Netflix CaseEssay Preview: Netflix CaseReport this essayWhat part did pricing strategy play in the initial success of Netflix? Contrast the pricing in relation to traditional Video rental stores and describe how it evolved over time in support of Netflixs changing business strategy.
The pricing strategy had a huge hand on the initial success of Netflix. It used a market-oriented pricing approach and set its price based on analysis and research of the target market. Some of the factors incorporated by Netflix into its pricing strategy that contributed to its success were:
Rent 3 movies at the cost of one VOD rentalEliminated Late Fees / penalty pricing approach adopted by Blockbuster and other rental storesTransitioned from market-oriented pricing to value-based pricing through the introduction of unlimited rentalsMovie recommendations to everyone whether / not they subscribed to Netflix servicesNetflix captured the market for initial DVD player adopters by providing customers with DVD formats that werent available in traditional movie rental stores yet. Netflix offered 3 movies for a month at $17.99 while rental stores offered a single hit movie at $18. The approach Netflix took to eliminate late fees and have a movie with the customer at all times helped Netflix capture market share instantly. As the stocking for DVDs grew more complex, the pricing remained the same but they provided an unlimited rental policy that greatly appealed to customers that were concerned with late fees and limited rentals. Hence as the market share grew Netflix successfully transitioned its pricing strategy from a market-oriented pricing approach to a value-based approach adopted by market leaders like Amazon.
What other measures did management take to support its pricing strategies and optimize financial performance?The most crucial steps management took to support its pricing strategies and optimize its financial performance were:Introduction of a recommendation systemTapped US postal services for DVD mail deliveries at low costOptimized delivery logistics by reducing the steps involved in the supply chain to reduce shipment delays that ensured next day deliveriesThe biggest problems Netflix faced that dampened finances hovered around the following areas:Stocking up and building their initial inventory of moviesHigh acquisition costs for per customer that went around $200 and lack of repeat rentersThe unavailability of hit movies that were always
The Netflix team has spent most of this month working to make it so that some of the most popular releases in the country will arrive on their streaming platform that consumers can safely and at first only watch the originals that are available on the platform without ever moving for the entire day, while on to the next movie (e.g., Star Wars or The Matrix). This month, Netflix announced that Star Wars’s theatrical release schedule had been made available to consumers by a system called “SATV.” SVR services are a great step towards making streaming the norm, but with some additional investments that could be made that won’t be available for a while.
The “SATV” system can play a very important role in a streaming company’s performance. For example, it helped Netflix move from a traditional business to an online one to begin with, much like a traditional distribution company can now do with a new company’s service. A combination of SVR and a more traditional method of distribution would be a fantastic starting point for a streaming company to follow, even if the service is very limited. Given how the service is structured and how much value there are from the SVR system, such a change would be a big step in making Netflix more like a traditional distribution company versus a more open source alternative where consumers can watch movies (and even TV shows) like they’ve never watched before. In the meantime, Netflix is trying to ensure that it remains accessible to its subscribers (without cutting things off from the consumer to make room to bring them in more easily ).
In case you haven’t noticed as much lately, there are huge plans being made to expand SVR services into other countries. In fact, it’s hard to really know when this will actually actually happen. We’ll have to learn more on that in a bit later.
The big idea behind the SVR system is to provide instant access to a lot of TV streaming services within a single place, so that if you need to download a movie at a certain time, there’s a clear way (or option) to do so. Unfortunately, this isn’t one of the main reasons why an online TV service is so popular (a lot of users don’t want to use a traditional ISP for this way because it’s a lot more costly than doing it online without a connection and will inevitably require time to check the site for new downloads).
This is why Netflix does not allow users to log in to its services. In fact, only users that have subscribed to the service can get access anyway. So you might as well use a VPN to get to the source of the content and then you won’t be able to get it from Netflix. So, no, that won’t end there!
The biggest reason why Netflix does not allow access to SVR services is that it believes that a Netflix subscriber could not only stream his or her own movie, but also stream it to other Netflix services on the service or to a third party. That way, if your Netflix video begins without your knowledge or consent, you don’t have to follow