Netflix's Rapid Expansion: How Tech Brands Can Adjust to Reach Developing Markets

By Special Guest
Marco Veremis, CEO of Upstream
February 02, 2016

Over the past year, Netflix has become a global content company. With offerings in over 130 new markets, each with varying maturities, the company has faced the difficulty of adjusting its services to meet the needs of developing markets, while still maintaining success in more developed areas. Balancing successful efforts in markets with differing needs is something that not many tech companies have been able to achieve. However, with more advanced markets quickly reaching their saturation points, and consumer acquisition becoming more challenging than ever before, tech brands need to focus on adjusting services to capitalize on the more than three billion consumers in high-growth markets.

Assessing the challenges

There are three major challenges – financial, technological and cultural - that tech brands need to keep top of mind as they attempt to build their presence in developing markets.

According to the Global Findex data set, access to financial services in low-income countries is at a severe disadvantage compared to developed regions. In these growth regions, only around one percent of the population has a credit card and six percent a debit card. This is a challenge that service providers need to address in order to provide offerings in these regions, especially given that they are accustomed to these being the most common forms of payment in Western regions.

In terms of technological challenges, while mobile is now considered the main form of internet access for consumers across the globe, it is important to consider that Wi-fi usage is much more limited in developing markets than in developed markets. Not only is connection speed much slower, operating at around 10Mbps in Brazil and at around one hundredth of that speed in Nigeria, (compared to 30Mbps in the US), but it is also patchy and unreliable. Mobile handsets in these markets have basic web-enabled features and do not support data heavy content.

However, it’s not only data heavy content that will struggle with expansion in growth markets. Content that is not highly localized in regards to context and language will encounter cultural challenges Results from a 2014 study conducted by Upstream and Ovum, The Next Mobile frontier, showed that 78 percent of consumers in developing markets noted the importance of mobile content being offered in their local language.

Finding localized solutions

These hurdles are not challenges without solutions. As we have seen Netflix do, it is vitally important for companies to remain flexible when looking towards developing markets. Adjusting pricing, technology and content to fit the needs of the consumers in each market will help companies find success. While Netflix hasn’t found perfect solutions to all of these challenges, it has made leaps and bounds to adjust its services to meet the needs of consumers in these markets.

Netflix has been able to set an example for many companies, especially when it comes to financial hurdles. While it has yet to find an approach that works for markets that have low credit card penetration, they have seen success by offering services at a lower price point in different markets. In the US, a monthly subscription for streaming services costs $7.99 per month. However, in countries like Argentina and Chile, pricing ranges between four and six dollars. By offering lower tier pricing in markets that are of lower income nationally, Netflix is able to penetrate the market. Tech companies need to consider this tiered pricing method as they consider expansion into high-growth markets.

Technology is a challenge that Netflix still has to address as it expands globally. As a video streaming service, data usage is extremely high by nature, and in many developing markets, the cost to stream Netflix is higher than the monthly subscription fee. That said, Netflix, and any content provider looking to target emerging markets, should consider teaming up with a local network operator in order to best reach consumers.

Netflix has never been a company to ignore localized content. With shows from each region available in their respective countries, Netflix has always understood the practice of providing content that is culturally relevant. Moreover, the company is even going to lengths to produce localized content, as seen when executives announced plans to release Bollywood content ahead of its launch in India. Service providers should look to Netflix as an example of how to provide content that is relevant to each specific market.

As with any launch in a new market, there are always new hurdles to overcome. Though they may be more complex with tech offerings in markets that are still developing as far as technology itself is concerned, there are strategies that can help alleviate some of the challenges. If these companies can understand the behaviors of these new potential consumers, they will find a better chance at success in high-growth markets. 




Edited by Kyle Piscioniere
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