Netflix Case StudyAugust 15, 2013

Introductions

• Leah Brady, Product MarketingProvidence College, 2014

• John DelSignore, Bank of AmericaBoston College, 2015

• Kathryn McKennon, Customer Experience Boston College, 2014

• Connor McNamara, Mid-Market SalesUniversity of Vermont, 2014

• Alex Wu, Kellogg’s & UnileverNortheastern University Master’s Program

Agenda1. Netflix Overview2. Business Strategy3. Technology4. Customer Retention5. ISP Partnerships

Epsilon’s Vision

client/brand needs

• Macro and micro insights• Integrated, multi-discipline

marketing competencies—”marketing technologists”

• Direct customer engagement• Channel• Content

• Cost-effective value• Proprietary platforms and

customization• Accountability

customer needs

• One-to-one engagement content• “Know me”

• On their terms• Media Channels• Timing

• Brand relevance• Authentic experiences• Recognition• Value

Netflix Overview

• Marketing expenses dropping consistently as percent of sales.

Netflix Stock

Streaming Introduced Qwikster Proposal

IPO Today

SWOT Analysis• Strengths:

• Strong brand:• Top provider of streaming content in the U.S.• Value of brand name on the rise since release of original content

• Weaknesses:• Undertaking large amounts of debt:

• To fund the mass licensing packages used to acquire content from other providers.

• Physical media delivery service has suffered greatly since the growth of the digital LOB

SWOT Analysis• Opportunities:

• “Cord-cutting” trend creates new demand for internet-based TV

• Original, in-house programming• Redirect percentage of marketing budget• International growth

• Threats:• Internet Service Providers• Competitor growth

Netflix Business Needs

• Interested in developing new strategy that would allow for growth in both markets, including:• Improving analytic capabilities• Forming strategic partnerships with ISPs• Developing transmedia properties

Business Strategy

Epsilon’s End-to-End Solutions Portfolio

Leverage Our Partners• Streamline multi-channel technologies

• Smart TVs, Tablets, Game systems

• Develop new capabilities• Integrate “app store”

WB CampaignMarketing DB

Epsilon Hosted

Marketing Solution Tools

Marketing Automation

Query & Reporting

Campaign Management

Email/MobileDeployment

MarketingResourceManagement

Data Mining&Analytics

LoyaltyProgram

or

RecommendationOptions

Future?

or

(Hosted at WB)

Technology

• What is CDI?A data processing domain relating to the accurate and consistent representation of customer data across enterprise systems.

• What does Agility do?Helps to realize the full potential of valuable customer. information

Customer Retention

Customer AcquisitionCost of subscriber acquisition: $16

Monthly cost of service: $7.99

Average subscription lifetime: 25 months

Customer lifetime value: $291.25

• As of April 2013, 5.7% of Netflix users were not paying for the service.

• Abuse of free trial offer.

• “Virtuous Cycle”

• Challenge: getting users to follow up free trial with a paid subscription.

Epsilon Solution

RESULTS

• Realized $3.4MM in incremental spend in the first year

• New member activation communication open rates averaged over 34% vs. the promotional average of 22%

SOLUTION

• Educate members on program and franchise offerings and improve customer engagement through a reactivation strategy and campaign

• Increased likelihood that a new program enrollee would transact and ultimately become a valuable customer

CHALLENGE

To increase transactions of program enrollments and no longer have any “stagnant” members

• Maximize free trial conversions.

• Mimic success of Hilton case:

• Last reported churn rate: 5% (2009). • “The company doesn't report churn,

but Sanford C. Bernstein puts it between 40% and 50% annually” (Wall Street Journal).

Customer Retention

• Customers cancel subscription once they finish a certain show.

• Challenge: Implement a more accurate recommendation software to keep users coming back.

Epsilon Solution

• Data Analytics Services.

• Modeling and Profiling.

• Discover why they go and where they go.

• Cut down on attrition.

ISP Integration

Internet Data Usage and Netflix Today

• Internet data usage in the U.S. has jumped 120% in the past year.

• Netflix continues to be the largest user of Internet Bandwidth in North America,

with its video traffic jumping more than 35% in one year.

• Accounts for one-third of peak-period downstream traffic in North America.

• Netflix is working to create relationships with ISP’s to save money on content-delivery costs.

• They have started program called Open Connect aimed at broadband service providers to directly connect with ISP’s.

• Netflix has signed up Cox Communications, Cablevision Systems and Suddenlink Communications, but wants to continue to expand their program.

Epsilon’s ISP Relations • Epsilon has a great relationship with ISPs.

• Marketing Policy Summit

• We are in contact with more than 100 major ISPs globally.

• Our deliverability team monitors ISPs on a daily basis.

Netflix could greatly benefit from Epsilon’s relationships with ISP’s globally.

Future Engagement

• Strategic Consulting: • Recognize decreasing marketing budget.• Develop unique solution set:

• Agility• Email campaigns• Loyalty Program• Technology enhancement• Leveraged relationships

Thank You Lisa Kenney Jill Draper Matt Ryan Ned McMullen