Companies need to be very aware of how their decisions will play out in the public. Gone are the days when consumers, if upset at a price increase imposed by a company, could merely express their displeasure by not buying the product or by choosing a competitor. In the 21st century, consumers have much more influence. They can post on Facebook or aim a well-crafted tweet about a product and they can influence hundreds or even thousands of people. Social media campaigns against a company can take on a life of its own. This phenomenon means that companies must be very careful to present large pricing changes and policies in the best light possible and to be ready for the backlash that might follow. Netflix and Bank of America are two companies …show more content…
The leaders of the company knew that they needed to increase revenue in order to be able to provide more content for their streaming service (Wingfield, 2011). By splitting the two services DVD and streaming content apart, Netflix was able to use the profit the DVD service provided, to help fund the increased content the streaming side would need to provide in order to become successful in the future. The splitting of the two services also served to encourage the subscribers to choose one service or the other—and most of them chose the steaming service. Netflix was able to transition these subscribers to their streaming service before a competitor online provider could lure them away (Hartung, 2013). Netflix felt that the streaming service was the future of the company and therefore they needed to make the decisions that would align themselves for that future. Netflix knew that their price increase was inline with prices being charged by other streaming services such as Hulu. The similarity in price for possible substitutes supports NetFlix’s decision to raise prices even when demand was elastic. Therefore, they apologized for how they handled the price increase but they kept …show more content…
By the next year, they had gained back the subscribers who left in protest of the changes in services and the price increase. By the end of 2012, the number of subscriptions had increased to 33.27 million. Growth, both domestic and international has continued since then. Total number of subscribers for 2016 was over 93 million people (Dunn, 2017). Recently, Netflix increased its prices again. This time however, the company did a better job of explaining why they were raising prices to the public. The company explained that exclusive content and movies have been added to the Netflix lineup as well as an overall improved experience. The consumers have been more accepting of the price change because the Netflix service still appears to be a good value when compared to their competitors (Netflix Price Rise Tests Demand, 2017). Because of this perceived value, Netflix demand is inelastic. Netflix is a leader in the online streaming providers. They are now a global company, available in over 130 countries. Netflix produces award winning original content that is ONLY available through their service. By increasing the content that they produce themselves they are able to reduce the amount that they have to spend in acquiring expensive content from other sources. This in turn has decrease their content cost per subscriber and increased their profit margin (Why Netflix’s Financials are Better Than You
“Stock of the online DVD rental company was up more than 15% in early morning trading Thursday. Netflix increased their forecasts for both revenue and total subscribers today, trying to compete with powerhouses like Blockbuster and Wal-Mart. The increased forecast stems from a slew of new subscribers that have invested in the service after a price decrease from $21.99 to $17.99 last month. Despite the increases in revenue and subscribers however, some analysts feel that the business model is “fatally flawed” and the company may fall by the wayside due to competition from the aforementioned retail and entertainment powerhouses.” Investors Guide reported this.
Two of the top alternatives to satellite tv or basic cable are Netflix and Hulu. I have been a member of both online streaming services for the past four years. I have dedicated much of my free time and studying time to these two services. Both services have gained many subscribers and make the need for satellite tv almost obsolete. It would be hard for me to only have one of the services as they both are strong services in their own way,
The video rental industry began with brick and mortar store that rented VSH tape. Enhanced internet commerce and the advent of the DVD provided a opportunity for a new avenue for securing movie rentals. In 1998 Netflix headquartered in Los Gatos California began operations as a regional online movie rental company. While the firm demonstrated that a market for online rentals existed, it was not financially successfully. Netflix lost over $11 million in 1998 and as a result significantly changed the business model in 2000. The new strategy included focusing on becoming a nationally based subscription model and focusing on enhancing the subscribers experience on their website. The change in strategic focus has allowed Netflix to grow into the largest online entertainment subscriptions service in the United States with over 6.3 million subscribers (Netflix).
? Netflix provides a subscription-style e-commerce service. Over 95% of customers pay at least $17.99 a month which includes unlimited rentals with up to three titles at a time. A comparably low monthly fee, allows Netflix to lead market share of online DVD rentals while competing with traditional brick and mortar rental stores. Meanwhile, Netflix might keep the customers who try the service and happy with it continue paying the monthly fee. Therefore, Netflix has fewer problems in predicting revenues.
As the firm moves forward, top managers must pay attention to staying unique to sustain a competitive advantage. Netflix does not own their content, nor do they have any tangible assets. Netflix is a part of a broad range of network users. As technology continues to grow exponentially, Netflix will have to be readily adaptive to change and innovation. Technology never stops growing and evolving, therefore, Netflix’s business platform should never stop growing and evolving. At the same time, they must be careful to remain user friendly and customer centric by keeping the technology at a level where users will not have to obtain a certain set of technological skill sets.
From its inception, Netflix has become a business based on superior customer service and has subscribed its business to the market marketing management philosophy. The main purpose behind Hasting’s idea of a better way to rent and enjoy movies was how to provide that service to their clients and not have any late fees. In other words, their customers could enjoy their rentals from Netflix for as long as they wanted, and they would never have to worry about late fees again, so long big movie rental chains! This aspect alone of Netflix’s marketing plan indicates that Netflix has based their marketing plan on market orientation, “a philosophy that assumes that a sale does not depend on an aggressive sales force but rather on a customer’s decision to purchase a product,” (Lamb, 2009, p.7). Many companies that take on this philosophy are said to implementing the market concept. The marketing concept states: “The idea that social and economic justification for an organization’s existence is the satisfaction of customer wants and needs while meeting orga...
Netflix is an amazing digital success story. Reed Hastings founded Netflix in 1997 in Scotts Valley, California. Despite the changes in the economy as well as the movie rental industry Netflix has continued to grow and increase their net income with each year. Netflix's U.S. subscriber base has grown by nearly 50 percent and its stock price has quintupled (cite). Netflix has been able to deliver movies through mail as well as having their movies streamed by its customers who indulge in movies in the privacy of their homes are all too familiar with how late fees work.
We now all know what happened with blockbusters. Blockbuster went bаnkrupt in 2010 аnd Netflix is now a $28 billion dollar compаny, ten times what Blockbuster was worth. Blockbuster failure to innovate with the chаnging times аnd rise of the internet lead to their downfall. Should they have grasped the opportunity to move their services online (Taken Reed Hastings proposal) we would have talked about blockbusters instead of Netflix. By already having a reputation with their client base should they have moves their services online the customers would not have been unfamiliar with the name(brаnd), thus trusting in the name, allowing for аn easier trаnsition online.
Nest to Netflix who started offering the same prices, with Hulu you could get as they call it “right now access”. This alone took some consumer base from their company. By allowing feedback from their consumers it allowed them to visualize their future. While Netflix has stayed the same, Hulu raised their prices to eleven ninety-nine, by offering a commercial free viewing which a lot of their regular customers switched over too. Now they are offering not only current and up to date TV show viewings, they are also keeping the shows that have already aired to provide those whom would wish to re-watch those they have already seen.
As part of their promotional package the company grants new users with a free promotional period of one month so they can try the service out, and look at the list of movies and shows available for streaming. Customer service experience for Netflix is also accomplished by extending the titles available every month, improving the service by providing better viewing quality, and by expanding the devises that make viewing Netflix possible. Netflix also believes that good customer service experience can act as a promotional tool as people will use their experiences to increase the number of subscribers, which in term will lead to more revenues. Improving financial performance Since FY2013 Netflix has increased their financial performance to a 21.2% growth. This is driven by a strong international streaming memberships in countries such as, Mexico, Canada, United Kingdom, and the Caribbean.
When customers see the fear of an increase in price once viewed as an affordable luxury, could now turn into an expensive item that needs to drop to make room for other necessity items. Since 2011, the price of Netflix membership has increased by 40%. As a result, Netflix is losing close to 800,000 memberships (Pepitone, n.d.). The price increase was a result of Netflix needed to spend more money to license additional material for its streaming services (Wingfield & Stelter, 2011). Netflix figured that the increase would not have caused that much backlash against the company, it would have been
Although Hastings vowed to be divergent from other video retailers, his goal was to use an identical pricing strategy; however, one that would “appeal to customers [. . .] who used online shopping as an alternative to traveling to retail outlets” due to ease of access and more preferences (Shih, Kaufman, & Spinola, 2009, p. 3). Furthermore, Netflix launched its business at a time DVDs had barely hit the marketplace as the firm anticipated the new technology to be a promising venture. Nonetheless, within a year DVD players became so vast...
The idea inspired Reed Hastings and Marc Randolph, and then they founded Netflix in Scotts Valley, California in 1997 (Netflix, 2014). The company comes into play by developing a subscription-based streaming platform for movies and television shows. Unlike the traditional movie rental businesses such as Blockbuster and Redbox, Netflix’s innovation offers service via Internet, and it does not have any physical stores but instead delivers DVDs through postal mail in the U.S. Since then, Netflix has become the world’s leading internet television network with constant growth of customers to over 48 millions members in more than 40 countries in the North America, Europe, and the Latin America (Netflix, 2014). In this analysis, the main focus is examining the current market environment for Netflix. It identifies the type of market structure that Netflix is currently competing. The analysis also expands on the competitions, product differentiation, pricing strategy, and measuring the level of easy entry-and-exit.
1) Netflix’s currently does not have a user-friendly method for customers to stream videos onto television sets. Netflix is entering agreements with the manufacturers of game systems, Blu-ray disc players, and televisions to include software capable of streaming Netflix videos. 2) There is strong competition with other companies that offer video streaming at no extra charge. Additionally, Netflix and its competitors are attempting to enter the digital world.
Netflix was established by Marc Randolph and Reed Hastings in 1997 in California. Initially, the company offered a DVD-by-mail service for a monthly, flat rate subscription fee. Videos were sen...