Great Content + Human Behaviour = Personalisation (the Netflix Way)
Netflix know something about you, that you don’t know about yourself, or at least you will not admit.
You are poor at making decisions.
We like to think of ourselves as reasonable beings, weighing the options and using mathematics and the position of the sun to inform our final decision. However, you are more likely to make a decision based on the shimmer of the object than by any grander insight. Every book you have read you judged by its cover. Why are good looking people liked more, and have better opportunities in life?
We are surface animals.
Netflix, the behemoth streaming service offers one product but continues to satisfy 120 million unique customers.
Our ability to make decisions informs Netflix’s value creation for its customers.
Netflix have great inventory. Their service is on-demand, so nobody can argue with availability. But, neither of these ensure a satisfied customer and “Satisfying customers is the source of sustainable value creation,” say Robert Kaplan and David Norton state.
There is no such thing as a satisfied customer; with every great experience a brand provides for a customer, the customer’s needs evolve, and there presents an opportunity for the brand. The brand that commits to anticipating their customers’ evolving needs will discover new opportunities to add value to their experience: opportunities to add benefits beyond the cost of the product/service the brand provides.
At the heart of the streaming service are two core understandings of human behaviour:
1) Customers do not know what they want.
2) Humans are poor at making a decisions, and increasing choice further decreases a human’s ability to make a decision.
Netflix behavioural data reveals when a customer arrives on the Netflix platform most have not decided on the content they want to consume, so they begin to browse.
However, the same data also shows from the point the user arrives on the homepage they have 90 seconds to make a decision and choose a show. Once that time lapses the bounce rate goes up, significantly.
How does Netflix help a customer make a well informed decision they will not regret, against a ticking clock?
Netflix inspire conversions in two ways: personalised recommendations and limiting choice.
The streaming service combines a number of different algorithms to power segmentation of content and users. This surfaces data, that when applied in a collaborative filtering model (used by Amazon and Spotify too) will produce recommendations personalised to each user.
Internationally, Netflix have 13,500+ titles in their catalogue, but for licensing reasons not all titles are available in every country. For example, the US has about 5,000 titles on their service, only 40% of their global inventory.
What do you see, when you land on the Netflix platform?
Netflix curate the recommendations into columns under various headings, each a different value proposition that is personalised to the user. Content is the product, and while the user has access to all 5,000 titles, the added value is in how Netflix curate the experience, showing a permutation of content unique to that user, limiting their choice.
Headings like Trending, and Popular on Netflix have a powerful psychological trigger of social proofing.
MyList and Because You Watched leverage the power of context, brand new content with a familiar access point to that user; we are drawn to familiarity far more than one thinks.
Netflix estimate that their approach to creating an experience around converting their customers saves them $1 billion per year.
Airlines and Hospitality brands can have the inventory and availability, but how can they inspire a customer who is inherently poor at making decisions to book? Especially when one considers:
1) The options for travel are endless; travel is a true global industry–even within a single city there are endless permutations of experiences to be consumed, and each traveller navigates the city based on their unique set of criteria. (Read this)
2) Booking travel requires greater commitment than choosing a show or even buying a higher ticket product.
3) The disconnect between the values of the modern traveller and the technological culture of travel brands (the restrictions in personalisation are rarely a technological shortcoming, and often the pre-digital entrenchment of an organisation).
4) The competition in a mature market like travel and hospitality is high.
While the industries of streaming content and travel are not like for like, the human behaviour is the same.
Most in the travel industry have a limited understanding of the travel life cycle, and define the remit of personalisation to the moment a customer shows intent to book, whereby a generic cycle of retargeted ads and ancillary offers begin. Where is the inspiration phase? The phase before Planning and Booking.
In an industry where the customer defines the product as access to the experience and/or the transformation that lies in that journey (If you’re not convinced, 42% of all posts on Facebook are about travel, go read them). When it comes to the Inspiration phase of the life cycle the very best travel brands have a paltry understanding of inspiration compared to brands like Netflix.
This is evident in travel email marketing where the one-size-fits-all approach to inspiration has largely ceded this phase of the booking life cycle to Google and Facebook–which could have serious ramifications for the travel brand/customer relationship, on which depend ancillary revenue and loyalty.
It’s simple mathematics. If a customer takes 4 trips a year, out of the 52 weeks of email offers which typically read “seat/room sale for X amount of destinations, Book Now,” four emails will arrive at the point when a customer is ready to Book Now (whether the content of the email is relevant is another issue). 90% of those email offers will be irrelevant to the life cycle: arriving when the customer is in another phase, when they are not ready to book.
This is detrimental when one considers the findings of a Google study which revealed that the travel brand that adds value to the customer in the Inspiration Phase of the life cycle are 67% more likely to earn the booking in the Booking Phase.
Netflix define inspiration as that which is uniquely relevant to the user. They achieve it by limiting choice to increase the conversion of personalised recommendations. Amazon do the same in retail. Spotify do the same in music streaming. The technology exists for travel brands to adopt this approach to destination discovery.
Who will become the Netflix of Travel?