Brand Positioning Strategy -Netflix, An Example

The first step for any new business is to ponder how to occupy space inside a target consumer’s mind, which is called ‘Brand Positioning’. It can also be termed as a consumer’s perception of a brand with respect to competing brands.

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Why does your brand need to enter his or her mind? If you ask a consumer to name a cola drink, ‘Coke’ name will spurt out. If you ask the consumer to name a toothpaste that comes immediately to the mind, most probably, Colgate name would pop out. If you ask about a photocopying brand, ‘Xerox’ name will spurt out. If you ask them the name of an energy drink, the red bull name will rush out. If you ask an Indian to name a noodles brand, most of the time ‘Maggi’ name would jet out.

Why do these brand names stay at the top of the consumer’s mind so that it can be recalled immediately?

Coke is the first cooldrink to enter the consumer’s mind under Cola category. Seven-up is the first cooldrink under the Un-cola category. Redbull is the first cooldrink under ‘energy drink’ category. Xerox is the first brand under the ‘photocopying’ category.

Being №1 in a consumer’s mind will help a business to grab a major market share and have a sustainable business. The above brands show that the easiest way to get into a person’s mind is to be first.

So, how can a business enter a consumer’s mind by being first? The business has to create a new category that doesn’t exist in a consumer’s mind.

What is the need for categories? Our human brains are wired for categorisation to help us remember things. Without that, we would be quickly overwhelmed by the vast amount of information.

Nicole Branan writes in ‘Scientific American’, Picture a living thing — say, a dog. Now imagine a hammer. Thinking of a dog activates an area that deals with animate objects, whereas a hammer excites one that processes inanimate things even if you had never seen a dog or a hammer before.

Whenever we come across new things, subconsciously, we would file them under different known categories in our memories. If a consumer sees your product, he would automatically file the product under a known existing category. The problem with this filing under the existing category is — your product would be filed several layers below the other products and the consumer would fail to recollect your brand name at the top of the mind. Example -Coke is the first product under the cola category. Pepsi is the second brand. Do you remember the third brand? Fourth brand? If you ask people, they may not recollect beyond two names. How many energy drinks can you name other than Redbull?

How To Create A New Category? -The new category should be based on the value offerings a brand can offer to the customer. For that, the company has to observe customers’ needs, desires, pains and choose value propositions that will solve customer’s pains and also match the business’ core strengths and core values. This is also called ‘Brand Differentiation’.

Michael Porter writes, “A company can outperform rivals only if it can establish a difference that it can preserve. It must offer greater value to customers or create comparable value at a lower cost, or do both”

We build a sustainable business by widening this differentiation and evolving the value propositions based on the changing needs and attitudes of customers.

BRAND POSITIONING OF NETFLIX

As we saw earlier that to create a category, we need to first freeze the target customer segment(Niche Market) and understand their requirements.

Focusing On a Niche Market. The general rule is to start small. Smaller the segment, it is easier for the entire company to focus and meet the customer needs, wants and desires. Once you become a leader in the niche market, you could grow your market.

How to find a niche market? A market exists when a customer has a problem that needs to be solved -Find and Focus on a particular need, work on it, make your product distinctive and dominate the niche market.

Netflix’s Niche -In the late 90s, after watching the dot-com buzz and the growth of e-commerce sites like Amazon, Marc Randolph(Co-founder of Netflix) wanted to sell something over the internet. He was looking for a product something similar to Amazon’s books -

  1. Should have boundless SKUs, which even a massive retail store cannot stock(a potential advantage for an online store since it had no such limitations)
  2. Should have a potential customer base with the need for convenience
  3. Should have a potential opportunity where customers would someday prefer to do online.

Randolph and Hastings brainstormed some options. Out of those, they chose online movie rentals as it met all the above conditions. But there was a couple of other conditions which the chosen concept had to meet.

1) Fighting Against Non-Consumption

Users generally are averse to try any new things or change their routine as they are afraid of the unknown outcome. Consumers at that time had little exposure to online buying. They had this fear of buying goods of unknown quality over the internet. But movie cassettes were pure commodities. A copy of a movie in one store would be identical to the same movie in any other store. So, the customers had no “Fear of Unknown”. They knew what they would be getting. The condition met.

2) Entry Barriers

Like ‘Barnes & Nobles’ in the case of Amazon’s books, neither Blockbuster nor Hollywood Video retail chains were interested in cannibalising their brick-and-mortar stores’ revenues and saw online DVD rentals as a threat. Amazon might start selling videos online but Netflix could establish a competitive advantage before them. So, Netflix saw that virtually there were no entry barriers.

VALUE PROPOSITIONS

Netflix’s core values are to deliver entertainment and make people happy. But how to derive Value propositions from those core values? The answer lies in understanding the customer’s needs & desires and the jobs they were trying to get done.

Research-Understanding the Users

Randolph and Hastings have hired experts who had worked in the video rental industry for years and who had observed consumers for more than ten thousand hours. Randolph himself had observed consumer’s behaviour. They began to question every aspect of consumer’s behaviour -Why they chose the title? Why did they abandon the movie? Why did they watch some movies again? Why did they spend so much time searching for a certain movie? What made them upset? etc…The research guided them to determine the value propositions.

Customer’s problems, Jobs to be done

  1. In brick-and-mortar stores, finding a popular movie was easier than finding a niche movie. Movie lovers of niche films had a tough time in physical stores. Only popular movies occupied all the prominent shelf spaces. — Netflix had limited cash reserves and popular movies were beyond their budget. Instead of new, popular latest movies, Netflix(backed by research data) chose to show the consumers older films, niche movies and movies inspired by various themes like Holidays, news events etc… It became a differentiation factor for Netflix.
  2. In the stores, there was no one to guide the ‘movie lovers’ to discover movie titles that were tailored to individual customer’s preferences — This prompted Netflix to work on an ‘automated movie recommendation programme’ to provide a customized solution for every customer, thus enhancing the customer experience.
  3. Consumers are always looking to save time and reduce the number of tasks involved in performing a job(planning, travelling to DVD rental store and related tasks, searching, enquiring, choosing, placing an order, billing etc…). Many of them were unsatisfied with the store experience as some tasks consumed a lot of time. (In Stores, sometimes customers could not find their first, second or even third choices available in the stores). If a consumer picks up more than one video, he must watch them within the company allotted timeframe. They were fed up with the high late fees charged by those retail stores. -Randolph realised that to make consumers adopt the new technology rapidly, he had to significantly reduce the number of steps involved in renting DVDs from physical stores and also help consumers to save time. Netflix’s first website was intuitive and easy to use. It was easy to search for movies by themes, actors, directors, genre, etc… Consumers can keep movies as long as they want. No deadline to return the DVDs and no late fees. It was easy to return the DVD by simply sealing it in the prepaid envelope provided by Netflix.

Netflix gave more freedom to consumers. It was letting customers construct their own experiences.

From the above research insights, it was clear that Netflix’s initial positioning strategy was ‘Comprehensive Selection Of Niche or Unpopular movies at extraordinary convenience with customizable experience’ at a fair price.

Note:

The above content is part of the following book.

How Brands Built Its Sustainable Competitive Advantage? by Shah Mohammed M On Amazon.com.

AVAILABLE ON AMAZON -

21 Essential BUSINESS LESSONS From The World’s BEST BRANDS: -A Guide for Every ASPIRING ENTREPRENEUR by Shah Mohammed M.

References: Positioning: The Battle Of Mind by Al Ries-Jack Trout, ‘Netflixed’ by Gina Keating.

Written by

Secular Humanist, Business Growth Consultant, Design Thinker, India. Reach me at mmshah8@gmail.com. or https://www.shahmohammed.com

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