Netflix's initial pricing model was similar to traditional video stores, charging $4 per movie rented plus a $2 shipping and handling. Issue: What cost and price structure should Netflix adapt to meet customer's needs, and improve customer's satisfaction? Analyzing the Issue SWOT Analysis Strengths: 1) Movies Recommendation system to any user, creating a web portal rather than just a subscription service. 2) Offering unlimited rentals. 3) The shift to no-late fee subscription model, no due dates.
Netflix and other Companies; Marketing Intermediaries at a Glance To provide easier access to most of the top movies companies such as Netflix, Inc. Amazon.com, Inc., and many other Kiosks appeared. Netflix, Inc. provides subscription based Internet services for TV shows and movies in the United States and internationally. The company allows its subscribers to watch unlimited TV shows and movies streamed over the Internet to their televisions, computers, and mobile devices. To keep up with the fast paced consumer environment, companies such as Netflix had to create integrated marketing strategies to promote business to the average consumer who have no extra time to spend in line at the local video store. Netflix, Inc. appears to fit the marketing concept of marketing intermediary.
With firms like Netflix, there is an increasing amount of consumers who pay for a subscription and can stream movies directly to their TV, computer, tablet, or even cell phone. With this subscription, they can also get movies mailed to them via postal service. The price of these subscriptions is significantly cheaper and more convenient than renting a movie, and with Netflix, consumers don’t have to worry about late fees. Bargaining Power of Suppliers: The bargaining power of suppliers is pretty low. Suppliers only have power if they are the only one that carries a specific movie, and chances are, if the movie can’t be bought from one supplier, it can be found fairly easily from another.
For years Netflix has been entering into deals with electronics manufacturers such as Song and Samsung to include the Netflix software with their devices, allowing the end-users to access the Netflix streaming service. Netflix needs to foster the creation of technologies that allow fast and easy access to the Netflix streaming service, while providing high quality content. The second major challenge is the growth in competition in the video streaming market, Netflix is competing against Hulu, Amazons subscription service, HBO Now, Google Inc. and others to dominate the video streaming market, and, at the time of this case study, was winning the battle against the newcomers, but this lead would surely decrease as other streaming services entered into agreement with movie and television studios. The third challenge that Netflix is facing is getting involved in original programming, creating their own series and movies. Netflix has had quite a bit of success here with shows such as ‘House of Cards’ and ‘Marvel’s Daredevil’, but other video streaming suppliers have started to create and release unique content as well, and some of the major media companies are pushing back against the unique content on streaming services by removing their own content from those streaming services.
Therefore, Netflix set the price $7.99 for both service unlimited online movies and unlimited mail-order DVDs respectively. It was increased 60% of the cost for customers who take both rental services. - Announcement of price change (July, 2011) The announcement released two months before the execution of the new pricing system. As mentioned, customers had to accept 60 % increase cost if they wished to keep using the both rental service. Customers were also advised that they needed to choose one service, either unlimited online streaming or DVD by-mail before the implementation of the new pricing.
3. How does Netflix’s approach to relationship marketing increase customer satisfaction? C en ga SOURCES: Jena McGregor, “At Netflix, the Secret Sauce is Software,” Fast Company, December 2005, 48–51; Jennifer Netherby, “Netflix Delivers Big Earnings Increase: Sets 5.9 Million Subs as Modest 2006 Goal,” Video Business, January 30, 2006, 1; Steven Zeitchnik, “Download Dreams: Netflix Eager to Expand Online Efforts,” Daily Variety, January 25, 2006, 5; Jennifer Moeller, “You’ve Got (Movies in the) Mail,” The Christian Science Monitor, December 2, 2005, 15; Ben Fritz, “Freaky Disc Biz: Netflix Grows at Blockbuster’s Expense,” Daily Variety, October 20, 2005, 1; “All Queued Up: How the Netflix Distribution Network Supports the Company’s Business Model,” Material Handling Management, November 2005, 9. er of ty ge Le ar ni ng Shocked at the $40 fee he incurred for a late return of Apollo 13, Netflix founder Reed Hastings decided that in the age of the Internet, there had to be a better way to rent videos for home viewing. Thus, in 1997, he started an Internetbased, DVD rental service that offered direct-to-home deliveries with no late fees. A mere decade and 4 million subscribers later, Netflix has taken on established video rental companies such as Blockbuster, Hollywood Video, and Wal-Mart and emerged as the leader in innovation and customer service.
So, to solve this problem, the movie and television studios decided to do something about this. YouTube has now negotiated with CBS, Universal Music, Lionsgate, Electronic Arts and other media companies who have the copyrights to “claim” their videos and start showing ads alongside them. So now, YouTube and the copyright owners share the revenue. Although even today, not many DVDs are bought because everyone started to watch movies and such online. At least today, the industry got their credit and half of the profit made.
MGMT 211 – Management Foundations Case Analysis #1 Netflix Los Gatos, California CEO Reed Hastings started Netflix in 1997 after becoming angry about paying Blockbuster Video $40 for a late return of Apollo 13. Hastings and Netflix struck back with flat monthly fees for unlimited DVDs rentals, easy home delivery and returns via prepaid postage envelopes, and no late fees, which let customers keep DVDs as long as they wanted. Blockbuster, which earned up to $800 million annually from late returns, was slow to respond and lost customers in droves. When Blockbuster, Amazon, and Walmart started their own mail-delivery video rentals, Hastings recognized that Netflix was in competition with “the biggest rental company, the biggest e-commerce company, and the biggest company, period.” With investors expecting it to fail, Netflix’s stock price dropped precipitously to $2.50 a share. But with an average subscriber cost of just $4 a month compared to an average subscriber fee of $15, Netflix, unlike its competitors, made money from each customer.
Competition in the Movie Rental Industry: Netflix and Redbox EXECUTIVE SUMMARY This analysis will cover the movie rental industry and providing recommendations to Redbox and Netflix. Movie rental industry is rapidly changing much of the once dominant force in movie rental Blockbuster is slowly shifting to the now increasing power house Netflix for most consumers’ movie rental choice. The recommendations for Netflix in order to maintain its dominance in the field is to maintain its low cost in subscription, increase its video library, collaborate with Television providers to incorporate Netflix directly into the Televisions. Recommendations for Redbox is to maintain its kiosk location, but also move into internet streaming where they provide newer movies for its same one dollar fee. ANALYSIS Netflix, Redbox and Competitors Netflix is the world’s largest subscriptions service for streaming of online movies and TV episodes as well as sending DVD’s through mail.
When reviewing my monthly expenses, I realized I could save a significant amount of money by cancelling my cable and joining Netflix and watching movies online. I also researched wireless providers, and decided to switch to a different company that could offer a much better deal. When planning our family vacation, I checked the rates at various hotels and realized we could stay somewhere very nice for a low rate, if we went during their off season. Critical thinking has allowed me to make smart choices regarding finances, while still being able to enjoy myself. College has given me ample opportunities to use critical thinking in