Understanding Consumer Behavior

When I think of what stocks I want to invest in, I can make a decision using different methodologies. Some of these include analyzing a company's revenue, cash flow, growth opportunity, or potential to be acquired. One method I used to decide to buy a company was determining whether or not a company understands its consumers in a detailed way. It's an unusual and atypical method, but it worked as we can see from Netflix 's 55% YTD growth.

We can say that Netflix's growth was caused by revenue increases and price/package adjustments, and as that is true, their campaign was only successful because of understanding consumer behavior on a deep level. But what does "consumer behavior" mean and what does it look like?

Consumer behavior is the understanding/realization of quantitative and qualitative buying patterns from consumers. Consumer behavior consists of emotions and preferences that buyers have towards products or services a company offers. Understanding this is crucial for any company as these patterns determine a product's performance. Whether or not a company understands consumer behavior can be seen by looking at improvements in new products compared to old products, successful marketing campaigns, and an increase in brand loyalty over a period of time.

Here's an example. Let's say we have two pen companies, Company A and Company B. Company A does not have any branding and Company B has incredible branding and marketing. Which one is most likely going to perform better and why? It would most likely be B. Branding and marketing go hand in hand-branding is being meticulous about what a company's message is and marketing is being meticulous about where and how to advertise it. Utilizing both is the key to successful companies.

Now that we have established how it can be beneficial, what is an example of how this is seen in the market? On Jan 9, 2007, 苹果 announced the very first iPhone during after-market hours. The very next day BlackBerry tanked 7%. The iPhone was simply a superior product, so BlackBerry was destined to fall, but a big reason why it fell so much was because of the marketing of Apple's announcement. Apple announced the iPhone at MacWorld 2007. Apple announced two other products before announcing the iPhone, but when they announced it they took a phone from BlackBerry and a phone from Motorolla and put them against the iPhone. Apple showed how their product is superior and will "revolutionize the industry." If this was not enough, they mentioned those exact words at the beginning of the conference showing how they revolutionized the wearable and music industry, and said they were going to do it again with the phone/telecom industry. Apple's branding brought customers who were loyal to the iPod to the iPhone and marketed it in a great way resulting in BlackBerry's fall.

Now let's talk about Netflix and how I decided to try out this method. Netflix knows its consumers in such a detailed way. 96% of consumers who use streaming services have heard of Netflix and 56% of those consumers are loyal to the brand (https://www.statista.com/insights/consumer/brand-profiles/3/5/netflix/united-states/#contentBox1). It is shown that they know their consumer by looking at their social media pages. They create unique and original content to post on Instagram and TikTok engaging their audience and connecting them with the cast/crew. Netflix makes itself visible through social media, word of mouth, digital display advertising, articles, and awards. From my experience as a young consumer, I hear about Netflix frequently. When I was in New York this past summer I saw their digital displays all over Times Square (helped market one of their campaigns, a story for another time) and posters around the subways. Netflix's award-winning content is shown within the first three rows of their app (some highlighted at the very top). As a Netflix consumer, I have noticed how much they have changed the content shown on the app with series like John Wick, Mission Impossible, Fast and Furious, etc. They keep adding content and taking away content that their consumers don't like. The constant changes to the app and new additions/content strategies get me excited for more content and see a growth opportunity as an investor.

As mentioned in paragraph 3, consumer behavior success is present when old products are compared to old products, marketing campaigns are successful and refreshing, and brand loyalty is increased. Let's check and see if Netflix has successfully done all of these.

• Old licensed content is replaced with new licensed content
• Original content improves every year (seen through awards)
• Marketing campaigns are incredibly unique to each show (ex: Owning Manhattan utilized digital display and Squid Games 2 created a game for the audience to play posting fans on their Instagram story)
• Marketing campaigns are successful (revenue increase, recurring customer rate increase, award increase)
• Loyal customers make up more than half of consumers who use streaming services
• Customer loyalty was clearly shown when Netflix increased its price and didn't lose many customers/customers came back two quarters after their price increase

With this evidence, we can conclude that branding has a strong place in a company's position and has increased Netflix's revenue. We can undisputedly see this through their recurring customers after increased pricing. This was a successful experiment and I was inspired to continue this experiment being a marketing major at Clark University School of Business . I was able to go into detail with this experiment by taking a branding class this semester taught by Professor Tom Murphy .

What is next for Netflix? My new hypothesis is that Netflix will continue to grow, not sure if it will be equal to their growth this year, but the results of Netflix streaming its two NFL Christmas games and the Jake Paul vs Mike Tyson fight will create a new opportunity to expand. As long as Netflix continues to experiment and tap into new audiences, we will see continuous growth. I am still bullish on Netflix, but my stance is a slight buy strong hold while paying close attention to the results of the livestreamed games which will change my consesus.