How would you increase the market penetration of Netflix in developing countries?

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Interviewer: You are a PM at Netflix. You are given the task to increase market penetration in developing countries. How would you go about this?

Priyanka: To get a better understanding of the problem, I would like to ask some clarifying questions. 
Interviewer: Sure, please go ahead. 

 

Priyanka: Firstly, I would like to clarify my understanding of Netflix. It is an OTT platform that provides a plethora of content like movies, television shows, and documentaries and has changed the entertainment landscape and the way people consume content. Netflix follows a subscription-based model where the customers pay either monthly or yearly fees to access the services. It also offers personalized lists and recommendations which further enhances the experience. Interviewer: Yes, that is well-defined. 

 

Priyanka: I am assuming there is enough internet penetration in developing countries to support live streaming through Netflix. 

Interviewer: That is a fair assumption. 

 

Priyanka:  When we say developing countries is there any specific country, we are focusing on? Can I assume it to be India as it forms a potentially large market with its varied demography and deep internet penetration after the launch of Jio? 

Interviewer: You can focus on India. 

 

Priyanka:  I would also like to discuss how we can define market penetration in this case. So, we can think of increasing the time people use the services or acquiring a greater number of users on the platform. In my opinion, the latter makes more sense as Netflix has to ultimately focus on increasing the no of active subscribers. The average watch time might be a skewed metric as the existing users might increase their watch time on the platform due to better engagement, but this will not contribute to revenue. So the goal metric should be to increase the active subscriber base. 

Interviewer: That’s correct. 

 

                                                                                                 Image Source - https://www.omniaretail.com/blog 

 

Priyanka: Is there any time/resource constraint should I be wary of? 
Interviewer: No, you are not bounded by that. 

 

Priyanka: Just to summarise what we have discussed till now, we would like to increase the active subscriber base for Netflix in India, and we are not bound by any time/resource constraints.  

Interviewer: That is well-summarised. 

 

Priyanka: Since we are targeting on increasing the market penetration for Netflix in India let us try to understand what the current scenario is. Although India forms a huge market, there is intense competition due to multiple players providing different value propositions. For example – Amazon Prime subscription not only offers entertainment but also enables users to become part of the premium clubs on Amazon e-commerce and get free and fast delivery. 
Additionally, India becomes a tough market for Netflix as the consumers are price-sensitive in nature. A lot of home-grown names like Zee5, and Alt Balaji are able to provide content at much cheaper rates. 
Interviewer: Agreed, these are a few of the biggest challenges. 

 

Priyanka: Okay, the way I would like to take a shot at this is, we will discuss the different user segments and then focus on a specific one. We will discuss the pain points they face. Then we will find out ways in which Netflix can address those pain points and have a better foothold in the Indian market. Post that, we will talk about the metrics to track whether our goal is being achieved or not. Are we aligned on this? 
Interviewer: Yes 

 

User segment:

Priyanka:  Okay, there can be multiple user segments for Netflix in India, but if I have to put them in a more comprehensive way, then I will come up with these 2 user segments: 

  1. Young rural enthusiasts: who may have low/high-ended devices, but they have the internet on their devices and spend a lot of time on their phones. 

  1. Mid-age homemakers: who want to seek new ways of entertainment and are still watching content on non-OTT platforms. They feel that OTT platforms cater to the needs of Gen Z only. 

  1.  

 

Prioritisation of User segment:  

All the above user segments can be potential targets, but if I were to pick one user segment; I will go with Mid age homemakers. They have enough spending power. Nowadays TV also has OTT integration so if Netflix starts catering to their needs, then we can convert them to users. Although they might be less tech-savvy, after the increase in smartphone penetration even they are slowly becoming aware of online services. This segment is worth exploring. 

Pain Points of User segment: 

  • 1. As a mid-age homemaker, I am not able to connect myself with the content I find on Netflix. 

  • 2. As a mid-age homemaker, I am more attracted to content which is in my native language as I relate to it in a better way. 

  • 3. As a mid-age homemaker, I enjoy watching a few reality shows and sports like Cricket, Kabaddi etc. I have been watching cricket since childhood and still don’t want to miss any match 

Ways to increase market penetration:  

 
1. Focus on regional content: 

Netflix has been quite focused on originals but to be able to crack the Indian market it is important for Netflix to focus on developing regional content which suits the taste of Indians. It is also important to have subtitles for famous shows in regional languages to attract a larger audience. Netflix can explore partnerships with local production houses in India to make this cost-effective.

2. Focus on Sports: 

Cricket is the most popular sport among Indians and Disney Hotstar has made a strategic move and acquired digital and TV rights for all ICC competitions till the year 2027. Similarly, Netflix can get exclusive rights for other popular sports loved by Indians – like football, hockey, kabaddi etc.

3. Pay per show: 

Till now Netflix has focused on testing different plans in India like a Mobile plan or a basic plan to enable watching content on 1 supported device at a time. Going forward, we can also test plans where users can be charged basis of the shows they want to watch. Amazon Prime has recently started a renting model where it allows users to rent particular movies/shows, but the price was over and above the subscription plan which Netflix can also explore.

Metrics: 

For an increase in market penetration, we can track the following metrics:  

  • 1. % increase/decrease in the Active subscriber base 

  • 2. User stickiness i.e., DAU/MAU 

  • 3. % increase/decrease in revenue 

To summarise, we discussed what Netflix is and how developing countries are the potential markets. We narrowed down our problem statement by saying we will focus on India and discussed the current challenges in the Indian market. We identified the less explored user segment i.e., mid-age homemakers. We discussed ways to suffice their taste and needs like content localisation, focus on sports and different pricing models which will help Netflix get a stronger hold in the Indian market. We identified metrics that will help us track whether we are able to increase the market penetration of Netflix or not. 

Interviewer: That was a great discussion. Thank you. 

 

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