How does a company know what consumers want? In the case of Nexflix, executives simply look at the selection of videos that consumers choose to watch.
Last year, NPR produced a segment on the importance of algorithms as a critical aspect of Netflix’s consumer research. The company uses algorithms to analyze consumer choices, and armed with that consumer research, the company then personalizes an individual’s Netflix queue.
Netflix is banking that this personalized strategy helps maintain high consumer satisfaction.
“Every time a Netflix member streams a title from us, we learn a little bit more about what's interesting to them,” said John Ciancutti, vice president of engineering at Netflix, in the NPR article.
Netflix is not alone in its use of algorithms. Facebook also uses algorithms to moderate sponsored posts that appear in an individual’s news feed.
But Netflix has taken it to another level—but using consumer research to create shows of its own. Consider the series $100 million “House of Cards” series featuring Kevin Spacey and Robin Wright: Netflix reports the series is the most popular show on its streaming service.
One can argue that Netflix needed to innovate and create House of Cards to stay ahead of the pack, given competition from companies such as Amazon. It seems to be working: Netflix’s strategy has resulted in revenue growth, and the company reports an increase in subscribers for its streaming services. Given this growth, perhaps Netflix’s algorithms will help the company maintain its competitive advantage.
–Team D (Bobby Hangar and Rachanee Srisavasdi)