the month is up. In that approach, the main aspect of the company’s homepage – looking more like a splash landing page than typical information-based – centers around the free trial sign-up. Drilling through, users only need to touch on a couple more pages before they are on their way to a plethora of great streaming videos. By knowing this click path, Netflix marketers can see where converted users originate and what specific pages might be driving people away from the site.

Netflix’s Recommendations

According to KISSMetrics, using analytics, Netflix was able to determine that the average lifetime value for one of their customers was $291.25. By realizing this figure, they can understand how much money can be allocated to marketing/promotional efforts while still seeing a positive ROI. Of course if a percentage of customers didn’t stay on, they couldn’t keep on offering affiliates $16 per signup. Or even spend $2 for every click from their Google AdWords campaign, but because they know their lifetime value metrics well –they can keep on dumping money into marketing. Every brand should do this. Placing a specific value on a conversion transcends online marketing from a guessing game to an actual measurable tactic. Netflix’s close monitoring of these metrics help to have a better understanding of their customers and how much can be spent to try and obtain that conversion.

Unlike some others in the top 10 e-commerce list, Netflix thrives on the use of its recommendations system. The way Netflix works is that users set aside movies or television shows that they wish to view. However, most consumers do not always know what they are in the mood for at that particular moment. So, Netflix uses the consumer’s past viewing history and saved favorites to generate suggestions based on that person’s taste. Other sites like Amazon and Pandora rely on similar algorithms for their businesses. Streaming has not only changed the way our members interact with the service, but also the type of data available to use in [Netflix] algorithms…The company said it now realizes the prize’s objective—more accurate prediction of a customer’s movie’s rating—is just one of the many components of an effective recommendation system. Within this ecosystem comes analytics and monitoring. Understanding user’s most popular searches, views, favorites, highest and lowest rated, feedback, etc, Netflix can better target their users in marketing efforts and make those tailored experiences much more enjoyable and worthwhile. If you can predict what a user will purchase, or in this case stream, but he/she even knows, you have a successful product on your hands.

Netflix Platforms

Rob Smith at Smashing Magazine makes a strong point about the purpose of e-commerce. The key to a good e-commerce strategy is customer insight and engagement. In other words, find out what people want, and give it to them (in an engaging way). Always be listening,asking questions and monitoring every facet of your website, business, industry and competition, and use whatever technology is appropriate to help you achieve your goals. As Netflix takes in data from their website, mobile platforms, Xbox and PS3-based integrated apps, etc they can learn a great deal about popular practices around their products. Moreover, Netflix invests large amounts of money into their digital ads. With such a tactic, they must heavily monitor the reward, or, the traffic coming to the site through these means. This is a vital element to their web analytic reports. There is no sense spending ad dollars if conversions are not making the investment worthwhile. Likewise, Netflix has a strong social media presence. If they are not doing so already, they should consider a tool to monitor these conversations and track any lead generation from these sources. Sprout Social or Ravel are a few good examples. It is critical that a brand as visible on the web (and whose entire business model revolves around the web) is able to track these social conversations and identify if those communications are turning into results.

Conclusion

Tracking consumer behavior on the web has become a necessity to help develop marketing strategy. E-commerce sites, in particular, should pay close attention to these metrics. Not only can they better identify where consumers are focusing on and/or where they are failing to convert, but also realize the most popular products and how to best improve that web experience. From Direct Marketing, multichannel retailers are measuring Web analytics to improve conversion rates among e-commerce shoppers,in addition to pursuing emerging opportunities in mobile and social commerce. The bottom line that remains most important to all marketers is to increase conversions (which eventually leads to increased sales). In order to do so, that online retail experience should be tailored to customers. These companies, Netflix in particular, are able to take web analytics and use the data to offer a better and more useful website.