Your habits could raise the price of your Netflix subscriptionIf you're running a business, there's always the question as to exactly how much your customers will pay for your goods or services. According to the Washington Post, Netflix may be on the way to figuring this out. A recent study published out of Brandeis University, led by economist Benjamin Shiller, showed that analyzing a combination of traditional demographic data along with information about web browsing habits yielded much more accurate predictions as to when a customer would commit to a Netflix subscription and provided better information as to how to separate customers into categories (such as students, seniors, veterans, etc.) and which incentives might be most attractive to those groups.
The simulations, which had Shiller's group look at the Comscore data of a range of Web users, included both Netflix subscribers and non-subscribers. By correlating the subscribers with their demographic data, Shiller's group was able to get an idea as to whether the user would purchase a Netflix subscription. The study then explored what individual behaviors might better improve the prediction's accuracy and found that users who visited movie-oriented sites like Rotten Tomatoes, Wikipedia, and Blockbuster.com were more likely to have a Netflix subscription. Armed with this information, Shiller's group created a formula that could successfully predict how much money Netflix could make by incorporating such demographic data into its efforts.
The results were profound.
Within the simulation, Shiller group found that the new forumla, complete with demographic information included, yielded variable profits 1.39 percent higher than variable profits with only price discrimination elements such as a cheaper monthly subscription rate built in.
In short, the study concluded that the more information a company has about you, the better it will be at predicting how much money it can make from you before you consider your options and take your business elsewhere. This example was seen -- and was controversial -- in 2012 when travel website Orbitz was accused of displaying higher prices for visitors using Macs as opposed to visitors using Windows and other operating systems, as Mac users are typically associated with having more disposable income than other computer users. In another case, a Wall Street Journal investigation discovered that some sites were charging customers more for goods and services based on the location of where they were accessing those business' web sites from.
While there's presently no sign as to how seriously Netflix is taking Shiller's study, it's an interesting thought to put out there. And given Netflix's reputation as a data-savvy company that knows how to read the market, its incorporation of demographic data into its marketing research and practice may not be that far off.